Despite industry pressures on healthcare operations and finances, some acute-care hospitals continue to reduce death rates and complications while charging payers less, maintaining healthy asset levels and operating at lower cost.
That's a principal finding of an analysis of nearly 4,000 acute-care hospitals by HCIA, a Baltimore-based healthcare information company, and New York-based Mercer Health Provider Consulting.
In addition, the study found major improvements among the best small hospitals, a category that "has been under fire for higher death rates and lower quality," said Jean Chenoweth, vice president of HCIA.
Meanwhile, the highest concentrations of best-performing hospitals were located in pockets of high managed-care penetration, demonstrating that the shift to healthcare contracting based on fixed reimbursement and defined populations may be spurring improvement in efficiency and clinical vigilance.
The HCIA/Mercer study of 1993 Medicare cost data produced the "100 Top Hospitals: Benchmarks for Success" list.
The study concluded that if all U.S. hospitals performed at the level of these 100 hospitals, it would result in savings of $21.6 billion a year while trimming a full day off average inpatient lengths of stay. Mortality would decline an average of 17%; complication rates would decline 14%.
The selection process relied on eight measures of clinical, operational and financial performance (See chart, p. 76) to rate hospitals in five peer groups by size, geographic location and teaching status.
This was the second year the two companies rated hospitals. Comparisons between this year's top 100 and last year's showed that the best performers are getting better but that hospitals couldn't stay on the list just by repeating their performance from one year to the next, said Ms. Chenoweth.
Only 25 of the hospitals on this year's list were on last year's. One of them, Boston's Brigham and Women's Hospital, repeated but in a different hospital category.
"The new top 100 have set new benchmarks for success," Ms. Chenoweth said. "They are clearly performing better and setting new standards for hospitals."
For example, the median expense per adjusted discharge among this year's 100 top hospitals-the "benchmark"-was $3,372, a 9% decrease compared with $3,696 last year. The benchmark for average length of stay was 4.91 days in the most recent study, 6% less than the 5.22 days of a year earlier.
Meanwhile, median expense for all U.S. hospitals rose 4.5% to $3,871 from the previous year's $3,703. And length of stay, while shadowing the 6% decline of benchmark hospitals, remained nearly a day longer: 5.78 days in 1993 and 6.14 days in 1992.
In identifying the top 100 performers, the study compared hospitals with others in their peer group. Then it allotted a certain number of representatives from each category in the final tally based roughly on percentage of the total market:
20 from a group of 1,529 small urban hospitals of fewer than 250 beds.
20 from a group of 1,487 rural hospitals of fewer than 250 beds. Rural and urban designations are based on HCFA's classification method.
20 from a list of 369 nonteaching hospitals of 250 or more beds.
15 from a group of 112 teaching hospitals of 400 or more beds at major academic medical centers.
25 from a list of 454 less-intensive teaching hospitals of 250 beds or more.
Differences in selection criteria played a part in enhancing or reducing a hospital's chances of being judged among the leaders.
This year's study reduced the total representation of small hospitals to 20 each in the urban and rural categories, down from 25 in each group last year. Major teaching hospitals got 15 slots this year, up from 10, and minor teaching hospitals were allowed 25 instead of last year's 20.
The eight measures of performance also were weighted differently to respond to changes in importance in the healthcare market, said Saad Allawi, vice president of Mercer's management consulting unit.
Last year's selection was weighted in favor of financial performance, he said. But payers said they were just as interested in operational efficiency and clinical capability.
Operations and clinical factors were given greater weight this year. Clinical measurements also were subjected to improved adjustments for severity of illness, Mr. Allawi said.
Small hospitals scramble.When
comparing top-performing hospitals with others in their peer group, rural and small urban benchmark hospitals were further ahead of their peers than were the classes of larger hospitals, the report said.
Rural hospitals on the list had an expense per discharge 20% lower than the median of all rural hospitals, while median investment in capital assets was 67% higher. Small urban hospitals had expenses 22% lower and assets 66% higher than the median.
By comparison, expenses at benchmark major teaching hospitals were actually 1% higher than their peer group, though the benchmark hospitals performed better in each of the remaining seven measures. Capital investment was 53% higher than the median (See chart, p. 76).
Ms. Chenoweth said the most significant improvements from the norm among hospitals "are in the parts of the industry that are most at risk-the ones facing closure."
Of the 34 hospitals that closed in 1993, 30 had fewer than 100 staffed beds, according to the American Hospital Association (March 28, p. 3). Nineteen of the 34 closed hospitals were in rural areas. In 1992, 21 of 39 hospital closings were in rural areas.
Pressures of competition and survival are creating an improving standard among small hospitals that are well-managed, Ms. Chenoweth said.
In contrast, she said, "I don't know how deeply the major teaching hospitals feel the heat of competition."
At Grande Ronde Hospital, La Grande, Ore., and Lebanon (Ore.) Community Hospital, both 49-bed rural facilities in different parts of the state, administrators have combined a culture of frugality and prudent capital investment with aggressive positioning for capitated reimbursement.
Grande Ronde President James Mattes said the hospital in 1993 paid off all its debt-about $2.9 million. The provider is now working on integrating operations with 45 members of its physician staff and developing its home healthcare and skilled-nursing services to further shorten length of stay and convert inpatient days to outpatient treatment.
Lebanon Community's administrator, Alan Yordy, said the facility is spending money-"but very carefully"-on preparing to accept fully capitated business despite having a small service area of about 50,000 residents.
The two facilities are among only three repeaters from the list of rural hospitals on the year-ago top 100 list. The third is also from Oregon: St. Charles Medical Center in Bend.
In fact, Oregon produced six of the 25 hospitals that repeated from last year. In all, this year's top 100 included 10 Oregon hospitals.
Mr. Mattes said the Oregon Health Plan-a legislative initiative to organize and manage health services-is the reason for much of the attention to efficiency and caring for a defined population. "The real change for those of us in the field is that managed care has been driven to the most rural of areas."
Managing care.Washington and California, two other states with high managed-care penetration, also had 10 hospitals each in this year's top 100. But even in regions producing few benchmark hospitals, such as the Northeast, managed care shows signs of influencing the performance of those that made the list.
At 316-bed Newton-Wellesley Hospital in suburban Boston, "We're trying to position ourselves for the inevitable capitation," said Thomas Lynch, chief operating officer. "Anything we do these days is prefaced with the word capitation."
In a region where charges are $8,850 and expenses nearly $3,800 per discharge, Newton-Wellesley's comparable figures were $8,250 and $2,900, according to HCIA. At the same time, it was able to slightly exceed the median cash-flow margin of 17% for benchmark minor teaching hospitals. And its assets per bed of $226,000 were more than double the Northeast region's median of $95,000 and 45% higher than the median for minor teaching hospitals.
But the facility's investment in capitation likely will bump it from next year's top 100.
Newton-Wellesley has been aggressively moving people from inpatient status to "observation" status, which lowers operational costs, Mr. Lynch said. However, the efficiencies also penalize financial results in the short term by forfeiting higher reimbursements from inpatient payment formulas, he said. Overall, the shift resulted in an operating loss of $2 million in fiscal 1994 ended Sept. 30.
Any operating loss likely would disqualify a hospital from contention for top 100 status, although the resulting expense reduction would keep it within striking distance, said Ms. Chenoweth.
But it's a loss that the hospital is willing to absorb rather than continue to base operations on financial incentives whose days are numbered, Mr. Lynch said.
"We've got our feet in both canoes, but we know which one is going to be floating," he said.
Massachusetts ranked first in HMO market penetration at 39% in 1993,according to SMG Marketing Group. The impact of managed care on healthcare providers is just starting to be felt in the state (June 27, p. 102).
Charges and costs.Competition for managed-care contracts is becoming weekly news in Florida, where the state is prodding the development of integrated health networks and where for-profit Columbia/HCA Healthcare Corp. is challenging the market share of not-for-profit hospitals.
In Lee County on Florida's Gulf Coast, Lee Memorial Hospital in Fort Myers has battled with Columbia/HCA over contracts while trying to remain competitive as a public hospital without taxing authority. Judged by the measures of the HCIA/Mercer study, Lee Memorial did well enough to make this year's top 100.
Despite providing 60% of the county's indigent hospital care and 70% of hospital-related services for Medicaid patients, 627-bed Lee Memorial has kept its average annual increase in charges to less than 4% during the past 10 years, said James Nathan, the hospital's president.
Without direct tax support, "we've had to learn to live off the land," Mr. Nathan said. Increases in indigent care and competition made it clear to the hospital's board that charges weren't going to be the source of survival, he said. "We needed to get it from improving our operations."
Lee Memorial's expenses per discharge of $3,610 in 1993 were 7% lower than the median for all U.S. hospitals and 9% lower than hospitals in the southern region of the HCIA/Mercer study.
Columbia/HCA also had two Florida hospitals in the top 100: 256-bed Medical Center Hospital-Largo and 266-bed North Florida Regional Medical Center in Gainesville.
Patrick Gray, North Florida Regional's chief executive officer, said the facility is relying on give-and-take with physicians to keep costs down and invest in the right services. "The era of `more is better' is very long gone, and our physicians have been very receptive to the pressures of the market," Mr. Gray said.
The hospital opened a $20 million women's center in 1990 and is working on development of a rheumatology center. "Those ventures were brought about in partnership with physicians in response to an obvious need," he said.
North Florida Regional also is working with physicians to identify the best medical practices and make individual physicians more efficient. "For a long time, hospitals had information that they didn't share," Mr. Gray said. "Now we share it with our physicians."