Hospital Revenue Not a Factor in Clinical Outcomes

Researchers find no link between hospitals' financial performance and heart attack, congestive heart failure, and pneumonia outcomes.

Higher hospital revenues are not associated with better publicly reported clinical outcomes, according to a recent study in the Journal of Hospital Medicine.

Lead author Oanh Nguyen, MD, MAS, assistant professor of internal medicine and clinical sciences at the University of Texas Southwestern Medical Center, says that she and her research team had expected that there would be at least somewhat of a correlation: "We found, to our surprise, that there was no association."

The study was inspired by a 2013 Time Magazine article, "Bitter Pill: Why Medical Bills Are Killing Us," which explored the high cost of healthcare and how widely costs can vary. Nguyen says that one issue that the article left open was whether institutions with financial ability to invest in better care were doing so.

The authors write that, "Public reporting of outcomes is thought to influence hospital reputation; in turn, reputation affects patient perceptions and influences demand for hospital services, potentially enabling reputable hospitals to command higher prices for services to enhance hospital revenue."

Indeed, a HealthLeaders story from last year notes that Health Care Cost Institute "data shows wide variability in prices for many services; prices for the same service can range from $10 to $1,000."

Nguyen and her colleagues set out to "assess the relationship between hospital financial performance and publicly reported outcomes of care."

In their study, the primary measure of hospital financial performance was net revenue from operations. But they also performed two companion analyses using operating margin and total margin as financial markers.

After all, there are a variety of reasons why a hospital may have greater  financial resources, whether it comes from an endowment, from high margins, volume, regional variations, and whether they are academic health centers, for-profit organizations, or nonprofits.

But in the eyes of the researchers, "our hypothesis is a dollar is a dollar, no matter how you get it," Nguyen says.

Looking for Correlations
The researchers examined the relationship between financial performance and 30-day mortality and readmission rates for heart attacks, congestive heart failure, and pneumonia at 279 California hospitals.

In order to do this, they used financial data from the 2008 and 2012 Hospital Annual Financial Data Files from the Office of Statewide Health Planning and Development (OSHPD) in the state of California. They then merged the financial data with outcome measures from July 1, 2008 to June 30, 2011 that were publicly reported by CMS on the Hospital Compare website

The researchers adjusted for several hospital characteristics: teaching status, rural location, bed size, safety-net status, ownership, Medicare caseload, and volume of cases reported for the respective outcome.

They found that strong hospital financial performance was not associated with improved publicly reported outcomes for mortality and readmissions.

"It didn't really matter how you looked at the revenue streams," Nguyen says.

The one exception in the findings: Rates of congestive heart failure mortality, which declined slightly in facilities with higher revenues.

The researchers say the reason for this is "unclear," but in speculating why it may be so, they write that "[o]ne possibility is that the CMS model for CHF mortality may not adequately risk adjust for severity of illness."

"Thus, robust financial performance may be a marker for hospitals with more advanced heart failure services that care for more patients with severe illness."

The general finding that hospital financial performance and the measured outcomes aren't linked "are reassuring for patients" who might worry that they're getting worse care if a hospital is less financially successful than another a few towns away, Nguyen says.

The study also showed that improved performance on those outcome metrics was not associated with a subsequent loss in revenue, something that the researchers say has been a worry for policymakers.

They conclude, though, that "financial incentives, in addition to public reporting, such as readmissions penalties, may help motivate hospitals with robust financial performance to further improve publicly reported outcomes."

Open Questions

There are some questions that the study didn't answer, such as whether high-revenue hospitals better at providing specialized or high-tech care. Nguyen says it would also be helpful to look at patient satisfaction and other quality-of-life measures in comparison to hospital revenue.

"Readmissions and mortality are important outcomes, but they're not the end of the story in terms of what matters for patients and communities," she says.

According to Nguyen, the study also invites other questions about patient perceptions of quality and value overall.

"I think hospital leaders should be aware that hospital costs and charges are really coming under public scrutiny, and it's going to be very important to be more transparent," she says. Increasingly, high-priced institutions need to justify their prices. Nice amenities may not translate to better hospital care, she adds.

Other recent research shows that patients don't always perceive a link between healthcare cost and quality, and that healthcare cost information needs to be presented carefully to avoid consumer confusion and misunderstanding.

"Most consumers think you get what you pay for," Nguyen says. "Sometimes you do get what you pay for, and sometimes you're just paying more."