Health Care:

Employers Urge Hospitals to Battle Costs Using Performance Data Systems

HEHS-95-1: Published: Oct 3, 1994. Publicly Released: Oct 12, 1994.

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Pursuant to a congressional request, GAO reviewed three communities' experiences with hospital performance measurement systems, focusing on: (1) the purposes for which employer coalitions and hospitals are using comparative performance measurement systems; and (2) whether these systems report the information employers and hospitals need to compare outcomes.

GAO found that: (1) severity-adjusted performance measurement systems have prompted hospitals to implement efficiency improvements because employers use the data to select cost-effective providers for their health care networks; (2) because of the threat of losing the coalition employers' business, most of the hospitals have purchased the coalition-sponsored performance measurement systems; (3) initial data show a significant variation in the charges and length of stay among the participating hospitals; (4) hospitals use performance data to manage their treatment costs by shifting certain services to ambulatory settings, using less costly supplies and drugs, and reducing, substituting, or rescheduling treatments and services; (5) the use of performance measurement systems could cause hospitals to specialize in certain services which could improve the quality of care; (6) the systems' cost savings potential is difficult to assess because of the systems' recent introduction and the difficulty in isolating other factors contributing to hospital improvements; (7) the systems have data limitation and quality problems, so employers should be cautious in interpreting their results; and (8) system results alone are not sufficient measures for comparing hospitals and their cost-effectiveness.

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