Ruhr Economic Papers

Ruhr Economic Papers #527

Selective-referral and Unobserved Patient Heterogeneity – Bias in the Volume-outcome Relationship

by Corinna Hentschker and Roman Mennicken

RUB, RWI, 11/2014, 25 S./p., 8 Euro, ISBN 978-3-86788-602-4 DOI: 10.4419/86788602



This paper examines the causal effect of the experience of a hospital with treating hip fractures (volume) on treatment outcome for patients. A full sample of administrative data from Germany for the year 2007 is used. We apply an instrumental variable approach to eliminate endogeneity concerns due to reverse causality and unobserved patient heterogeneity. As instruments for case volume we use the number of potential patients and the number of further hospitals in the region around every hospital. Our results indicate that after application of an IV regression of volume on outcome, volume significantly increases quality.

JEL-Classification: I11, I12, I1

Keywords: Volume; hospital quality; mortality; instrumental variable