Quality Improvement Spillovers : Evidence From the Hospital Readmissions Reduction Program

Financial incentives are commonly used to encourage improvements in quality. However, the presence of spillovers can make managing these incentives difficult. Using a large, national dataset, we study the spillover effects of a national healthcare quality improvement policy, the Hospital Readmissions Reduction Program (HRRP), on patients and metrics not targeted by the policy. Whereas prior work has shown limited spillover of quality improvement initiatives in manufacturing settings, we find that in the healthcare setting HRRP led to improvements of 3% to 6% in 30-day readmissions (the target metric) for those targeted by the policy as well as for those with non-targeted insurance types or clinical conditions. We also find significant improvements in non-targeted measures such as 31-60-day readmissions and hospitalization cost. These findings provide insight into how hospitals operationalized quality improvements, as the legislation had beneficial spillover effects beyond the narrow focus of the policy