Hospitals In Better Financial Shape Do Not Necessarily Have Better Outcomes Interview with:
Oanh Kieu Nguyen, MD, MAS | Assistant Professor UT Southwestern Medical Center Divisions of General Internal Medicine and Outcomes and Health Services Research Dallas, TXOanh Kieu Nguyen, MD, MAS | Assistant Professor
UT Southwestern Medical Center
Divisions of General Internal Medicine and Outcomes and Health Services Research
Dallas, TX What is the background for this study? What are the main findings?

Dr. Nguyen: The impetus for this study was Steven Brill’s 2013 Time magazine award-winning article, “Bitter Pill: Why Medical Bills Are Killing Us.” This report investigated inflated charges for hospital bills, and and suggested that a major driver of irrationally high charges was the disproportionate negotiating power of hospitals, as evidenced through their high profit margins. As hospital physicians, our reaction was “But what if hospitals that make more money are delivering more value and better outcomes to patients? If that’s the case, wouldn’t most people say that their profits justifiably earned?” Surprisingly, we found that no one had really looked at this issue in a systematic way.

We set out to answer this question using hospital financial data from California’s Office of Statewide Health Planning and Development (OSHPD) and outcomes data on 30-day readmissions and mortality for congestive heart failure, acute myocardial infarction (‘heart attacks’), and pneumonia from the Centers for Medicare and Medicaid Services (CMS) Hospital Compare website. California has more hospitals than any other state other than Texas, and also has a wide diversity of hospital types. The OSHPD financial data are also audited, so we thought these would be more reliable than using data from other sources. Because the outcomes reported on Hospital Compare are viewable by the general public, we thought hospitals would be most motivated to target improvements in these outcomes.

We found that there was almost no association between how much money a hospital made and its subsequent performance on outcomes. The exception to this was we found that hospitals that had better finances reported higher rates of 30-day mortality for congestive heart failure, which was counterintuitive. We’re not sure why this was the case but speculate that it is possible that hospitals with better finances take care of sicker heart failure patients because they have more advanced (and more expensive) treatments available.

Additionally, we looked to see if hospitals with lower readmissions rates subsequently made less money. This is a specific area of policy concern given federal penalties in the U.S. for excessive hospital readmissions. Many critics of these penalties have argued that reducing readmissions makes no financial sense for hospitals, since readmissions still generate hospital revenue despite the penalties. Thus, reducing readmissions would reduce a key source of hospital revenue and lead to poorer hospital finances. However, our analysis showed that lower readmissions rates were not associated with poorer hospital finances, as has been feared. What should clinicians and patients take away from your report?

Dr. Nguyen: Hospital leaders should be aware that hospital charges, costs, and profits are coming under public scrutiny, and that they will have to be more transparent about their finances to patients and the public. They will also be increasingly expected to justify their value to patients, their local communities, and to American society at large. If measures such as 30-day readmissions and mortality do not adequately measure hospital quality and value, hospital leaders should help policy makers develop and implement better measures of hospital quality and value.

Patients should be aware that ‘fancy’ hospital surroundings (often the external manifestation of robust hospital finances) do not necessarily translate to better hospital care, especially for common conditions such as heart failure, heart attacks, and pneumonia. Sometimes you get what you pay for; sometimes you are just paying more. What recommendations do you have for future research as a result of this study?

Dr. Nguyen: The lack of association between hospital finances and publicly reported outcomes suggests that hospitals don’t have much of a financial incentive to improve these outcomes. Additionally, public reporting of outcomes alone appears to be inadequate to hold hospitals accountable for improving outcomes. The CMS Hospital Readmissions Reductions Program (HRRP), implemented in October 2012, took the approach of tying financial incentives (readmissions penalties) to publicly reported 30-day readmissions rates. This combined approach may be key to motivating hospitals to improve outcomes buts its effectiveness is currently known. This would be a key area for future investigation once outcomes data are available for the three year period after implementation of the HRRP. Thank you for your contribution to the community.


J Hosp Med. 2016 Feb 29. doi: 10.1002/jhm.2570. [Epub ahead of print]

Relationship between hospital financial performance and publicly reported outcomes.

Nguyen OK1,2, Halm EA1,2, Makam AN1,2.

Note: Content is Not intended as medical advice. Please consult your health care provider regarding your specific medical condition and questions.

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Oanh Kieu Nguyen, MD, MAS | Assistant Professor (2016). Hospitals In Better Financial Shape Do Not Necessarily Have Better Outcomes