Updated July 2022
Hospitals and other care facilities are expected to track and improve on hundreds of financial and quality metrics. 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 aim to improve the patient experience. Before we go into more detail, however, let's first define what these metrics entail.
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 healthcare commercial intelligence.
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 examined for an entire hospital or a specific therapy area, such as acute myocardial infarctions (AMIs).
This data is important because it quantifies care efficiency over time. 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.
Interestingly, cardiac patients are an exception to this rule. Those admitted for heart failure see lower mortality rates with shorter hospital stays, but higher readmission rates. As with other conditions, there is a 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 incentivizes shorter patient stays where possible, offering financial bonuses 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 the 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.
The average all-cause hospital readmission rate in 2021 is 15.5% according to Definitive Healthcare data (most recent data available). Pittsburgh VA Medical Center (PA) had the highest all-cause readmission rate at 21.2% — more than one in five patients was readmitted to a hospital within 30 days of discharge. New York’s Hospital for Special Surgery had the lowest readmission rate with 11.5%.
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.
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.
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—particularly hospitals with high patient volume. Average daily census refers to the mean number of patients admitted to the hospital every day.
According to Definitive Healthcare data, of the 3,110 hospitals that received an HCAHPS star rating, only 178 hospitals achieved 5 stars — about 5.7%. Roughly 28% received a 4-star rating (886 hospitals) in 2021.
4. Mortality Rates
Patient mortality rate measures the percentage of patients who 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 Definitive Healthcare data, the average heart attack mortality rate is 12.6% in 2021 (most recent data available). Doctors Medical Center Modesto (CA) and Franciscan Health Dyer (IN) tied for the highest heart attack mortality rate with 16%. Mayo Clinic Hospital – Saint Mary’s Campus had the lowest mortality rate with 8.7%.
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.
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 49.9%. The rate is higher for urban hospitals than for rural hospitals. Urban hospitals have an average bed utilization rate of 57%, while rural hospitals have an average rate of 36%.
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.
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, 758 hospitals reported receiving a penalty for hospital-acquired conditions in fiscal year 2021.
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’s value-based programs offer financial rewards for improvement on a variety of clinical and quality metrics.
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 in understanding 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.
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.
According to Definitive Healthcare data, the average hospital net operating margin is -16.4%, meaning that most U.S. hospitals are not turning a profit. Of hospitals with a positive operating margin, the average is 14.9%. Hospitals with a negative operating margin averaged -38%. Of the 6,600 active hospitals that report margins tracked by Definitive Healthcare, 12 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.
Under the original guidelines, any lack of repayment was reported as bad debt. As of January 2019, 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.
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 7.2%. Only seven of the 5,950 hospitals reporting bad debt claimed a negative ratio. Of those seven, five hospitals also reported a negative net patient revenue.
Want to learn more about the significance of hospital quality metrics? Read our blog: Why Hospital Quality Performance Is Valuable to You. You’ll explore the financial incentives surrounding quality metrics as well as the wealth of opportunities available to those that take the time to understand them.
Want easy access to financial and quality metrics for the hospitals in your market? Start a free trial today, and see how healthcare commercial intelligence from Definitive Healthcare can shape your business strategy.