The association between asymmetric information, hospital competition and quality of healthcare: evidence from Italy

We study the effect of competition on adverse hospital health outcomes in a context in which information about hospital quality is not publicly available. We use data on patients who were admitted to hospitals in the Lombardy region of Italy. Although risk-adjusted hospital rankings are estimated yearly in this region, such rankings are provided to hospital managers only and are not available to general practitioners or citizens. Hence, patients may choose the hospital where to be admitted on the basis of different criteria such as their geographical closeness to the hospital, local network information and referrals by general practitioners. We first estimate a model of patient hospital choices and include among the determinants a variable capturing social interaction, which represents a proxy for the quality of hospitals perceived by patients. Using patient-predicted choice probabilities, we then construct a set of competition indices and measure their effect on a composite index of mortality and readmission rates that represents, in our settings, hospital quality in terms of adverse health outcomes. Our results show that no association exists between such adverse events and hospital competition. Our finding may be the result of asymmetric information, as well as the difficulty of building good quality health indicators.