Patient experience and hospital profitability: Is there a link?

ABSTRACT

BACKGROUND: Patient experience has had a direct financial impact on hospitals since value-based purchasing was instituted by the Centers for Medicare & Medicaid Services in 2013 as a method to reward or punish hospitals based on performance on various measures, including patient experience. Although other industries have shown an indirect impact of customer experience on overall profitability, that link has not been well established in the health care industry. Return-to-provider rate and perceptions of health quality have been associated with profitability in the health care industry. PURPOSE: Our aims were to assess whether, independent of a direct financial impact, a more positive patient experience is associated with increased profitability and whether a more negative patient experience is associated with decreased profitability. METHODOLOGY/APPROACH: We used a sample of 19,792 observations from 3767 hospitals over the 6-year period 2007-2012. The data were sourced from Centers for Medicare & Medicaid Services and Hospital Consumer Assessment of Healthcare Providers and Systems. Using generalized estimating equations to account for repeated measures, we fit four separate models for three dependent variables net patient revenue, net income, and operating margin. Each model included one of the following independent variables of interest percentage of patients who definitely recommend the hospital, percentage of patients who definitely would not recommend the hospital, percentage of patients who rated the hospital 9 or 10, and percentage of patients who rated the hospital 6 or lower. FINDINGS: We identified that a positive patient experience is associated with increased profitability and a negative patient experience is even more strongly associated with decreased profitability. PRACTICE IMPLICATIONS Management should have greater justification for incurring costs associated with bolstering patient experience programs. Improvements in training, technology, and staffing can be justified as a way to improve not only quality but now profitability as well.