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Medicare could save $8 billion annually if all the hospitals included in a new Lown Institute report boosted their cost and outcome metrics to match the top performers.
Lown says its report is the first to rank more than 3,000 hospitals based on cost efficiency, a metric that combines outcomes—measured by patient mortality rates—with their cost to Medicare. The healthcare think tank’s analysis turned up wide variation in cost even among hospitals of the same type, size, region and with similar mortality rates. Medicare costs ranged from $9,000 to $27,000 per patient among those with average 30-day mortality rates.
“It looks like if everybody could do as well as the best, we would definitely save money and save lives,” said Dr. Vikas Saini, president of the Lown Institute. “But it’s hard to say for any given hospital: This is the magic formula.”
To arrive at its scores, Lown used hospitals’ risk-standardized 30- and 90-day mortality for Medicare patients hospitalized between 2016 and 2018. For cost, researchers used 30- and 90-day total risk-standardized Medicare payments for patients hospitalized between 2016 and 2018. The payments were standardized for patient risk so that hospitals with sicker patients weren’t penalized.
To combine those metrics into scores, Lown placed them on a scatter plot and measured each hospital’s distance from the ideal score to create a score for each facility, Saini said.
Not everyone agreed with using mortality as the singular quality metric. Michael Abrams, managing partner of the healthcare consultancy Numerof & Associates, said it’s too high level a measure to provide any useful information. He said something like heart attack outcomes would be more useful.
“There’s got to be something short of death that you would call not good quality,” Abrams said. “It doesn’t go very far in explaining what is the quality of care.”
Lown chose mortality because it’s the “hardest to argue with,” Saini said. The group will look at other metrics as it expands its research.
Topping the list was Pinnacle Hospital in Crown Point, Indiana, a small, 18-bed physician owned hospital whose website touts a variety of specialties, like orthopedic services, plastic surgery and internal medicine. Pinnacle did not return a request for comment.
Saint Mary’s Regional Medical Center in Reno, Nevada came in second place. Alan Smith, the hospital’s chief financial officer and chief operating officer, said he thinks that’s because of its intense focus on communication between members of the clinical team, support staff, community providers and family caregivers. There’s a lot of coordination to ensure patients get their test results and medications. If they’re getting discharged to skilled nursing facilities, hospital staff contact those providers to coordinate the transfer. If they’re going home, they contact caregivers and make sure they understand their responsibility, he said.
“That focus on communication begins when the patient crosses our threshold and doesn’t stop until they go home,” Smith said.
Smith said he thinks the main drivers of mortality after discharge are a lack of transportation and the high cost of medications, which in some cases prevents patients from picking them up. Saint Mary’s helps fund a local not-for-profit organization that drives patients to pharmacies, doctor’s appointments or grocery stores—wherever they need to go. The hospital does not have a program to help patients afford their medications.
Saint Mary’s is part of Prime Healthcare, a for-profit hospital chain based in Ontario, California that had multiple hospitals near the top of Lown’s cost efficiency ranking. Smith said he thinks it’s because Prime is physician led and encourages hospitals to share protocols that work well with one another.
Prime and two of its doctors in July paid $37.5 million to settle kickback allegations involving implantable medical devices. That’s after Prime and its CEO paid $65 million in 2018 to settle a U.S. Justice Department lawsuit accusing the provider of pushing doctors to admit Medicare beneficiaries as inpatients when they should have been outpatients.
Third on the list was Mercy Medical Center in Dubuque, Iowa, followed by Encino Medical Center in Encino, California, another Prime hospital. AdventHealth Hendersonville in North Carolina, formerly Park Ridge Health, came in fifth place.
Ella Stenstrom, AdventHealth Hendersonville’s chief financial officer, said in a statement the hospital’s commitment to “whole-person care” is what sets it apart. That means staff focus on meeting patients’ physical, mental and spiritual needs.
“These patients let us know how much they appreciate this focused effort on their care paired with cost efficiencies,” she said.
Oroville Hospital in Oroville, California came in sixth. Like Saint Mary’s, Oroville Hospital’s CEO Robert Wentz said he thinks the key to his hospital’s performance is communication. Staff track each patient closely, including a detailed run-down of patients with hospitalists each morning.
Whenever a patient is going to be discharged, that’s communicated through the system so that not only doctors, but case managers, discharge planners and everyone else involved is coordinated.
“If someone asked, ‘Why are you ranked so high?’ If I could say in a word, it’s communication,” Wentz said.
Saini wasn’t sure why the most efficient hospitals ended up being in small or mid-sized cities. Research tends to show that metro hospitals have lower mortality and costs and rural or suburban hospitals tend to be the opposite, he said. He also wasn’t sure why several for-profit hospitals topped the list of most cost-efficient hospitals, guessing that it could be they have more patient throughput.
“The speculation would be they maybe really get them in and get them out,” Saini said, “kind of like with restaurants that if you’re able to have a higher turnover, you do better.”
Lown’s report also estimated how much Medicare would save if less efficient hospitals had the same per-patient costs as their more efficient peers. This section of the study compared hospitals in the same cities with similar mortality rates.
For example, in Boston, Mount Auburn Hospital’s 30-day per-patient cost was $11,708. Brigham and Women’s Hospital’s per-patient cost was $14,567. Lown estimated that if Brigham and Women’s was as efficient as Mount Auburn, Medicare would save $33.4 million annually.
In Chicago, Advocate Illinois Masonic Medical Center’s 30-day per-patient cost was $12,913, compared with $16,372 at Rush University Medical Center. The study said that showed a potential annual savings of $27.5 million.
Since Medicare pays standardized rates, Lown’s cost metric does not reflect variation in prices, but variation in the volume of services delivered to patients. It includes all providers involved in the patient’s care, including skilled nursing or home health providers.
The assumption is that if a hospital or community is better at coordinating care throughout a patient’s episode, the hospital will perform better on cost efficiency, Saini said. The cost data does not include commercial billing, but he said if a hospital’s Medicare billing practice reflects its broader style or culture, that should flow over to commercial as well.
“When clinicians put their minds to it, there’s probably a lot of ways of improving care—both quality and cost—that require focused attention,” Saini said, “and then the innovation and the creativity of the clinical community, when it’s brought to bear, can actually generate a lot of interesting and good results.”
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