Looking for a benchmark? Try Southern states

Highlights from HCIA/Mercer's top 100 list

Which hospitals are delivering the most cost-efficient and highest quality medical care? Each year since 1993, HCIA Inc. and William M. Mercer have identified the hospitals that excel in measures related to clinical practices, operations, and financial management. Here are highlights of the 1997 study, 100 Top Hospitals-Benchmarks for Success. (See list of nine measures, p. 48.)

1. Southern and Western hospitals top the list. For the third consecutive year, the South has dominated the group of top performers, claiming 50% of all benchmark hospitals. In fact, 35% of all benchmark hospitals are found in just three states: 17 in Florida, 10 in Tennessee, and eight in Texas. Those Southern hospitals performed better than other benchmark hospitals in the following areas:

· complications;

· average length of stay (LOS);

· profitability;

· growth in outpatient revenue;

· long-term growth in equity;

· total asset turnover ratio.

Western hospitals are giving the South a run for its money, however. Both areas display a nearly equal proportion of top-performing hospitals this year: 4.2 and 4.0, respectively. (For the past three years, the regions were nearly equal in the percentage of benchmark hospitals.) Western hospitals outperformed U.S. hospitals in these areas:

· average LOS;

· expenses;

· profitability;

· proportion of outpatient revenue;

· growth in total facility;

· occupancy;

· long-term growth in equity;

· total asset turnover ratio.

Why the superior performance in the two regions? The South has been a hot spot for battles over market share by investor-owned chains, and the West has the most managed care coverage, says George D. Pillari, chairman and chief executive officer of HCIA. For example, nine Florida hospitals on the benchmark list are owned by Columbia/HCA. "The resulting environment has forced hospitals in these areas to seriously pursue improvement, particularly with regard to price and quality of care," he says.

2. Northeast and North Central regions still lag behind. With 17 and 15 top-performing hospitals, respectively, these regions were nearly tied. The Northeast improved somewhat this year, with 2.7% hospitals represented (up from 1.1% last year). The North Central region had 1.9% hospitals represented among this year's winners (down from 2.8% last year). The relatively small number of top-performing hospitals in the Northeast and North Central regions reflects these challenges:

· higher median average LOS;

· higher expenses;

· lower profitability;

· lower proportion of outpatient revenue;

· lower long-term growth in equity;

· lower total asset turnover ratio.

3. Five-year trends compared in 1997 study. A new feature of the just-released study is the comparison of performance measurement data from the five years from 1992 to 1996 with those from 1997. The most significant trends occurred in these measures:

· decreased average LOS every year in every peer group (at 28%, teaching and major teaching hospitals had the greatest decrease in the five-year period);

· proportion of outpatient revenue, which displayed at least a 22% increase and grew each year in every peer group;

· decreased total facility occupancy rate every year in every peer group (at 13.4%, non-teaching hospitals had the greatest decrease in occupancy rate over the five-year period).

4. Level of managed care penetration compared. For the first time, the study also stratified hospitals by level of managed care penetration (percentage of residents in the hospitals' metropolitan statistical areas enrolled in managed care plans). Data from the American Association of Health Plans was used to determine high, medium, and low managed care groups. They found the following:

· Average LOS declined as managed care penetration increased. The median average LOS for hospitals with a high level of managed care penetration, 4.08 days in 1996, was nearly 18% lower than that for hospitals with a low level, 4.96 days.

· Expenses decreased as penetration increased. The median case mix- and wage-adjusted expense per adjusted discharge was $4,170 at low managed care hospitals and only $3,840 at high managed care hospitals in 1996.

· The proportion of outpatient revenue decreased as the level of managed care penetration increased. The median low managed care hospital derived 36.4% of its revenue from outpatient services in 1996, while the median high managed care hospital derived only 29 percent. "This could be caused, in part, by the tendency of managed care payers to treat patients in clinical settings outside of hospitals," Pillari says.

For a complete summary of the study, see http:// www.hcia.com or http://www.mercer.com. To buy the full study, contact HCIA at (800) 568-3282.