The conundrum of whether mission is affected by margin may finally be resolved, according to a study released last month. In one of the first studies of the correlation between patient safety and hospital financial performance, two senior economists from HHS' Agency for Healthcare Research and Quality found that hospitals in financial trouble make more mistakes.
The study, which appeared in the spring issue of the quarterly healthcare policy journal Inquiry, finds that hospitals unable to maintain healthy profit margins are less able to invest in their facilities to improve patient safety, leading to more medical errors.
The study concluded that patients face significantly greater odds of having adverse events from major surgeries in hospitals where profit margins have eroded. Study authors William Encinosa and Didem Bernard found that the hospital industry has undergone tremendous financial fragmentation since the mid-1990s. An average of $25.3 million in annual net income separates the five top financially performing hospitals in 2003 in the San Francisco market from the five worst -- up 173% from $9.3 million in 1999.
"Moreover, the disparity between the rich and poor hospitals has become quite severe," the report finds, with increased numbers of uninsured and their growing unpaid bills pressuring hospitals even as concern with improving quality has risen.
The study examined inpatient discharge data from more than 1 million patients who had major surgery at 176 Florida acute-care hospitals from 1996-2000. The authors used annual cost reports collected and audited by the Florida Agency for Health Care Administration, American Hospital Association annual surveys and state inpatient discharge data.
The authors cautioned that the Florida data might not apply nationally for several reasons. While for-profit hospitals represent 10% of the country's total hospitals, they constitute 34% of Florida's hospitals. Florida also has a disproportionately higher percentage of seniors living there.
The authors said they hope payers, health plans and employers will design payment structures to hospitals "more carefully with concerns that cost-cutting initiatives might erode patient safety and the safety culture within hospitals."
AHA spokesman Richard Wade said the study "documents in a scientific way what everyone has been saying all along."
"When a third of the nation's hospitals are operating in the red and a third more barely getting by, they're not going to be as able as wealthier hospitals to invest in . . . tools to improve patient care," Wade said.
This story was originally published in the June 13 issue of Modern Healthcare.