Consumer response to composite ratings of nursing home quality

Abstract

Health-care report cards are intended to address information asymmetries and enable consumers to choose providers of better quality. However, the form of the information may matter to consumers. Nursing Home Compare, a website that publishes report cards for nursing homes, went from publishing a large set of indicators to a composite rating in which nursing homes are assigned one to five stars. We evaluate whether the simplified ratings motivated consumers to choose better-rated nursing homes. We use a regression discontinuity design to estimate changes in new admissions six months after the publication of the ratings. Our main results show that nursing homes that obtained an additional star gained more admissions, with heterogeneous effects depending on baseline number of stars. We conclude that the form of quality reporting matters to consumers, and that the increased use of composite ratings is likely to increase consumer response.