Social Interaction in Patients' Hospital Choice: Evidence from Italy

We study the influence of social interaction on patients' choice of hospital and its relationship with the quality that is delivered by hospitals, using Italian data. We explore the effect on individual choices of a set of variables such as travel distance and individual- and hospital-specific characteristics, as well as a variable capturing the effect of the neighbourhood. The richness of our data allows us to disentangle the influence of sharing information (the network) on patients' choices of hospital from contextual effects. Our empirical investigation suggests that past experience in the utilization of health services by the network plays a significant role in explaining current patients' choices of hospital. Other relevant factors that influence patients' decisions of being admitted in a particular hospital are prior use of health services in that hospital, patient-to-hospital distance and supply factors such as the number of beds and number of doctors. We then investigate the relationship between a set of health outcome indicators and the sensitivity of patients' choices to the network, to test whether sharing information increases the likelihood of selecting a high quality hospital. Our results suggest that social interaction does not have an influence on health outcomes, and in some cases it may even mislead patients, who end up in low quality institutions. One explanation for this result is the absence of a source of information on the quality of hospitals that is accessible to all individuals, such as guidelines or star ratings, which may exacerbate the influence of information that is gathered locally on choices of hospital and may result in a lower degree of competition between hospitals and lower quality.