Are Healthcare “Report Cards” Good for Patients?
Skip to content
Podcast | Insight Unpacked Season 1: Extraordinary Brands and How to Build Them
Policy Strategy Economics May 1, 2007

Are Healthcare “Report Cards” Good for Patients?

More information may not always be better

Based on the research of

David Dranove

Daniel Kessler

Mark McClellan

Mark Satterthwaite

In grade school, a bad report card might have gotten you grounded, which probably motivated you to do better next time. Or did it just motivate you to take easier classes? In a larger context, “report cards” in sectors such as healthcare and education have received considerable attention from policy makers and researchers. Report cards provide information about the performance of institutions and individuals, where the performance depends both on the skill and effort of the provider (hospitals, physicians or schools), and the characteristics of the patients or students.

In the healthcare sector, proponents of report cards argue that these improve the ability of patients to identify the best physicians and hospitals, while giving providers a powerful incentive to improve quality. Detractors argue that report cards encourage providers to “game” the system by seeking healthier patients, avoiding very sick ones, or both.

A study published in the Journal of Political Economy in 2003 by David Dranove (Kellogg School’s Management & Strategy Department), Daniel Kessler (Stanford University), Mark McClellan (Stanford University) and Mark Satterthwaite (Kellogg School’s Management & Strategy Department) focuses on a well known healthcare sector case.

In the early 1990s, New York and Pennsylvania began publicly reporting the physician and hospital mortality rates for coronary artery bypass graft (CABG) surgeries. Dranove, Satterthwaite, and their co-authors used Medicare claim data on elderly patients and information on U.S. hospital characteristics from the American Hospital Association from 1987 to 1994 to analyze the impact of the introduction of report cards at both the patient and hospital levels. Their empirical strategy uses a “difference-in-difference” framework, which compares the change trends in New York and Pennsylvania before and after the introduction of report cards to the change in trends in the same periods in other states (the “control” states).

The main result of their research is that the introduction of report cards led to a substantial shift in the incidence of intensive cardiac treatment. It found that CABG patients in 1994 (after report cards were instituted) spent less money on healthcare in the year before their surgeries than did CABG patients in 1990 (before report cards were instituted), as shown in Table 1. This is contrary to trends in other states, where CABG patients’ healthcare expenses rose during that same time period. The study concludes that New York and Pennsylvania hospitals began operating on healthier patients—those patients who did not have to spend as much on hospital bills in the year before their surgeries, meaning they likely suffered from fewer health complications.

Table 1: Mean expenses in year prior to admission for AMI or for CABG surgery, elderly Medicare beneficiaries, 1990 and 1994.
image

Compared to other states that did not have mandatory report cards, doctors in Pennsylvania and New York hospitals became more reluctant to operate on difficult, severely ill patients. Instead, the study suggested that physicians opted to perform the coronary artery bypass graft (CABG) surgery on healthier patients who were more likely to have positive outcomes, possibly to improve their report card scores. The estimated decline in the measure of illness severity in New York and Pennsylvania relative to all other states was statistically significant and ranged from 3.74 to 5.30 percent. This could mean that sicker patients did not receive the treatment that could most benefit them, the researchers determined.

Report cards led to an increase in the number of CABG surgeries performed in those two states. This means that even as they limited the surgeries to healthier patients, doctors chose to perform more of them. “One possible explanation is that operating on healthier patients is a way of boosting your report card score,” said David Dranove, a Kellogg School professor and a co-author of the study.

In terms of aggregate outlays, the authors found that report cards led to higher expenses overall, both because of the increased number of CABG surgeries performed and the increased readmission rates for sick patients. “Poor outcomes are often associated with higher cost, and I think that’s what we’re seeing,” Dranove said.

Another key finding was that the introduction of report cards induced increased sorting of patients to providers on the basis of the severity of their illness. In both states, the heterogeneity of patients within each hospital diminished, with teaching hospitals (presumed to be of higher quality) picking up a larger share of severely ill patients. Supporting their finding that report cards led to increased selection and sorting, the researchers found that the introduction of report cards also led to delayed treatment for both healthy and sick patients. “One thing we know is overall there seemed to be a delay in all cardiac interventions, possibly as the hospitals tried to figure out how the interventions would affect their report card scores,” Dranove said. “But that’s a conjecture.”

To determine the effects of the delays, the researchers analyzed hospital expenditures for heart attack patients in the year after their initial visit and also looked at their rates of mortality and readmission. They found that relatively sicker heart attack patients (those who spent more money on healthcare in the year before their heart attack) experienced higher readmission rates and, in some cases, higher mortality rates after report cards were instituted. “The delays in treatment seemed to be associated with increased complications and increased readmission,” Dranove said, alluding to one of the study’s most alarming findings: sick patients were doubly affected by report cards, first because some might not have received needed CABG surgery and, second, because delays in their treatment led to adverse health affects later on.

But in their analysis, the researchers were hesitant to ring too loud an alarm, emphasizing that what they studied were the short-term effects of report cards. “I think the glass is more full than empty, but we look here at the empty part,” Dranove said. “The hoped-for benefit of report cards is for providers, in addition to the games they’re playing, to actually make an effort to improve patient care. And there are a lot of anecdotal accounts of that happening.”

Featured Faculty

Walter J. McNerney Professor of Health Industry Management; Faculty Director of PhD Program; Professor of Strategy

Professor Emeritus

About the Writer
Taryn Luntz, a master’s student at the Medill School of Journalism, Northwestern University.
About the Research

Dranove, David, Daniel Kessler, Mark McClellan and Mark Satterthwaite (2003). “Is more information better? The effects of report cards on cardiovascular providers and consumers,” Journal of Political Economy, 11(3): 555-588.

This article received the Kellogg School’s “Stanley Reiter Best Paper Award” in 2005.

Most Popular This Week
  1. Your Team Doesn’t Need You to Be the Hero
    Too many leaders instinctively try to fix a crisis themselves. A U.S. Army colonel explains how to curb this tendency in yourself and allow your teams to flourish.
    person with red cape trying to put out fire while firefighters stand by.
  2. What Triggers a Career Hot Streak?
    New research reveals a recipe for success.
    Collage of sculptor's work culminating in Artist of the Year recognition
  3. What’s the Secret to Successful Innovation?
    Hint: it’s not the product itself.
    standing woman speaking with man seated on stool
  4. Which Form of Government Is Best?
    Democracies may not outlast dictatorships, but they adapt better.
    Is democracy the best form of government?
  5. How Much Do Campaign Ads Matter?
    Tone is key, according to new research, which found that a change in TV ad strategy could have altered the results of the 2000 presidential election.
    Political advertisements on television next to polling place
  6. What Went Wrong with FTX—and What’s Next for Crypto?
    One key issue will be introducing regulation without strangling innovation, a fintech expert explains.
    stock trader surrounded by computer monitors
  7. How Are Black–White Biracial People Perceived in Terms of Race?
    Understanding the answer—and why black and white Americans may percieve biracial people differently—is increasingly important in a multiracial society.
    How are biracial people perceived in terms of race
  8. Immigrants to the U.S. Create More Jobs than They Take
    A new study finds that immigrants are far more likely to found companies—both large and small—than native-born Americans.
    Immigrant CEO welcomes new hires
  9. How Experts Make Complex Decisions
    By studying 200 million chess moves, researchers shed light on what gives players an advantage—and what trips them up.
    two people playing chess
  10. Yes, Consumers Care if Your Product Is Ethical
    New research shows that morality matters—but it’s in the eye of the beholder.
    woman chooses organic lettuce in grocery
  11. Why Well-Meaning NGOs Sometimes Do More Harm than Good
    Studies of aid groups in Ghana and Uganda show why it’s so important to coordinate with local governments and institutions.
    To succeed, foreign aid and health programs need buy-in and coordination with local partners.
  12. Product Q&A Forums Hold a Lot of Promise. Here’s How to Make Them Work.
    The key to these online communities, where users can ask and answer questions, is how many questions get useful answers.
    man sits at computer reading Q&A forum
  13. What Went Wrong at AIG?
    Unpacking the insurance giant's collapse during the 2008 financial crisis.
    What went wrong during the AIG financial crisis?
  14. When Do Open Borders Make Economic Sense?
    A new study provides a window into the logic behind various immigration policies.
    How immigration affects the economy depends on taxation and worker skills.
  15. What the New Climate Bill Means for the U.S.—and the World
    The Inflation Reduction Act won’t reverse inflation or halt climate change, but it's still a big deal.
    energy bill with solar panels wind turbines and pipelines
  16. Post-War Reconstruction Is a Good Investment
    Ukraine’s European neighbors will need to make a major financial commitment to help rebuild its economy after the war. Fortunately, as the legacy of the post–World War II Marshall Plan shows, investing in Ukraine's future will also serve Europe's own long-term interests.
    two people look out over a city
  17. How Has Marketing Changed over the Past Half-Century?
    Phil Kotler’s groundbreaking textbook came out 55 years ago. Sixteen editions later, he and coauthor Alexander Chernev discuss how big data, social media, and purpose-driven branding are moving the field forward.
    people in 1967 and 2022 react to advertising
  18. The Political Divide in America Goes Beyond Polarization and Tribalism
    These days, political identity functions a lot like religious identity.
    people engage in conflict with swords
More in Policy