Do higher hospital reimbursement prices improve quality of care

Does higher medical spending improve quality of care? We estimate the effect of changes in regulated reimbursement prices for hospitals on multiple dimensions of hospital quality, including mortality outcomes, surgical complications, process quality, and patient satisfaction. We exploit an exogenous variation in reimbursement prices between the years 2006 and 2010 based on a reform of hospital financing in Germany. We find that changes in reimbursement prices do not affect quality of care. This effect is precisely estimated, and we can rule out effect sizes that are large relative to the overall variation in quality indicators across hospitals.