Quality of Care

Over the past decade, market forces have increasingly reshaped the American health care system. Public and private payers have hired for-profit managed care organizations to approve the utilization of health care services. Purchasers and their employees select among competing health plans. Health care facilities and systems vie for contracts to treat populations of patients. The infusion of market forces into the health care system has outpaced the dissemination of data on the quality of care. Market forces can allocate resources efficiently in the presence of what economists term “perfect information.” But in the health care marketplace, not even imperfect information is available. While employees may receive information about health care benefits to guide their choices among plans, they know little about the intensity and types of care allowed by a plan’s utilization-review criteria. Similarly, consumers, purchasers, and payers lack sufficient information to compare providers based on their quality of the care. Market economics suggest that when purchasers lack information that differentiates products on the basis of quality, they will maximize their utility by seeking the lowest price. If providers and plans are unable to demonstrate higher quality, they will have little financial incentive to expend resources to improve care. In fact, greater resource utiliza-