Report Cards, Incentives, and Quality Competition in Health Care

Throughout the health care sector, report card programs, which collect and publicize information on providers’ quality, have been gaining popularity as a means of improving quality. However, to date the empirical evidence of the efficacy of these programs has been mixed. This paper undertakes a theoretical investigation of the impact on providers’ behavior of making better quality information available to consumers. While better quality information often increases quality, it need not necessarily do so. Further, improving the quality information available to consumers need not improve welfare, especially in environments such as health care, where prices are set administratively. Preliminary and Incomplete — Please do not cite without the author’s permission ∗Email: [email protected]. I thank Amitabh Chandra, Daniel Hojman, Erzo Luttmer, and Richard Zeckhauser for helpful conversations.