Researchers writing in the journal Health Affairs examined the characteristics of hospitals along the dimensions of quality and cost. This topic has assumed heightened importance with CMS’s value-based purchasing initiative, which initially is based on process and outcome measures of quality but which is adding measures of efficiency or cost. (HA Article) The researchers used Medicare data files, including claims data, information on beneficiaries, patient satisfaction data, quality performance scores, data from the American Hospital Association on hospital characteristics and information on the demographics of the community in which the hospital is located. They constructed quality scores for each hospital and inferred whether the hospital was low or high cost looking at charge to cost ratios and then placed each hospital in a grid along dimensions of quality and cost.
There were 122 hospitals that were in the highest quartile of quality and the lowest quartile of cost–these are the “best” hospitals. There were 178 hospitals in the lowest quartile of quality and the highest quartile of cost–the “worst” hospitals. The worst hospitals served a much greater percent of poor and minority patients. The best hospitals tended to be larger, to be non-profit and were less likely to be in the South and more likely to be in the Northeast. High quality, but high cost hospitals had many similar characteristics but also were more likely to be teaching hospitals and to have high nurse to patient ratios. Patients also rated the worst hospitals much lower on the patient experience scores. Since that survey asks a number of questions about the basic atmosphere and condition of a hospital, hospitals in wealthier areas with fancier wood, marble, etc. structures probably are at an advantage although that likely has little to do with actual care quality.
It seems likely that there are characteristics of patients from poor communities that account for some of the higher costs at hospitals that serve those communities. While the research attempts to adjust for illness burden, it may not be capturing all of the extra services needed by those patients. It may also be that serving poor patients makes it harder to get high scores on the quality measures, perhaps because these patients are less compliant with care recommendations and perhaps hospitals serving high numbers of poor patients find it harder to attract good staff. More research is needed to understand all the dynamics going into the designation of a hospital as high or low quality or high or low cost. This is particularly important because, as the researchers point out, the negative financial consequences of being designated low quality by CMS could make it even harder for these hospitals to improve their performance.