A 15 minute read
People standing on bar graph elements
May 8, 2018

Updated July 2019

There are hundreds of financial and quality metrics that hospitals and other care facilities are expected to track and improve on. As the Centers for Medicare and Medicaid Services (CMS) continue to add and modify quality programs, it can be difficult for hospital leaders to focus on the most vital and easily-improved metrics. 

Naturally, individual facilities will focus on specific metrics depending on their current and ideal performance. While some hospitals prioritize financial performance, others may seek to improve the patient experience. Before we go into more detail, however, let's first define "quality metrics."

What are hospital quality metrics?

Hospital quality metrics are a set of standards developed by CMS to quantify healthcare processes, patient outcomes, and organizational structures.

In value-based payment models, quality metrics are used to adjust provider reimbursement rates, offering a bonus in the event of above average ratings or a penalty for failing to meet standards.

Below we've listed the top 10 essential hospital metrics to track, with examples from Definitive Healthcare’s comprehensive platform of market intelligence.

Top 10 key hospital metrics

1. Length of Stay

Length of Stay measures the length of time between a patient's admittance to and discharge from a hospital. This metric is most often tracked over months and annual quarters, though it can also be tracked over the course of a few weeks. Length of stay measurement can be used throughout a hospital or for a specific therapy area, such as acute myocardial infarctions (AMIs). 

Screenshot of clinical metrics trends
Fig. 1: Length of stay data for Massachusetts General Hospital. Insights from Definitive Healthcare based on most recent available CMS data, hospital cost report period, 2018 (accessed July 2019).

This data is important because it provides hard data over time on care efficiency. Longer patient stays are associated with greater risk of hospital-acquired infections (HAIs) and other hospital-acquired conditions (HACs), as well as higher patient mortality rates. An exception to this rule are cardiac patients. Those admitted for heart failure see lower mortality rates with shorter hospital stays, but higher readmission rates. Like with other conditions, there is risk of releasing patients too early and overlooking potentially life-threatening complications.

Patient length of stay also impacts hospital financial performance. Naturally, the longer a patient stays at a hospital the more money is required to care for them. In addition to patient care costs, CMS emphasizes shorter patient stays where possible, offering financial incentives to reduce the time patients spend in hospitals for an episode of care.

2. Readmission Rates

Readmission Rates track the percentage of patients that are admitted into the same or another hospital within 30 days of being discharged for the same condition or a complication from the original episode of care. This metric measures quality of care given to patients. High hospital readmission rates indicate that physicians and other care providers are not delivering the proper care to patients, overlooking complications or relevant patient data. Lower hospital readmission rates, by extension, indicate a strong quality of care.

Screenshot of Medicare readmission reduction penalty scores
Fig. 2: Medicare readmission reduction penalty scores for Massachusetts General Hospital. Insights from Definitive Healthcare based on most recent available CMS data, April 2019 (accessed July 2019).

The average all-cause hospital readmission rate in 2016 is 15.3 percent according to Definitive Healthcare data (most recent data available). Oroville Hospital (CA) had the highest all-cause readmission rate at 20.2 percent — more than one in five patients was readmitted to a hospital within 30 days of discharge. New England Baptist Hospital had the lowest readmission rates with 10.4 percent.

High readmission rates could also be a detriment to hospital financial performance. Hospitals with the highest readmission rates may not receive full Medicare reimbursement payments as a penalty. Walking the line between short patient stays and low readmission rates is a difficult task, but it is important for patient health as well as hospital financial health.

3. HCAHPS

The Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) survey measures 64 markers of patient satisfaction. Topics included in the survey range from care quality to cleanliness of the care facility. Results from the survey are released as star ratings on a scale of 1 to 5, with 5 being the best possible score. HCAHPS scores provide actionable data on how hospitals can improve patient care and services offered.

Top 10 5-Star Hospitals by Average Daily Census

Hospital Name Average Daily Census Net Patient Revenue 

Mayo Clinic Hospital - Arizona

195.3

$1,392,149,121

Wentworth-Douglass Hospital

80.9

$334,984,494

Oklahoma Heart Hospital North

77.5

$274,528,570

Arkansas Heart Hospital

63.6

$197,802,616

New England Baptist Hospital

60.7

$223,599,726

Oklahoma Heart Hospital South

42.5

$141,090,773

St Joseph Mercy Chelsea (FKA Chelsea Community Hospital)

30.7

$156,592,652

Dana Farber Cancer Institute

28.6

$1,130,077,403

Hoag Orthopedic Institute

28.6

$127,369,357

Jennings American Legion Hospital

28

$39,681,844

Fig. 3: Top 10 HCAHPS 5-Star Hospitals by by average daily census. Insights from Definitive Healthcare based on most recent available CMS data, 2018 (accessed July 2019).

Most criticisms of the HCAHPS system center around the simplistic manner of the star system. Hospital leaders argue that the ratings are misleading, as they do not always provide the whole picture of patient care. Similarly, experts expressed concern that hospitals serving poor and high-risk populations are unfairly penalized through this system, and particularly hospitals with high patient volume, such as those listed above. Average daily census refers to the mean number of patients admitted to the hospital every day.

According to Definitive Healthcare data, of the 3,401 hospitals that received an HCAHPS star rating, only 215 hospitals achieved 5-stars — approximately 6 percent, up from just under 4 percent in 2017. Roughly 31 percent received a 4-star rating (1,068 hospitals) up from 34 percent (1,122 hospitals) in 2017. Nearly 45 percent (1,535 hospitals) received a 3-star rating, which stayed roughly consistent with 44 percent in 2017. Almost 15 percent received a 2-star rating (511 hospitals), and about 2 percent received a 1-star rating (72 hospitals), generally staying consistent with the 2017 metrics.

4. Mortality Rates

Patient mortality rate measures the percentage of patients that die in a hospital's care before being discharged. This metric is a strong indicator of providers' ability to stabilize a patient's condition following surgery or another procedure. According to the Centers for Disease Control (CDC), the national average patient mortality rate is 2 percent, for a total of 715,000 patient deaths annually.

Screenshot of 30-day mortality rates
Fig 4 Serious Complication and Death Measures for Massachusetts General Hospital. Insights from Definitive Healthcare based on most recent available CMS data, April 2019 (accessed July 2019.)

Of the 2 percent of patients who died before being discharged, about 25 percent were over 85 years old. In addition, the average patient mortality rate fell by 0.5 percentage points (approximately 20 percent) since 2000. According to Definitive Healthcare data, the average heart attack mortality rate is 13.2 percent in 2019 (most recent data available). Lafayette General Medical Center (LA) and Erlanger Baroness Hospital (TN) tied for the highest heart attack mortality rate with 18.7 percent. Cedars-Sinai Medical Center (CA) had the lowest mortality rate with 8.9 percent.

5. Bed Utilization Rate

Bed Utilization Rate (also called Bed Occupation Rate) refers to the number of hospital beds being used at any given time. Knowing bed demand in real time is important to providers who need to know the difference between available beds and patients awaiting care.

Screenshot for bed utilization ratesFig. 5: Bed Utilization Rate and other clinical metrics for Massachusetts General Hospital. Insights from Definitive Healthcare based on most recent available CMS data, 2018 (accessed July 2019.)

Balancing bed availability can be difficult. If occupancy is too low, the hospital is likely losing money through unnecessary staffing and facility maintenance. If occupancy is too high, care quality could decline because there aren't enough clinicians to care for the admitted patients. According to Definitive Healthcare data, the average bed occupancy rate is 49 percent. The rate is higher for urban hospitals than for rural hospitals. Urban hospitals have an average bed utilization rate of 57.36 percent, where rural hospitals have an average rate of 36.36 percent.

6. Incidents

Hospital incidents include unintentional consequences or side effects of hospital procedures, including conditions like sepsis, postoperative respiratory failure, pulmonary embolisms, hemorrhages, and other reactions or infections. This metric measures the ability of healthcare professionals to provide comprehensive, high-quality care to patients without triggering an adverse reaction. 

Screenshot of sepsis metrics
Fig. 6: Therapy Area Analytics: Sepsis DHC Visual Dashboard. Insights from Definitive Healthcare based on most recent available CMS data (Accessed July 2019.)

Tracking hospital incidents is vital to understanding the quality of care a facility is providing. Incidents provide hard data on what steps a hospital should take to improve its services as well as reduce patient mortality and readmission rates. According to Definitive Healthcare data, 784 hospitals reported receiving a penalty for hospital-acquired conditions in fiscal year 2019.

7. CMS Program Performance

CMS spearheads dozens of initiatives aiming to reduce overall healthcare costs and improve care quality across the country. Some of these programs, like the Medicare Shared Savings Program, target Accountable Care Organizations (ACOs). Others, like Fee-For-Service Part B, target hospital spending. Regardless of the target facility or organization, CMS  value-based programs offer financial rewards for improvement on a variety of clinical and quality metrics.

Top 10 BPCI Model 2 Hospitals by Net Patient Revenue

Hospital Name Net Patient Revenue  Discharges

NYU Langone Tisch Hospital

$4,101,296,000

58,632

UCSF Helen Diller Medical Center at Parnassus Heights

$3,620,962,130

35,476

Vanderbilt University Medical Center

$3,442,776,569

57,902

Yale New Haven Hospital

$2,749,659,018

65,019

Montefiore Hospital - Moses Campus

$2,728,344,000

86,865

Baystate Medical Center

$2,545,278,066

37,985

Mount Sinai Medical Center (AKA the Mount Sinai Hospital)

$2,467,873,137

56,276

Hospital of the University of Pennsylvania

$2,448,160,000

37,929

Orlando Regional Medical Center

$2,319,178,866

92,416

UC San Diego Medical Center - Hillcrest

$1,842,794,494

30,647

Fig. 7: Top 10 BPCI Model 2 Hospitals by Net Patient Revenue. Insights from Definitive Healthcare based on most recent available CMS data, 2018 (accessed July 2019.)

Participation in these programs can lead to improvement in care quality, efficiency, technology use, and more. CMS incentive programs serve as beta tests to improve care delivery while lowering costs. In addition to the obvious financial incentives, participating facilities also have a plethora of data to analyze in order to improve on the most relevant measures.

8. Average Cost per Discharge

Tracking the average care costs per patient discharged can aid hospitals understanding of which therapy areas see overspending. Similarly, this metric shows where hospitals make the greatest profit as well as whether the costs associated with patient care actually improved the patient's outcome. Cost per discharge is a dynamic measure that can be adjusted for a hospital's case mix and other patient population demographics.

Screenshot of cost per discharge

Fig. 8: Cost per Medicare Discharge for Massachusetts General Hospital. Insights from Definitive Healthcare based on most recent available CMS data, 2018 (accessed July 2019.)

Tracking this metric can help hospitals understand long-term spending by therapy area and adjust care provision accordingly. Over time, high care costs and low profits can negatively impact hospital performance and care offerings, reducing the variety of services available and physicians on staff.

9. Operating Margin

A hospital's operating margin refers to the facility revenue after subtracting operating costs such as wages, medical equipment and supplies, rent, and other expenditures. To remain operational, hospitals must be able to pay these fixed costs without going into debt. 

Screenshot of financial strength metrics

Fig. 9: Net Operating Profit Margin and other financial strength indicators for Massachusetts General Hospital. Insights from Definitive Healthcare based on most recent available CMS data, 2018 (accessed July 2019.)

According to Definitive Healthcare data, the average hospital net operating margin is -0.08 percent, meaning that most U.S. hospitals are not turning a profit. Of hospitals with a positive operating margin, the average is 15.8 percent. Hospitals with a negative operating margin averaged -27.5 percent. Of the 7,800 hospitals tracked by Definitive Healthcare, 10 reported a profit margin of 0.

10. Bad Debt

Bad Debt refers to revenue loss that occurs when a hospital requests payment from a patient for care provision and does not receive the full amount. New, narrower guidelines were enacted as of January 1, restricting what qualifies as bad debt. Under the original guidelines, any lack of repayment was reported as bad debt. Now, bad debt is only valid if there was an event in a patient's life, such as unemployment, that led to the inability to pay for their care.

Screenshot of hospital bad debt to NPR ratio
Fig. 10: Financial Comparisons: Financial Ratio Analysis DHC Visual Dashboard featuring Bad Debt to Net Patient Revenue and Net Income Margin. Insights from Definitive Healthcare based on most recent available CMS data (accessed July 2019.)

With these new bad debt guidelines uncompensated care, including charity care, will still be provided to patients, but the way it is reported will change. A high bad debt ratio can impact the amount of charity care a hospital is able to provide to patients. Bad debt also negatively impacts hospital revenue, restricting available services.

According to Definitive Healthcare data, the average bad debt to net patient revenue ratio is 9 percent. Only six of the 4,495 hospitals reporting bad debt claimed a negative ratio. Of those six, four hospitals also reported a negative net patient revenue.

Learn More

Are you still unsure about the significance of hospital quality metrics? Read our blog on Why Hospital Quality Performance Is Valuable to You. Here, you will learn more about not only the financial incentives surrounding quality metrics, but also the wealth of opportunities available to those that take the time to understand them.


ABOUT THE AUTHOR

Alanna Moriarty

Alanna Moriarty is a healthcare industry writer and content strategist. As the Content Marketing Manager for Definitive Healthcare, she most enjoys connecting the dots between data and care delivery. ...


Continue Reading