The role of patient amenities in hospital demand.

Amenities such as good food, attentive staff, and pleasant surroundings may play an important role in hospital demand. We use a marketing survey to measure amenities at hospitals in greater Los Angeles and analyze the choice behavior of Medicare pneumonia patients in this market. We find that the mean valuation of amenities is positive and substantial. From the patient perspective, hospital quality therefore embodies amenities as well as clinical quality. We also find that a one-standard-deviation increase in amenities raises a hospital's demand by 38.4% on average, whereas demand is substantially less responsive to clinical quality as measured by pneumonia mortality. These findings imply that hospitals may have an incentive to compete in amenities, with potentially important implications for welfare. Dana Goldman RAND Corporation 1776 Main Street P.O. Box 2138 Santa Monica, CA 90407-2138 and NBER [email protected] John A. Romley RAND Corporation 1776 Main Street PO Box 2138 Santa Monica, CA 90407 [email protected]