At least a few hospital administrators have quietly questioned how patient experience connects with financial performance. Skeptics say that experience is, at best it’s a “nice to have.” But for many executive leaders, the acid business test of a hospital facility is service line profitability.
Part of the answer, of course, is where patent-reported experience scores drive rewards for hospitals via Medicare’s Value Based Purchasing (VBP) program, for example. Now a study from the Deloitte Center for Health Sollutions, The Value of Patient Experience, reports:
“Improving the patient experience can help a hospital improve its financial performance by strengthening customer loyalty, building reputation and brand, and boosting utilization of hospital services through increased referrals to family and friends.
“As a result, patient experience scores for factors as diverse as nighttime noise level and doctors’ and nurses’ communication skills have become a key hospital performance measure.”
The Deloitte report observes: “Hospitals with high patient-reported experience scores have higher profitability. Hospitals with ‘excellent’ HCAHPS patient ratings between 2008 and 2014 had a net margin of 4.7 percent, on average, as compared to just 1.8 percent for hospitals with ‘low’ ratings.”
Higher patient experience ratings are associated with higher profitability…
Other significant observations indicate that patient experience provides a strong return, and that quality staff is a significant contributor to experience and profitability.
Invest in staff: A highly engaged staff boosts patient experience, translating into better performance. Patient experience scores pertaining to interactions with nurses have the strongest association with hospital financial outcomes.
Value incentives are incidental: VBP incentives likely contribute a small amount to the association of patient experience with hospital financial performance. Medicare VBP incentives (tied to patient experience) account for only seven percent of the association between patient experience and hospital financial performance, as measured by net margins.
Positive Return-on-Investment: [Hospital] investments in patient experience increase costs, but increase revenue even more. Hospitals with better experience levels earn disproportionately more than they spend compared to those with lower ratings.
Deloitte study conclusions…
There is a clear and important business value in collecting and applying patient experience data. In this study, the link between good patient experience and hospital profitability is strong. Moreover, the strongest point of influence associated with better care is nurse-patient engagement and communications.
The Deloitte report, The Value of Patient Experience [available here], suggests that, for greater profitability, hospital executives should consider should consider investing in the tools and technologies necessary to better engage patients and enhance patient experience.