Management Accounting Section Midyear Meeting

Quality Disclosure Regimes and Their Impacts

• In Event: Hospitals

Abstract

We examine quality disclosure regulation in the California hospital industry. Unlike extant research where disclosure regulation is an indicator variable that is either present or absent, we study the construct of disclosure more granularly. We identify four distinct disclosure regimes that include – (1) no regulated quality disclosures and minimal discourse about quality, (2) no regulated quality disclosures and heightened discourse about quality, (3) mandated quality disclosures, (4) and mandated quality disclosures with financial penalties for poor performance. Using patient level data for the period 1995-2013 and a difference-in- differences empirical strategy, we find that disclosure is associated with quality improvements that are not only pronounced in disclosed ailments, but also spill over to non- disclosed ailments in the same medical family as the disclosed ailments. Additionally, quality improves with an increase in the regulatory rigor of the disclosure regulation. Finally, we find anecdotal evidence of impression management by high and low performing hospitals, indicating that hospitals care about quality performance. Our findings shed light on the continuous nature of the disclosure construct and have implications for the design of disclosures in markets where quality is a critical performance variable.

Authors

• Aishwarrya Deore, Michigan State University

• Ranjani Krishnan, Michigan State University

• Martin Holzhacker, Michigan State University