You're Being Watched

Patients' usage of cost and quality data has been limited. But don't let that fool you.

About 36 million U.S. adults—roughly 16% of the adult population—had a medical procedure performed at a new-to-them facility in 2007, but very few logged on a computer to compare cost and quality data before deciding where to seek care.

Nearly three in four relied solely on their physician's referral, according to a new report by the Center for Studying Health System Change, and fewer than 10% sought any comparative information. But hospital leaders should not be lulled into thinking quality and cost ratings do not matter, warns Michael L. Millenson, president of Health Quality Advisors in Highland Park, IL. "There is no more important issue to the economic future of any hospital than quality and price transparency," he says.

For one thing, just because patients are not yet using cost and quality data for decision-making does not mean no one is peeking at your performance. Competitors, prospective employees, trustees, and the media all may use the ratings in ways that affect the hospital.

For another, patients will likely start using the ratings, as well. Keith Seashore, chief financial officer for managed care at Alegent Health in Omaha, says the Centers for Medicare & Medicaid Services, which is heavily promoting its HospitalCompare.com Web site, is leading the way to a consensus on the quality measures that matter. While the measurement of healthcare value—cost and quality—is still being worked out, he expects insurers will eventually produce value data that their members find meaningful.

Millenson says hospital leaders should learn how various ratings are calculated and work to make sure the hospital's performance merits a high score. He compares hospital ratings to auto ratings published in Consumer Reports (which, by the way, is also now reporting hospital ratings). While a bad rating will not immediately kill car sales, an accumulation of bad ratings over time will hurt sales significantly.

"If you don't prepare now so that you'll look good on a report card, you can't say, 'We'll do better on the pop quiz next week,'" he says. "Once you impair your reputation with bad results that are public, even if you fix it, it takes a long time to win back trust."

—Lola Butcher