What it takes to land on the annual list of the nation's 100 Top Hospitals isn't a mystery: It's a matter of mixing high-quality care, an efficient, well-tuned operation and a healthy bottom line. Though many hospitals know how it is done, some just do it much better. During a time when a challenging marketplace has squeezed hospital revenue and profits, an elite group of top-performing hospitals has broken from the pack. These hospitals are seeing better financial results at the same time they are experiencing more successful patient outcomes than their peers, according to the ninth annual study 100 Top Hospitals: Benchmarks for Success, conducted by Solucient, an Evanston, Ill.-based healthcare information company.
Once again, this year's 100 Top Hospitals-or benchmark facilities-posted higher overall margins than the other hospitals in the study. With a median 8.81% total profit margin, the 100 Top Hospitals easily out-earned their peers, which lagged behind at 3.69%.
Differences in cash-flow margins also are similar as the benchmark hospitals posted a 14.9% margin while the peer group comes in at just over 10%, according to the study.
"These are hospitals that are functioning on all cylinders," says Jean Chenoweth, executive director at Solucient. "Their boards, management teams and medical staff are all aimed at the same goals. They identify the best opportunities to improve performances and they go do it."
This club of premiere hospitals includes 44 organizations making their first appearance on the 100 Top Hospitals list, which was created in 1993 by Solucient's predecessor, HCIA-Sachs, which merged with HBS International in 2000 to form Solucient.
Solucient used 2000 Medicare cost report data from 2,236 acute-care hospitals to establish this year's 100 Top Hospitals and their peer groups. Hospitals are grouped in one of five categories, depending on their teaching status and the number of beds, and ranked on eight measures of clinical, operational and financial performance. The five categories are major teaching hospitals, teaching hospitals, large community hospitals, medium community hospitals and small community hospitals.
Hospitals that have made the list in the past tend to have an easier time turning in a repeat performance. This year, 57 hospitals appear on the list for at least the second time. Because of a tie, this year's list includes 101 hospitals.
The name appearing most frequently on the 100 Top Hospitals ranking over the years is Evanston (Ill.) Northwestern Healthcare, which makes the list this year for the eighth time. Right behind are Cleveland Clinic Foundation; Inova Fairfax Hospital, Falls Church, Va.; and North Florida Regional Medical Center, Gainesville, each making their seventh appearance on the ranking.
The leading hospitals also are ahead of their peers in clinical measures, such as improving survival rates after medical procedures and lowering complications among patients.
For the benchmark hospitals, 95.2% of Medicare patients survived their hospital stay and were discharged, compared with 94.2% among their peers, according to the study. The patients in the 100 Top Hospitals were also sicker and had more complex cases, based on the 17% difference in Medicare case-mix indexes compared with the peer group.
The 1 percentage-point difference between the benchmark hospitals and their peers means more than 57,000 people saw their lives extended at those hospitals, Chenoweth says.
Patients also had fewer complications at the benchmark hospitals. The median complication index, which measures unexpected complications among medical and surgical patients based on patient characteristics, is 18% lower at the 100 Top Hospitals than the median for the peer group. Better performance in clinical care and better data quality resulted in the lower complication index.
Measuring success in clinical areas is one reason that Evanston Northwestern has made the list consistently as a major teaching hospital, officials of the hospital say.
The 650-bed facility measures improvements in clinical and business areas, such as tracking infection rates and analyzing costs for technology, says Mark Neaman, the organization's president and chief executive officer. "We have a commitment to always want to get better," Neaman says. "We think we are improving on most of our clinical measures."
The organization uses a homegrown system that records clinical protocols considered "best-demonstrated practices" for treating patients with certain conditions, he says. The facility gathers data on the outcomes of clinical procedures and compares it with statistics from outside the organization, and then studies the best way to improve results. "We have protocols that say this is the best way," Neaman says. "That helps us to make sure we are getting measurable improvements."
The standards also help physicians push themselves to find the best ways to improve clinical measures, Neaman says. "It is a standard way of doing business," he says. "We have spent a little more time and perfected it a little more."
Dartmouth-Hitchcock Medical Center, a major teaching hospital in Lebanon, N.H., makes its first appearance on the 100 Top Hospitals ranking. The 375-bed facility credits a learning environment and improvements in clinical strategies for its success.
"We have been able to create a very collegial environment," says James Varnum, president of Mary Hitchcock Memorial Hospital and Dartmouth-Hitchcock Alliance, a regional network of hospitals and healthcare organizations. "That is going to spin off on your relationships with patients."
Like other benchmark hospitals in the major teaching category, Dartmouth-Hitchcock treats more complex cases. Overall, the benchmark major teaching hospitals had a case-mix index 9.7% higher than their peer group.
"They are very sick and require critical care," Varnum says. "That makes our case index extremely high. We are also in a rural area." The closest city, Manchester, N.H., is 75 miles away.
By focusing on teaching resources and clinical-improvement strategies, Dartmouth-Hitchcock has been successful in holding the line on expenses, a common theme among benchmark hospitals, according to Solucient.
Chenoweth says the teaching hospitals are good case studies of facilities accomplishing more while spending less. "They are taking care of more inpatients with higher severity of illnesses at lower costs," she says. "They know they are addressing the needs of their communities effectively."
The average operating expense per patient discharge for major teaching hospitals was 19% lower than for peer hospitals in this year's study, which was consistent with previous years. From 1996 to 2000, the top 100 benchmark hospitals reported a 4% increase in adjusted expenses while their peer hospitals reported a jump of 13%.
"Communicating inside the organization and trying to change the processes of care so it's more cost-effective will affect your bottom line," Varnum says.
Dartmouth-Hitchcock and the 25 other Northeastern hospitals on the ranking represent a major shift in regional dominance over time. In Solucient's first study of the top performers, the Northeast accounted for four of the 100 Top Hospitals. The increase in Northeast hospitals comes at the expense of hospitals in the South and North Central regions.
The South peaked in 1997 with 50% of the designations, but has been losing ground since and has dropped to 31 hospitals. The North Central region of 12 states, spreading from North Dakota to Ohio, represents 29 of the benchmark hospitals, down slightly from 34 in 2000. Chenoweth could not explain the shift to the Northeast, but she says that heavy regulation in that region has diluted the power of managed care in recent years.
The West has remained relatively stable after a free-fall from its high-water mark of 42 in the second annual survey. During the past five years, the West has been represented by 14 to 19 hospitals. In this survey, 15 hospitals come from that region.
Lewistown (Pa.) Hospital also is a newcomer to the 100 Top Hospitals list and is one of 16 Pennsylvania hospitals on the ranking. The 174-bed hospital is included in the medium community hospital category.
President and CEO Gordon McAleer credits his staff of 135 doctors for the facility's clinical successes, such as a double-digit drop in medication errors and a program focusing on preventing patient falls at the hospital, which can lead to costly extensions of hospital stays. "We strive for a higher level of excellence," McAleer says. "We have a culture of performance improvement."
The hospital categorizes medication errors by units, shifts and the risk to patients, McAleer says. Once errors are recorded, staff members are informed of the mistake and they review the error. As a result, such errors have declined 25% in the past year, McAleer says. The hospital has seen patient falls decrease by 40% during the past three years.
The clinical success also has spilled over to the operational side of the hospital, McAleer says. The hospital, which reported net income of $750,000 in fiscal 2002, a 31% increase from the previous year, has cut its full-time employee base by 100 to 650 and has seen improved productivity while cutting labor costs, he says. "We have been good partners with managed care. We demonstrate good quality care at a low cost," he says.
This year's small community hospital segment-for hospitals that have between 25 and 99 beds-includes 11 newcomers, or more than half of the 20 facilities on the list.
Douglas County (Minn.) Hospital is among the first-timers. William Flaig, CEO of the 99-bed hospital in Alexandria, Minn., credits technology upgrades for his hospital's stellar performance. The hospital, in a rural area about 130 miles from Minneapolis, was the first to install an MRI in the rural area. The hospital acquired an open MRI last year to complement its closed MRI technology.
"The key is to respond to the needs of the patients," Flaig says. "People will respond to healthcare in rural communities if you provide services."
The hospital has been able to keep infection rates and mortality rates low because of investment in technology, Flaig says. Douglas County Hospital also boasts a positron emission tomography machine, which is used in diagnosis and biomedical research for studying brain and heart functions. The technology is a big reason why the small hospital has attracted 60 physicians.
"We are able to attract physicians because of the technology we have," Flaig says. "We made investments to keep up with technology. We are a little ahead of the curve."
In recent years, smaller hospitals have adjusted quickly to industry challenges and have capitalized on outpatient alternatives and maintaining shorter lengths of stay, Chenoweth says. The small benchmark hospitals have the shortest average length of stay (3.68 days), highest percentage of outpatient revenue (57.1%) and the lowest expenses per patient discharge ($3,297) than any other benchmark group.
The 100 Top Hospitals also are ahead of their peers in compensating employees, the study shows. The median wage-adjusted salary and benefits expense was 5% higher among all benchmark hospitals compared with their peers.
The top hospitals pay an average of $43,614 for employee salary and benefit expense, compared with $41,624 for peer hospitals. Meanwhile, the benchmark hospitals have 4.94 adjusted full-time-equivalent employees per adjusted average daily census, compared with 5.09 at the peer hospitals.
Chenoweth says the difference might reflect a variance in skill levels among employees in the two groups. For example, the benchmark hospitals maintain higher levels of registered nurses, she says. During the past five years, the benchmark hospitals have exceeded peer hospitals in salaries and employee expenses each year. The 100 Top Hospitals focus on employing fewer numbers of the best possible workers instead of recouping losses by slashing salaries, Chenoweth says.