End of Life Inpatient Spending and Hospital Advertising

Does hospital advertising inform patient choice or represent ‘cheap talk’? We investigate the hospital advertising at the market level, establishing a correlation with end-of-life inpatient spending, a proxy for geographical differences in hospital spending on care with a uniform outcome.

Abstract:

In recent decades, hospitals have increased their advertising expenditures. How these advertisements impact patients, however, is unclear. Hospital advertising may provide valuable information, reduce search costs, and help patients find higher quality care. Alternatively, it could simply represent ``cheap talk’’ and contribute to wasteful health care spending. This paper provides an initial descriptive analysis of the determinants of hospital advertising at the market level. Using unique data on hospital advertising campaigns, we ask whether hospitals and hospital systems advertise more in markets that have higher health care utilization (measured by end of life Medicare spending). We find that a one standard deviation increase in end-of-life spending is associated with a 48\% increase in all advertising spending, a 30\% increase in hospital-specific advertising spending, and a 57\% increase in hospital system advertising spending. This finding suggests that advertising expenditures are correlated with measures of excess healthcare utilization at the market level.

Recommended citation: Freedman, Seth, Victoria Perez, Megdalynn Fisher. "End of Life Inpatient Spending and Hospital Advertising" under review .