Becoming a Magnet Hospital Can Increase Revenue, Offset Costs of Achieving Magnet Status

Several studies have found that Magnet Hospitals have lower mortality rates, shorter lengths of stay, higher patient satisfaction, and better patient outcomes than non-Magnet Hospitals. They are also more likely to adopt National Quality Forum-approved patient safety practices. Until recently, though, little was known about the effect of Magnet status on hospital revenue.

A study funded by INQRI and published in the May issue of Medical Care finds that achieving Magnet status is worth the investment - increasing hospital revenue by an average of $1,229,770 to $1,263,926 annually.

On average, it takes a hospital 4.25 years to complete the process of attaining Magnet Status, at an average cost of $500,000 annually, for an average total investment of $2,125,000. At that cost, the researchers calculate that hospitals begin to realize payback from achieving Magnet Status in two to three years.

“Since Magnet Hospitals have better patient outcomes, we suspect that these increases in revenue reflect increased reimbursement rates from private insurers, relative to non-Magnet Hospitals,” said co-principal investigator Richard Lindrooth, PhD, associate professor in the Department of Health Systems, Management and Policy in the Colorado School of Public Health, University of Colorado Anschutz Medical Campus. “That increased premium is related to the perceived higher quality of care and the desirability of including high-quality hospitals in insurers’ networks. The higher costs likely reflect a combination of the cost of providing high quality care and, to a lesser extent, a shift toward treating more complex cases.”

The study finds that, the increase in revenue overshadowed changes in patient costs.  Net patient revenue increased on average by 3.89 percent compared to non-Magnet hospitals, while costs increased only by 2.46 percent.

The research team data from 1998-2006 for 2,541 non-Magnet Hospitals and 141 Magnet Hospitals from the American Hospital Association Annual Survey, the Hospital Cost Reporting Information System from the Centers for Medicare & Medicaid Services, and the American Nurses Credentialing Center (ANCC). Data included information on hospital characteristics, as well as utilization, costs, charges, and other relevant financial information.

The interdisciplinary research team was led by Jayani Jayawardhana, PhD, assistant professor of health policy and management, University of Georgia; John M. Welton, PhD, RN, professor in the College of Nursing, University of Colorado Anschutz Medical Campus; and Lindrooth.

 

The Importance of Nursing in Achieving the "Best Care at Lower Cost"

by Richard C Lindrooth and Olga Yakusheva

The Institute of Medicine (IOM) released the findings of its Committee on the Learning Health Care System in America in a report entitled "Best Care at Lower Cost: The Path to Continuously Learning Health Care in America"[1] in early September, 2013.  The report recognized that the complexity of clinical decision-making is rapidly increasing and that clinicians need to continuously update their skills in order to keep up with:

(1) rapidly expanding diagnostic and treatment options; and
(2) the increasingly complex and chronic clinical condition of patients.

Given the growing external demands placed on nurses, the IOM reports that a critical determinant of the success of an organization in dealing with these demands is how "a learning health care organization harnesses its internal wisdom—staff expertise, patient feedback, financial data, and other knowledge—to improve its operations."   Nurses in particular are in an excellent position to play a central role in creating a virtuous feedback loop such that it is feasible to continuously adjust and incrementally improve systems in response to rapidly changing external demands.  The report, supported by the results of a growing and increasingly robust body of academic research, stresses the important role of leadership and management in fostering and maintaining an environment within which continuous learning could take hold.

The recommendations highlight the critical importance of continuing investments in the human capital necessary to enable clinicians' (nurses) to thrive in the dynamic health care market.  Bachelors of Science in Nursing (BSN) programs teach nurses the critical communication skills and analytical tools and that can be harnessed by a well-managed organization in creating an environment that fosters and rewards continuous learning. 

The good news is that employers will increasingly recognize the value of a BSN and reward staff for the additional cost and effort required for the degree.  The IOM Future of Nursing report documents the value of an advanced degree and knowledge of the value of a BSN is reflected in recent hiring trends.  Standard economic theory predicts that the value of a BSN - and human capital in general - depends upon the ability of an organization to put those skills to productive use.  Well-managed organizations will be apt to reward advanced training precisely because the organization can harness the human capital to increase productivity. 

The IOM report documents the experiences of many organizations that have successfully fostered the skills and experience if their staff to improve outcomes and productivity.  While the case studies are encouraging, there are even more organizations that still have not adopted the management practices necessary to facilitate continuous learning.  An organization's future success hinges on its ability to keep up with rapidly changing treatments and the increasingly complex needs of patients. Those organizations that are successful in doing so will thrive and grow market share at the expense of organizations that fail to keep up. 

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[1] Smith, M; R. Saunders, L. Stuckhardt, and J.M. McGinnis, Editors. 2013. ""Best Care at Lower Cost: The Path to Continuously Learning Health Care in America." Available at: http://www.nap.edu/catalog.php?record_id=13444, accessed on September 20, 2013.

Will Dr. Robot Open New Doors for Nurses?

By Olga Yakusheva, PhD and Richard C. Lindrooth, PhD

Olga Yakusheva, PhD, is an associate professor of economics at Marquette University. Richard C. Lindrooth, PhD, is an associate professor at the University of Colorado Anschutz Medical Campus. Both are INQRI grantees.

Technological innovation is rapidly transforming patient care. A new generation of innovations will potentially change the most fundamental aspect of the patient experience – patients’ interactions with physicians and nurses. The FDA recently approved the first autonomous telemedicine robot for use in acute care hospitals. Even more advanced technologies, some capable of processing up to tens of millions of pages of plain medical text per second, are being tested and may soon be used to diagnose conditions and recommend treatment, with limited input from clinicians.

This new technology has the potential to perform several tasks more efficiently than clinicians, albeit with some limitations. It can quickly and effectively sift through large amounts of information and, based on a complex set of guidelines, create a probability-weighted list of diagnoses and recommendations. The result will be purely evidence-based and free of human cognitive decision-making biases.  The technology can drastically speed diffusion of new research and guidelines through electronic dissemination, similar to automatic software updates, and make most novel treatment regimens instantly available to patients.

However, even the smartest technology may not perform well when guidelines require information that is not easily quantifiable, nor when decision-making requires patient-specific judgment. Furthermore, technology is unlikely to supplant humans in direct patient care, including procedures and tasks that require empathy and emotional support.