The results of the new analysis, experts say, fly in the face of a decade-old presumption that meeting quality-of-care mandates outlined in the landmark To Err Is Human report would make hospitals less profitable. The Thomson Reuters data show that hospitals with better records on patient safety and mortality spent significantly less than the average on drugs and supplies on a per-case basis.
“Fundamentally, I believe that quality is less expensive, and that with evidence-based practices we are able to reduce variation, hence driving out waste and increasing consistency,” says Jim Brown, president and CEO of Memorial Hermann Sugar Land (Texas), one of the high-performing hospitals cited in the study.
Hospitals on Thomson Reuters' 100 Top Hospitals list—which recognizes healthcare providers that turn a profit while providing high-quality care—spent an average of 6% less on pharmaceuticals than hospitals that didn't make the list.
Specifically, those on the 100 Top Hospitals list spent $987 a case for drugs, versus $1,051 for hospitals that didn't make the list. Memorial Hermann Sugar Land, to choose one example, spent an average of $902 on drugs per case. (The data on spending is adjusted to account for differences in patient severity.)
Susan DeVore, president and CEO of hospital-supply purchaser and quality-improvement firm Premier, says the findings mirror trends that her company has seen in its own three-year-running analysis of the relationship between hospital spending and care quality.
“Every time we drill down and mine the data, we can find proof points proving that improving quality lowers cost, so we think the business case is clear for improving quality,” DeVore says. “But it doesn't happen in a vacuum. People do have to invest in technology and people and processes.”
Premier's Quest collaborative project has found that the total inpatient cost per case rose 4% in the past three years at 200 high-performing hospitals in their study, while overall inpatient costs at U.S. hospitals have risen 21% during that same period. “There is a huge bending of the cost curve that occurs when you try to affect quality and performance,” she says.
Executives at high-performing health systems offered many explanations for their performance, citing everything from the cost savings that come from membership in a health system to the efficiency of team-based decisionmaking. In some cases, increased spending can yield future savings, as with electronic health-record systems, while other initiatives such as closed formularies and uniform clinical pathways can prevent wasteful spending from occurring.
However, the analysts at Thomson Reuters found two notable exceptions to their conclusions on how drug spending relates to care quality. First, hospitals that spent more on pharmaceuticals were better able to keep their patients from being readmitted to the hospital within 30 days for conditions such as pneumonia and heart attack.
Perhaps more puzzling, study authors found, is that when the patients are asked to give their opinions, they tended to rate their own satisfaction higher at hospitals that spent more on prescription drugs. That conclusion was based on comparisons of a hospital's Hospital Consumer Assessment of Healthcare Providers and Systems survey scores and its pharmacy usage.
Thomson Reuters noted in its report that the result “may reflect the fact that some of the HCAHPS survey instrument items ask about pain management and medication instructions from caregivers.”
David Foster, lead scientist at Thomson Reuters' Center for Healthcare Analytics, says it was not shocking that patients would show a preference for care that might deviate from best practices on efficiency or care quality.
“To me, it seems like a hospital that is using pharmaceuticals in a more liberal fashion might create an impression among patients that would be favorable to them,” Foster says. “I don't think the typical patient necessarily sees the value in using a generic product over a branded product.”
The Thomson Reuters study also looked at use of medical supplies, and it found the same trends as with pharmaceutical use: Hospitals that are more profitable and deliver better care also tend to spend less on supplies on a per-case basis. Specifically, facilities on Thomson Reuters' 100 Top Hospitals list spent an average of $1,955 a case on supplies, while the thousands of other hospitals that didn't make the list of high performers spent $2,239 a case—a 13% difference in spending. “Bad quality is expensive, and cost-effective quality can definitely lead to more-efficient and less costly care,” says Dr. Elizabeth Mort, vice president of quality and safety at Massachusetts General Hospital, Boston, which is on the 100 Top Hospitals list
When the Institute of Medicine published To Err Is Human in 1999, its finding that medical errors caused as many as 98,000 deaths a year was greeted by hospital executives in the context of another massive event in healthcare at the time: the Balanced Budget Act of 1997.
That law slashed Medicare rates and changed caring for government-insured patients from an overall profitable enterprise into a money-losing proposition. The change happened just as the the IOM went public with its startling argument that hospitals were actually causing thousands of deaths per year with poor-quality care.
Hospital executives at the time complained loudly that government and private payers and managed-care companies were taking away revenue at the same time that the public clamored for investments to make hospitals safer through greater staffing and process automation (May 28, 2001 supplement, p. 4).
The result, as quality observers often note, has been a fitful approach to quality improvement, as healthcare providers weigh the stark realities of their balance sheets against the more generalized findings on patient safety and satisfaction.