Better hospital financial performance didn’t produce better patient outcomes, study shows

In addition, the study found that improvements in patient outcomes on several commonly assessed criteria did not lead to a loss in revenue, as some had feared.

Researchers assessed the relationship between financial performance from more than 250 hospitals against their 30-day mortality and readmission rates for heart attacks, congestive heart failure, and pneumonia -- three key conditions for which outcomes are publicly reported by the Centers for Medicare and Medicaid Services (CMS). Strong hospital financial performance was not associated with improved publicly reported outcomes for mortality and readmissions for any of those conditions.

"This finding suggests hospitals that are financially well off do not necessarily do better on these publicly reported outcomes than hospitals with worse financial performance," said study lead author Dr. Oanh Nguyen, Assistant Professor of Internal Medicine and Clinical Sciences at UT Southwestern.

"We also found that improved performance on these outcome metrics was not associated with a subsequent loss in revenue, which has been a major concern in policy circles," noted senior author Dr. Anil Makam, Assistant Professor of Internal Medicine and Clinical Sciences at UT Southwestern.

Other implications included: • Public reporting of outcomes may have had less than the intended impact in motivating hospitals to invest in quality improvements.

• Financial incentives in addition to public reporting, such as penalties for excessive readmissions, may help motivate hospitals with robust financial performance to further improve outcomes.

Hospital care accounts for the single largest category of U.S. health care expenditures, totaling $936.9 billion in 2013, according to the study. Because reimbursement for services provided creates incentives for hospitals to prioritize high-volume over high-quality care to maximize profits, researchers wanted to examine the relationship between hospital financial performance and quality patient outcomes. The few existing studies had suggested a limited correlation between improved hospital financial performance and better quality, patient safety, and lower readmission rates, but had important limitations, resulting in the need for the new, updated study.

Researchers collected audited hospital financial data from the Office of Statewide Health Planning and Development in California in 2008 and 2012, and linked this data to 30-day mortality and readmission data from the CMS Hospital Compare website, hospitalcompare.hhs.gov. Researchers measured hospital financial performance based on net revenue from operations, operating margin, and total margin.

The study appears in the Journal of Hospital Medicine.