Photo: BolistonHospitals may be more recession-proof than many other industries, but they are hardly immune. If you are running a hospital these days and want keep your beds full, what should you do: Try to raid your competitors for the best doctors available? Undertake an ad campaign that trumpets the excellence of your care? Or maybe just install wireless internet and spruce up the rooms?
According to a new working paper called “Hospitals as Hotels” by Dana Goldman and John A. Romley, both of RAND, that last option — improving the hospital’s patient amenities — might be the best investment. (Abstract is here, PDF is here.) As they summarize:
“Amenities such as good food, attentive staff, and pleasant surroundings may play an important role in hospital demand. We use a marketing survey to measure amenities at hospitals in greater Los Angeles and analyze the choice behavior of Medicare pneumonia patients in this market. We find that the mean valuation of amenities is positive and substantial. From the patient perspective, hospital quality therefore embodies amenities as well as clinical quality. We also find that a one-standard-deviation increase in amenities raises a hospital’s demand by 38.4 percent on average, whereas demand is substantially less responsive to clinical quality as measured by pneumonia mortality. These findings imply that hospitals may have an incentive to compete in amenities, with potentially important implications for welfare.”
I find this mildly disheartening but not very surprising. The hospital that my family and many friends use in New York has extraordinary medical personnel and great outcomes but facilities that leave quite a bit to be desired.
There is a constant mental struggle between acknowledging how good the care is while facing how unpleasant the surroundings can be. So far, we’ve stuck with it — but I can imagine a first-time patient walking in there and deciding, merely because of the lack of amenities, not to become a second-time patient.
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In the last months of her life in 1986, my mother was in and out of the hospital. At home one evening, she was having trouble breathing. She called me into her room and asked, “Well, do you think I should check into the hospital?”
That sounded to me like a request for attention and, yes, pleasure. And you wouldn’t have believed how her bedroom was soon suffused with the energy of uniformed men to help her “check in.”
“Demand is substantially less responsive to clinical quality as measured by pneumonia mortality”
One reason for this may be that it is incredibly difficult for a consumer to learn which hospitals have better clinical quality. For one, it’s not well-publicized. Furthermore, it’s very hard to measure. Maybe the hospital that has the highest pneumonia mortality is not the worst hospital but the best – the reason their mortality is higher is they are accepting the sickest patients. Sure you could control for this, but it may be difficult.
Amenities at hospitals is analogous to nicely packing a product. The quality of the actual doctors is like the quality of the product itself, which customers don’t notice right away.
Unfortunately, amenities sometimes matter more, as it should be. It is hard to truly see if a doctor is good, while amenities are immediate and more easily noticeable.
As for that hospital in newyork that Mr.Dubner is talking about, they should definitely invest more on packaging their product. It’d be a win-win for everyone since more people would come, get higher quality medical treatment, while the hospital rolls in cash.
The hospital that my wife had our baby in (CPMC in SF) had wonderful nurses, doctors, etc. But what I will remember most about the place (And look forward to most for the next kid) are the cookies that are delivered to each room every afternoon.
why not just crank up the morphine pumps?
This makes sense, apart from one point: hospitals are overcrowded already. Increasing demand is really about increasing demand for patients that result in a profit, and thus displacing patients that don’t. At an individual level this is good, at an aggregate level its a zero-sum game.
Another approach is to offer value-added services as a few hospitals do (such as Massachusetts General and Brigham and Women’s in Boston.) In this model a patient can stay on a seperate floor in a single room with superior amenities for a fee (thus subsidizing other patients). Not surprisingly, the demand is relatively low, in large part as “medical tourists” now avoid the US instead of flocking here.
Hospitals are there to help people. Those who are working there, doctors and nurses, want to truly cure the patients, one must not forget that that is their job (source of money). Doctors have to feed their children, family too. Hospital is a business, and in economics, the side that is providing goods/services must maximize their profit. Today when there is internet, where people can research about medical subjects online, the standard of the expectations are raised, it is normal for all hospitals to have a well equipped, knowledgeable team, like that in the TV show “House”- but kind. Where are the hospitals going to make difference, “attractive”? Amenities.
First of all, patients have virtually no access to data regarding quality of outcome; so how could they possibly shop for a medical facility based on outcomes.
Secondly, even if they did have access to that data, they would find that it is unlikely that choice of facility within the same region will affect their outcome measurably.
Instead of outcome assessments based on data, patients instead rely on outcome assessments based on accumulated anecdotal evidence; or the facilitiy’s reputation.
But if the facility’s reputation is really just an accumulation of patients perspectives, and those in turn are affected highly by their overall inpatient experience and strongly influenced by use of amenities.
Additionally, if hospitals are paid by health insurers per inpatient day, and the number of days stayed is at all affected by the patient’s desire to go home sooner; then amenities should be expected to contribute to demand.
Health Insurers can mitigate some of this hazard by insisting that hospitals switch from contracts based on per-day or per-procedure rates to contracts which pay facilities based on outcomes.