Association between Hospital Cost of Care and Quality of Care and Readmission Rates

The Centers for Medicare & Medicaid Services (CMS) routinely reports on >30 quality-of-care measures at all hospitals in the United States. To encourage patients to seek low-cost providers, as of August 2008, the CMS reports were expanded to include data about cost of care for common conditions. Likewise, in the private sector, payers often focus on tiered payment networks that encourage patients to choose hospitals with low costs and high quality of care.

To date, it is unclear whether efforts to reduce hospital costs will have adverse effects on the level of the quality of care or ultimately increase inpatient costs. A previous study of hospitals’ overall cost of care found a positive association with quality of care for congestive heart failure (CHF); however, there was no association between cost of care and quality of care for pneumonia. There was also no association between overall cost of care and mortality rates for CHF or pneumonia.

Researchers recently conducted an observational cross-sectional study of hospitals in the United States that discharged Medicare patients for CHF or pneumonia in 2006. The study was designed to address the following questions: (1) do low risk-adjusted costs of care continue year to year and are hospitals’ relative costs of care for CHF and pneumonia correlated? (2) when cost of care for specific conditions is used, do hospitals with low costs have low process quality-of-care scores and higher mortality rates? and (3) will hospitals that achieve savings by reducing use of diagnostic or therapeutic services and discharging patients early incur higher rates of rehospitalization and greater per capita inpatient cost of care following discharge? Results of the study were reported in Archives of Internal Medicine [2010;170(4):340-346].

Using data from the 2004-2006 Medicare Provider Analysis and Review 100% Files, the researchers looked at the association between hospital cost of care and process quality of care, 30-day mortality rates, readmission rates, and 6-month inpatient cost of care. The 2 subgroups of data used in the study were patients discharged with the primary diagnosis of CHF (International Classification of Diseases, Ninth Revision [ICD-9] codes 398.91 and 428.0-428.9) and patients discharged with the primary diagnosis of pneumonia (ICD-9 codes 480-486).

For CHF, observed costs of care and predicted costs of care were calculated among 3146 hospitals; for pneumonia, observed costs and predicted costs were calculated among 3152 hospitals. For each of the 2 conditions, the analyses found variations in hospitals’ condition-specific relative cost indices. Hospitals in the lowest-cost quartile for CHF had adjusted cost ratios that ranged from 0.33 to 0.82, while hospitals in the highest-cost quartile for CHF had adjusted cost ratios that ranged from 1.12 to 1.89. Analysis for pneumonia found a similar pattern.

When cost ratios were converted to US dollars, care for a typical CHF patient (mean, $7114) ranged from $1522 if discharged from the lowest-cost hospital to $18,927 if discharged from the highest-cost hospital. Cost of care for a typical patient with pneumonia could range from $1897 to $15,829 per hospitalization (mean, $7040).

The association between a hospital’s cost of care and quality of care was weak and differed by condition; the association between cost of care and mortality rates also differed by condition. Hospitals in the highest-cost quartile for care for patients with CHF had a higher quality-of-care score than hospitals in the lowest-cost quartile (89.9% vs 85.5%; P<.001) and lower mortality for CHF (9.8% vs 10.8%; P<.001).

For patients with pneumonia, the converse was true. High-cost hospitals had lower quality-of-care scores than low-cost hospitals (85.7% vs 86.6%; P=.002) and higher mortality (11.7% vs 10.9%; P<.001).

Thirty-day readmission rates were similar or slightly higher for low-cost hospitals compared with high-cost hospitals (24.7% vs 22.0% for CHF, P<.001; 17.9% vs 17.3% for pneumonia, P=.20). For patients treated in low-cost hospitals, 6-month inpatient costs of care were lower compared with patients treated in high-cost hospitals ($12,715 vs $18,411 for CHF, P<.001; $10,134 vs $15,138 for pneumonia, P<.001).

In conclusion, the researchers noted that the associations between cost of care and quality of care and between cost of care and mortality rates are inconsistent. They said that “Most evidence did not support the ‘pennywise and pound foolish’ hypothesis that low-cost hospitals discharge patients earlier but have higher readmission rates and greater downstream inpatient cost of care.”—Tori Socha