The Direct Link Between Quality and Finances in Hospitals

When you talk about Hospital Financial Data, the conversation soon leads to hospital cost and quality. This is mainly because of accountable care. Health systems didn’t need to concern themselves with achieving high-value care until accountable care took the healthcare industry by a storm in 2010. That’s because health systems had a predictable revenue stream from the fee-for-service payment model, and to account for their revenue, they were primarily interested in the financial data they acquired from patient volumes. So with this new system, hospital have to actually improve quality in order for them to increase their finances and make their financial data look more viable. Considering this direct correlation between quality and finances, here are some major points for hospitals to take note of in order to improve their quality

If you can’t measure quality, you can’t improve it:

In order to improve, you must first measure. This is simple logic but requires a lot. Measurement is very critical in quality improvement. Implementing changes takes time money and manpower and so it’s important to test and measure during the process. This helps to track changes, identify what works and improve as you go along. Deductively., measurement requires data. Data is very important in measurement. Not just any data but meaningful data. Having meaningful data which is then interpreted and understood is one of the first steps to quality improvement. This leads to the next principle

Make sure the correct data is available at the right time and in the right hands:

This goes exactly as it sounds. Health organizations need the right data at the right time and in the right hand. It’s a trifecta that must always go together for efficient quality improvement. For example, if you have the right data but at the wrong time, it might be useless. And if the right data is available at the right time but to the wrong person (or department) that data becomes either useless or misused. Having data flow efficiently through the organization is very important for quality improvement to take place.

Now back to the switch from fee-for-service. There are some new Clinical Quality and Operational Metrics Required for Value-based Purchasing

While the switch to value-based purchasing will ultimately improve both quality and cost outcomes, health systems now need the capability of tracking and analyzing many other metrics before they can comply with the government’s new mandates. These metrics include the following:


The time it takes to complete a process, such as shortening the average wait time in the ER or reducing the time between cases in the OR, now translates directly into money and greatly affects quality. Improving throughput will benefit the organization by reducing cost and increasing patient satisfaction.


With value-based purchasing, hospitals are required to assess and report measures of quality relative to defined benchmarks. Were patients given discharge instructions? Did the care manager schedule follow-up visits? How many falls occurred in the hospital? How many hospital-acquired infections? If hospitals don’t report their quality metrics, they’ll receive a penalty, further impacting their bottom line.


Quality will also be assessed based on the rates of readmissions for all causes within a certain time period for specific patient populations. For example, what are the rates of heart failure, pneumonia and AMI readmissions within a 30- and 90-day period?

Mortality rates:

This is the rates at which patients die due to different diseases. What are the hospital’s mortality rates for pneumonia, heart failure and acute myocardial infarction (AMI) among its patient populations? High mortality rates in pneumonia, health failure and AMI will result in loss of incentives beginning in 2014.

Patient satisfaction:

Patient satisfaction is now tied directly to payment models. How satisfied are patients with their care experience? Was the room satisfactory? Was the family comfortable? Would they recommend the hospital?

Cost per episode of care:

Containing costs is now more important than ever as value-based purchasing systems strive to keep treatment consistent and expenditures appropriate and predictable. Reducing clinical process with variations will improve the cost structure.