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The Volume-Outcome Relationship Revisited: Practice Indeed Makes Perfect

Objective: To examine the causal effect of a hospital's experience with treating hip fractures (volume) on patient treatment outcomes.

Data Sources: We use a full sample of administrative data from German hospitals for 2007. The data provide detailed information on patients and hospitals. We also reference the hospitals’ addresses and the zip codes of patients’ place of residence.

Study Design: We apply an instrumental variable approach to address endogeneity concerns due to reverse causality and unobserved patient heterogeneity. As instruments for case volume, we use the number of potential patients and number of other hospitals in the region surrounding each hospital.

Principal Findings: Our results indicate that after applying an instrumental variables (IV) regression of volume on outcome, volume significantly increases quality.

Conclusions: We provide evidence for the practice-makes-perfect hypothesis by showing that volume is a driving factor for quality.

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