Are Two Report Cards Better than One? The Case of CABG Surgery and Patient Sorting

Public reporting of information regarding quality may encourage sellers to improve product quality. I study the impact of quality disclosure in the context of the health care market. In particular, I examine the impact of mortality report cards on the degree of within-hospital sorting using hospital discharge data on coronary artery bypass graft (CABG) surgery in New York State from 1986 to 1993. Hospital and surgeon report cards may facilitate sorting by making it easier for patients to identify the best providers. Hospitals may also encourage surgeons to allocate patients in more efficient ways to boost hospital scores. However, surgeon report cards may provide incentives for surgeons to avoid risky patients. I find that the level of within-hospital sorting increased immediately following the publication of hospital report cards but fell after the publication of surgeon report cards for hospitals in Manhattan, but not hospitals elsewhere. This phenomenon may have been driven by the intense competition faced by hospitals and surgeons in Manhattan. Moreover, I find that an increase in the degree of within-hospital sorting improves the treatment outcomes of risky patients. ∗Management & Strategy Department, Kellogg School of Management, Northwestern University, 2001 Sheridan Road, Evanston, IL 60208. y-zhang@kellogg.northwestern.edu. I am indebted to David Dranove for his continuous guidance and support. I am also grateful to Bernard Black, Leemore Dafny, and Craig Garthwaite for their advice. I would like to thank Steven Farmer, Jie Gong, Mark Satterthwaite, Tuan-Hwee Sng, and Bruce Spencer for valuable discussions. Conversations with Robert Bonow, Angelo Costas, and Steven Farmer vastly improved my understanding of medical and institutional background information. Chieko Maene provided generous GIS support. This work has also benefited from the comments of seminar participants at Kellogg School of Management and Institute for Policy Research at Northwestern University. All errors are mine.