Cost/Quality Relationship Unclear

A study reported in Health Affairs (Health Affairs article) provides further input to the question of the relationship, if any, between costs and quality in health care.  This particular study examined the costs of about 3800 hospitals in the United States and compared them with certain quality measures used by the Center for Medicare Services in its incentive programs for hospitals.  As used in this study, costs means the actual costs the hospitals incurred in providing care, not the price they charged or what they were paid for the services.

The authors’ initial hypothesis was that lower cost hospitals might have better management and therefore might also have better quality.  Hospitals in the lowest quartile of costs were more likely to be for-profit, have a greater percent of Medicare patients and have lower nurse staffing ratios than hospitals in the highest quartile of costs.  But these low-cost hospitals also had slightly worse performance on some quality indicators, although not on others.  In no case did they appear to have better quality performance.  The authors were not able to elucidate specific reasons for why quality might be better or worse in the low cost hospitals, but their overall conclusion is that there is not a consistent relationship between hospital costs and quality.

Much of the Dartmouth Atlas of Health Care work suggests that high cost hospitals and physicians often have worse quality outcomes than low cost ones, but in that work, cost means what was actually paid, typically for an episode of care or an illness for specific matched patients and the relationship between what was paid and the hospital or physician’s actual costs is not examined.  And cost on a per service basis could be low, but if lots of services are delivered, the overall cost of an episode of care or treatment for an illness could still be high. 

While some researchers have suggested that better quality health care will lead to lower costs, often because they believe better quality will mean less overall services, there is often so much confusion about how quality is defined and how cost is defined, that it is hard to compare results of various studies or analyses. At this point, however, it appears difficult to find conclusive evidence that better quality and lower cost are definitively correlated.