Hospitals as Hotels


Hospitals may be more recession-proof than many other industries, but they are hardly immune. If you are running a hospital these days and want keep your beds full, what should you do: Try to raid your competitors for the best doctors available? Undertake an ad campaign that trumpets the excellence of your care? Or maybe just install wireless internet and spruce up the rooms?

According to a new working paper called “Hospitals as Hotels” by Dana Goldman and John A. Romley, both of RAND, that last option — improving the hospital’s patient amenities — might be the best investment. (Abstract is here, PDF is here.) As they summarize:

“Amenities such as good food, attentive staff, and pleasant surroundings may play an important role in hospital demand. We use a marketing survey to measure amenities at hospitals in greater Los Angeles and analyze the choice behavior of Medicare pneumonia patients in this market. We find that the mean valuation of amenities is positive and substantial. From the patient perspective, hospital quality therefore embodies amenities as well as clinical quality. We also find that a one-standard-deviation increase in amenities raises a hospital’s demand by 38.4 percent on average, whereas demand is substantially less responsive to clinical quality as measured by pneumonia mortality. These findings imply that hospitals may have an incentive to compete in amenities, with potentially important implications for welfare.”

I find this mildly disheartening but not very surprising. The hospital that my family and many friends use in New York has extraordinary medical personnel and great outcomes but facilities that leave quite a bit to be desired.

There is a constant mental struggle between acknowledging how good the care is while facing how unpleasant the surroundings can be. So far, we’ve stuck with it — but I can imagine a first-time patient walking in there and deciding, merely because of the lack of amenities, not to become a second-time patient.


In the last months of her life in 1986, my mother was in and out of the hospital. At home one evening, she was having trouble breathing. She called me into her room and asked, "Well, do you think I should check into the hospital?"

That sounded to me like a request for attention and, yes, pleasure. And you wouldn't have believed how her bedroom was soon suffused with the energy of uniformed men to help her "check in."


"Demand is substantially less responsive to clinical quality as measured by pneumonia mortality"

One reason for this may be that it is incredibly difficult for a consumer to learn which hospitals have better clinical quality. For one, it's not well-publicized. Furthermore, it's very hard to measure. Maybe the hospital that has the highest pneumonia mortality is not the worst hospital but the best - the reason their mortality is higher is they are accepting the sickest patients. Sure you could control for this, but it may be difficult.


Amenities at hospitals is analogous to nicely packing a product. The quality of the actual doctors is like the quality of the product itself, which customers don't notice right away.
Unfortunately, amenities sometimes matter more, as it should be. It is hard to truly see if a doctor is good, while amenities are immediate and more easily noticeable.
As for that hospital in newyork that Mr.Dubner is talking about, they should definitely invest more on packaging their product. It'd be a win-win for everyone since more people would come, get higher quality medical treatment, while the hospital rolls in cash.


The hospital that my wife had our baby in (CPMC in SF) had wonderful nurses, doctors, etc. But what I will remember most about the place (And look forward to most for the next kid) are the cookies that are delivered to each room every afternoon.


why not just crank up the morphine pumps?

Nate Cobb

This makes sense, apart from one point: hospitals are overcrowded already. Increasing demand is really about increasing demand for patients that result in a profit, and thus displacing patients that don't. At an individual level this is good, at an aggregate level its a zero-sum game.

Another approach is to offer value-added services as a few hospitals do (such as Massachusetts General and Brigham and Women's in Boston.) In this model a patient can stay on a seperate floor in a single room with superior amenities for a fee (thus subsidizing other patients). Not surprisingly, the demand is relatively low, in large part as "medical tourists" now avoid the US instead of flocking here.


Hospitals are there to help people. Those who are working there, doctors and nurses, want to truly cure the patients, one must not forget that that is their job (source of money). Doctors have to feed their children, family too. Hospital is a business, and in economics, the side that is providing goods/services must maximize their profit. Today when there is internet, where people can research about medical subjects online, the standard of the expectations are raised, it is normal for all hospitals to have a well equipped, knowledgeable team, like that in the TV show “House”- but kind. Where are the hospitals going to make difference, “attractive”? Amenities.


First of all, patients have virtually no access to data regarding quality of outcome; so how could they possibly shop for a medical facility based on outcomes.

Secondly, even if they did have access to that data, they would find that it is unlikely that choice of facility within the same region will affect their outcome measurably.

Instead of outcome assessments based on data, patients instead rely on outcome assessments based on accumulated anecdotal evidence; or the facilitiy's reputation.

But if the facility's reputation is really just an accumulation of patients perspectives, and those in turn are affected highly by their overall inpatient experience and strongly influenced by use of amenities.

Additionally, if hospitals are paid by health insurers per inpatient day, and the number of days stayed is at all affected by the patient's desire to go home sooner; then amenities should be expected to contribute to demand.

Health Insurers can mitigate some of this hazard by insisting that hospitals switch from contracts based on per-day or per-procedure rates to contracts which pay facilities based on outcomes.



Not the best thing, but has some clinical quality data for some particular conditions that could be used to compare facilities. Also has some data on mortality rates adjusted for risk factors in the particular patient population.


Anyone who doesn't think amenities matter, or should, should read The Experience Economy. People have gone from demanding the good, to demanding service, to now demanding an "experience" that is unique to a provider. Current economic situation aside, providing this experience for a customer becomes more important than providing lowest cost. Hospitals are extremely competitive and if that is what patients, or potential patients expect, that is what the next capital campaign will pay for. You would not BELIEVE the uber-posh birth tower our hospital just built. I know people who decided not to induce so they could wait the extra couple days for it to open. CRAZY.


I have to take issue with this oft-repeated contention that hospitals are more "recession-proof". This is misinformation. Here's a tip: when Americans don't have jobs, they tend not to have health insurance. When they don't have health insurance, they tend not to go to the doctor. We've already seen massive drops in the levels of routine Primary Care visits and elective surgeries. If an issue is not urgent, Americans are not getting it taken care of. Hospital, private doctors offices, and dentists are all suffering in this economic climate.


Agree with #11.

Joe Smith

Amenities may matter for outcomes in some circumstances.

The story may not be true but I have heard that Denmark was in the practice of shipping some convalescing patients to a hotel in Majorca rather than keep them in a Danish hospital because the patients made a faster and better recovery at a lower cost in Majorca.

thawing out

When my dad was alive, My mom loved to go to hospitals. In her mind, they were where she could be taken care and perhaps left alone. I don't see it that way so much. Barring illness, people have to take care of themselves. But then how does one stay calm when kids are demanding and feeling a bit hopeless. the advice I have been giving myself--chill out.


Free beds? What free beds? At my public hospital we have more patients than we can handle and often run at a loss because these patients can't afford the medical care we're providing. We should be fixing the health system first before providing "amenities" to patients - personally, I'd rather see money go to purchasing flu shots than providing cookies (which are full of simple carbs, anyway).


I can't think of a better argument against for-profit hospitals than this. What sort of health system views hospitals having fewer inpatients as a problem? Especially having fewer patients that are likely to get swayed by whether or not there's a nice painting in the room.

If we're talking something other than emergency care (where getting treatment quickly usually matters more than anything else), a rational patient would be most interested in issues like whether the hospital had a reputation for quality care in the specialty in question. In other words, which hospital would help them stay alive. That seems like a good standard to choose from to me.


Honestly, i'm not surprised at all by these results. Patients are not doctors, they don;t know how good a hospital is in medical terms, they either get cured or they don't, as far as they are concerned the medical outcome is binary, the hospitality aspect is measurable and comparable.

What patients do know is how well they are treated, not how well their flu shot worked. Hospitals offer services, one of them being a pleasant stay. When the stay actually is pleasant as well as healing, its obvious how this would have major increases on customer volume


Honestly, especially for the romantically starved. Or otherwise not fully sustained.

Attractive staff is a major component. The "mythical" bedside manner can be composed of good looks, good manners, and just a "nice" look.(more of a circular engagement really)

Babies are calmed by attractive faces, so are infantalized patients. Also, about the mortality issue, patients who wait the longest to check in probably don't have time to scan over hospitals. They just get taken to the nearest or cheapest one.

Hospitals do take what they can get, by ethical standards they must accept patients in need of intensive care. However, especially if patients do not project 'complaint' and stress 'problems' it could be overlooked.

To minimize cost, I think a lot of hospitals will just start hiring better looking staff with more people skills. That's cheaper than switching to comfortable mattresses or buying blankets. Forget the 'delicious' cookies, getting the cafeteria staff on track would cost far more than any of the amenities mentioned above.

Currently you could sleep more comfortably at an average homeless shelter than most hospitals.



If the amenity is a private room, and the privacy allows the patient to sleep better and recover faster, then amenities can be helpful in recovery.

Some roommate situations in semiprivate rooms work well, but others don't.

Health care providers, in my experience, tend to be dismissive when customers -- their patients -- are sensitive to noise, lack of privacy, inferior food, glaring or inadequate lighting and other distractions in the health care environment. Tasteless food? The doctor shrugs. Too much light or noise to sleep? The nurses shrug and keep talking outside your door.

People are so used to the way hospitals are run they haven't tried to figure out the optimal circumstances for recovery.

Why is this? It's because insurers are trying to pare the fees for care (translation: pay workers at hospitals less) so the insurer can point to money saved and skim off part of that money as "profit."

If this country wants an economic stimulus, the Medicare reimbursements could be increased on the condition the additional funding was used only for wages for people earning $40,000 a year or less.

I recently read that better nursing homes have less turnover, so increases in wages would reduce turnover and perhaps attract better quality employees.



I am VERY glad to see that attention is being paid to this topic, even if it is from a profit-driven perspective. As a 29 year old with a chronic medical condition, I have seen the inside of many hospitals and doctor's offices and believe strongly that treatment environment is a critical component of patient care. Ok, so a broken leg is a broken leg, but for chronic conditions that are both triggered and exacerbated by stress, things like "attentive staff and pleasant surroundings" have a very real effect.

For me, it's not about being "romantically starved" or otherwise lonely - being sick can be really scary and upsetting. And then on top of the fact that your body is falling apart, you are dealing with rude, gossipy nurses and indifferent doctors all while lying in an uncomfortable bed while you hear other people moan in pain? For almost 2 years straight, I left every medical "encounter" in tears, even though, technically, the clinical quality of my care was very good. But I often didn't get as many check-ups as I should have because, to put it bluntly, it sucked so bad going to the doctor.

I have often though to myself, "There is really a market for a hospital that doesn't freak people out when they walk in the door; but rather makes people relax when they arrive because they know right away that they are going to get help to get better." Now that there's some market research to back up that idea, maybe my next visits won't be quite so abrasive...