Overview

Hospitals are attempting to increase their market share by achieving measurable improvements in the quality of care. Although these improvements can significantly lower a hospital's cost structure for treating patients, they may be costly to implement, and may not add revenue—indeed, they may even lower it. The Children's Hospital and Health Center of San Diego (CHSD) has significantly lowered the cost of providing care and slashed the length of hospitalization through measurably increasing its quality outcomes. Yet, under the current business model of per diem payment, those savings have accrued mostly to insurers and other payers, and the hospital has actually forfeited millions of dollars in annual revenue. The per diem payment structure typical for children's hospitals (where Medicaid typically becomes the primary payer for chronic conditions) contrasts with the per discharge basis for Medicare; reducing length of stay thereby gives adult hospitals a financial gain, but gives children's hospitals a financial loss.

For an overview of this and other business case for quality case studies, see this Health Affairs article, The Business Case For Quality: Case Studies And An Analysis, by Sheila Leatherman, Donald Berwick, Debra Iles et al.

This study was based on publicly available information and self-reported data provided by the case study institution(s). The aim of Fund-sponsored case studies of this type is to identify institutions that have achieved results indicating high performance in a particular area, have undertaken innovations designed to reach higher performance, or exemplify attributes that can foster high performance. The studies are intended to enable other institutions to draw lessons from the studied organizations' experiences in ways that may aid their own efforts to become high performers. The Commonwealth Fund is not an accreditor of health care organizations or systems, and the inclusion of an institution in the Fund's case studies series is not an endorsement by the Fund for receipt of health care from the institution.

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