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.
This is irrational on one level. But on the other hand, it’s pretty intuitive — people are much better equipped to judge the quality of hospital amenities than they are to judge the quality of patient care. I’m also familiar with research indicating that when it comes to malpractice suits the main issue isn’t how much the doctor screws up, but whether or not he or she is a generally nice and friendly person. Again, you can see why it might go that way, but these things are important aspects of the health care market.