1 Do Markets Respond to Quality Information? The Case of Fertility Clinics Presented by Kate Bundorf Co-authors: Natalie Chun, Gopi Shah Goda, Daniel Kessler AcademyHealth Annual Research Meeting June 10, 2008

2 Background Quality report cards, which provide comparative information on provider performance, now exist in many different health care markets. The main objective of quality report cards is to improve quality of care. Consumer response to quality information is the key mechanism by which report cards could influence quality of care.

3 Evidence on Consumer Response to Quality Information is Mixed Some studies find that report cards influence the market shares of hospitals and health plans. –(Mukamel and Mushlin 1998; Beaulieu 2002; Scanlon, Chernew et al. 2002; Wedig and Tai-Seale 2002; Cutler, Huckman et al. 2004; Dafny and Dranove 2005; Jin and Sorensen 2005; Chernew, Gowrisankaran et al. 2007). Others find that report cards have little effect on markets for health services. –(Mennemeyer, Morrisey, and Howard 1997; Schneider and Epstein 1998; Mukamel, Mushlin et. al 2000; Romano and Zhou 2004; Howard and Kaplan 2006).

4 Research Question Do consumers respond to information about clinic performance when choosing among clinics providing assisted reproductive therapies (ART)?

5 Assisted Reproductive Therapies (ART) ART is a treatment for infertility in which a woman’s eggs are surgically removed from her ovaries and combined with sperm in a laboratory. A developing embryo is then returned to her uterus. The first ART cycle was performed in the U.S. in In 2004, 411 fertility clinics performed 127,977 cycles resulting in 36,760 live births of 49,458 infants.

6 Quality Reporting and Fertility Clinics The Society of Assisted Reproductive Technology (SART) began collecting and reporting data on the utilization and outcomes for ART procedures in The Fertility Clinic Success Rate and Certification Act of 1992 made the collection and dissemination of this information mandatory. First mandatory report was made available in December of 1997 and was based on data from cycles started in 1995.

7 Empirical Strategy Our estimate of the effect of public reporting is the difference between the relationship between clinic market share and measured performance before and after the information was disseminated to consumers. –Observe measures of both outcomes and patient mix for both the pre- and reporting periods. –Data include both measures that were and were not ultimately reported.

8 Data and Study Sample Clinic-level information on utilization and outcomes from SART –Obtained hard copy reports from SART for 1989 to 1994 –Reports from 1995 to 2003 are available on the CDC website Linked clinics over time based on name and address Calculated 3-year lagged performance for clinics operating from 1996 to 2003 Define the market as the MSA Restrict our analysis to MSAs with 2 or more clinics

9 Performance Measures Calculate clinic outcomes relative to competitors using the within-MSA Z-score. Analyze the following Z variables: –3-year lagged unadjusted birth rate –3-year lagged patient age distribution (proportion under 40 years of age) –1-year lagged unadjusted birth rate –1-year lagged patient age distribution

10 Empirical Model Dependent variable is ln of clinic market share in MSA Z is clinic-level performance measure P is an indicator of the public reporting period (1998+) X are controls for time-varying MSA characteristics (number of incumbents, number of entrants, number of physicians, and county population) Y includes year fixed effects Estimation by OLS Allow for correlation within MSA when estimating standard errors

11 Key Results Dependent Variable: ln(market share) Independent Variable Coeff (s.e) 3-year lagged birth rate*after (0.205)** 3-year lagged birth rate (0.157) 1-year lagged birth rate*after (0.16) 1-year lagged birth rate (0.180)***

12 Summary of Findings The implementation of mandatory quality reporting caused fertility clinics reporting better outcomes to gain market share relative to their competitors. –A change from the 25 th to the 75 th percentile z-score leads to a 12% increase in market share. Consumers used basic information about patient mix when evaluating clinic performance. –Holding birth rate constant, clinics with a greater proportion of younger patients had lower market share after than before the implementation of public reporting. Consumers have information about clinic quality from sources other than the report card. –1 year lagged birth rates were positively correlated with market share and the effect did not differ after the implementation of public reporting

13 Why Do Report Cards have a Larger Effect in this Context than in Others? Performance measures may be either more informative or easier to understand. Consumers may have less access to or place less value on sources of information other than the report card. The audience is different. –Patients seeking treatment for infertility are relatively young, wealthy, and highly educated; the setting is non-emergent.

14 Conclusions Consumer report cards have potential to improve quality of care. –Consumers do respond to information on quality when choosing among providers. –Very simple risk adjustment can mute the incentives of providers to improve their scores by selecting good prognosis patients. The overall effects on patient welfare in this context are unknown. –Did quality improve in response to quality reporting? –Were clinics able to improve their scores, without a corresponding reduction in market share, by selecting good prognosis patients based on characteristics that were not publicly reported? The extent to which these findings are generalizable to other settings is uncertain.