Research study suggests correlation between prices and quality

Kellogg School of Management released an interesting study suggesting that America should perhaps not be quite as keen to cut healthcare prices. Their study looked at a number of measures which they took to represent quality. The study reported that hospitals that were expected to have more privately insured patients had better quality measures.

On some level, some of the findings make intuitive sense: hospitals that receive more money have more money to invest into technology (one of the quality measures that were considered). However, this finding goes against many observations that hospital pricing can vary wildly, even for procedures where there might not be discernible differences in quality (e.g. imaging procedures). Whether the conclusion of this study is correct in a meaningful sense could affect the dialogue regarding rising healthcare prices.

Not being an academic, I suspect that researchers who study the relationship between prices and quality would find a lot of room for improved clarity in this study. For example, the authors of this study used demographic information from the zip codes surrounding hospitals to estimate the share of privately insured patients that a hospital treats. A more direct way to discover payer mix would be to actually find out from hospitals themselves (or potentially through claims data). The more problematic area is with quality. For example, none of the listed measures seem to directly include outcomes and mortality measures. Theoretically, a fancy hospital might be investing in a lot of technology (which would raise their quality measure for this study), for example, but actually have worse outcomes than another hospital that has not made such investments.