Measuring efficiency: the association of hospital costs and quality of care

Abstract

Providers with lower costs may be more efficient and, therefore, provide better care than those with higher costs. However, the relationship between risk-adjusted costs (often described as efficiency) and quality is not well understood. We examined the relationship between hospitals' risk-adjusted costs and their structural characteristics, nursing levels, quality of care, and outcomes. U.S. hospitals with low risk-adjusted costs were more likely to be for-profit, treat more Medicare patients, and employ fewer nurses. They provided modestly worse care for acute myocardial infarction and congestive heart failure but had comparable rates of risk-adjusted mortality. We found no evidence that low-cost providers provide better care.