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Drivers of Operating Margin
April 2015
Some factors commonly used to explain poor operating performance do not prevent many hospitals from being highly profitable. For example, Truven Health Analytics™ has found that rates of uncompensated care, drug expense, and other factors do not seem to differ between unprofitable and very profitable hospitals. But factors such as Medicaid utilization rates and poor reimbursement rates do appear to impact the least profitable hospitals. One controllable factor that appears to be significant is labor productivity, with the most profitable hospitals posting the lowest labor expense per patient.
In response to concerns raised by healthcare leaders that the absence of adjustment for socioeconomic status (SES) and race characteristics in patient populations impedes the fair comparison of hospitals on risk-standardized 30-day unplanned readmission rates, Truven Health Analytics™ evaluated the extent to which risk-adjusted readmission rates for acute myocardial infarction, heart failure, and pneumonia are affected by adjustments for community-level SES factors through its Community Need Index (CNI) and patient race. The study shows there is, indeed, a statistically significant effect. For more, visit truvenhealth.com/wp/readmissionpenalties.
Healthcare reform regulations, increasing costs, and more competition are driving employers and their health plans to focus more than ever on opportunities to reduce cost trends. For example, the country experienced a 3.0% growth in per capita gross (allowed) medical and pharmacy costs from 2012 to 2013. Truven Health Analytics anticipates those costs in 2014 and 2015 will increase by 4% to 5% or more. By taking a data-driven approach, payers can manage costs and, ultimately, make their benefit programs sustainable in the context of healthcare reform. They can also maximize opportunities to improve population health and productivity and optimize the delivery of care.
The Truven Health Analytics 50 Top Cardiovascular Hospitals study identifies hospitals that achieve the best performance on a scorecard of performance measures. This year, based on comparisons between the winners and a peer group of similar high-volume hospitals that were not winners, the study found that if all cardiovascular providers performed at the level of this year's winners, approximately 9,500 additional patients could survive, more than $1 billion could be saved, and almost 3,000 additional bypass and angioplasty patients could be complication-free. This is based on an analysis of Medicare patients; if the same standards were applied to all inpatients, the impact would be even greater.
