The effect of financial pressure on the quality of care in hospitals

This paper examines the effect of financial pressure on hospital quality, using health outcomes after treatment for acute myocardial infarction (AMI) as quality indicators. The financial pressure variables are: fiscal pressure from the Prospective Payment System (PPS) for inpatient care, and changes in health maintenance organization (HMO) penetration at the county level. The study shows that both types of financial pressures adversely affect short-term health outcomes, but do not affect patient survival beyond 1 year after patientsʹ hospital admissions. Furthermore, the impact of HMO penetration appears to differ from that of Medicare payment changes for certain hospitals because HMO penetration encourages price competition.