The Economic Impact of Healthcare Quality

IMF Working Papers, August 16, 2019

Source details

Study objective: measure the costs of hospitalizations on patients’ earnings and labor supply.
Data: the universe of hospital admissions in Denmark and full-population tax data.
Proposed measure: "Adjusted Earning Losses" (AEL) — evaluates quality of treatment based on its ability to mitigate the labor market consequences of a given diagnosis.

Quality evaluation approach: assess hospitals by how much they reduce post-hospitalization labor market losses for patients with the same diagnosis.
AEL: a new hospital-quality measure constructed from observed post-hospitalization earnings and labor supply outcomes.

Difference across hospitals: a 4 percentage points difference in lost earnings between the best and worst large Danish hospitals, all else equal.
Additional information: AEL contains significant additional information relative to traditional measures and does not suffer from worse selection issues.
Time trends in labor cost of hospitalizations:
- The average post-hospitalization reduction in labor earnings declined by 25 percent on the intensive margin between 1998 and 2012.
- The average post-hospitalization reduction in labor earnings declined by 50 percent on the extensive margin between 1998 and 2012.
Variation: large variations across diseases in the decline of the labor cost of hospitalizations.

Subject areas: Health; Labor; Labor costs; Labor force participation; Labor markets; Wages.
Keywords provided: earnings loss; Global; health shocks; healthcare quality; hospital admission; hospital choice; hospital patient; hospital productivity; Hospital quality; Labor costs; Labor force participation; labor market; Labor markets; labor supply; low-AEL hospital; medical condition; quality measure; standard deviation; Wages; WP.