The relationship between quality and cost: pure and simple?

This study focuses on the relationship between the quality and the cost of hospital care. I report the findings of variable cost regressions that include outcome indicators of hospital quality: risk-adjusted mortality and readmission indices. Hospital level data are aggregated from a modified 1985 Medicare Provider Analysis File (MEDPAR) and the Commission of Professional and Hospital Activities. Results show several quality measures to be statistically significant determinants of cost. With each measure, the cost-quality relationship is nonlinear but not monotonically increasing throughout the entire range of quality.