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Patient experience a key driver in profit margin growth for hospitals, Accenture says

Hospitals delivering superior customer experiences saw net increases that were 50 percent higher than average performers, study says.

Beth Jones Sanborn, Managing Editor

Instead of slashing jobs to cut costs and increase profits, hospitals should focus on delivering high-quality customer experiences to widen their margins. That's the word from a new study released by Accenture, which shows that hospitals that delivered superior customer experiences increased their net margins by 50 percent over average-performing facilities.

Cost-cutting has often been the measure of choice for systems looking to increase profits, while increasing customer satisfaction is often viewed as leading to higher costs with little financial upside, Accenture said. This study turns that philosophy upside down, and indicates that in an age where consumerism is driving industry trends, hospital leadership would do better to court consumers with higher quality rather than cut staff and services.

[Also: 168 get 5 stars, 65 get 1 star in latest Hospital Compare patient experience ratings; See the list]

Accenture compared six years of hospital margin data with patient experience scores from the Hospital Consumer Assessment of Health Providers and Systems surveys. They found that both hospital margins and revenues for top-performing facilities are growing at an above-average rate and that even though costs go up, revenue outpaced operating expenses in these hospitals.

Moreover, this relationship became increasingly significant over time. Over six years, with a 10 percent improvement in HCAHPS scores, hospital margins saw 70 percent growth, the study showed.

The pattern holds true for hospitals of all sizes and categories, from stand-alone to systems owned, nonprofit or for profit, urban or rural. However, urban hospitals did achieve margin increases that were about eight times higher than rural ones, suggesting high-performing urban hospitals could double their margins compared to average-performing urban facilities.

[Also: Once-failing hospitals say accountability, transparency key to surviving fallout from failing patient safety grades]

The data point to the need to at least re-examine profit growth strategies, especially when considering cutting jobs or services, and place greater emphasis on "patient-centric enhancements". The study showed that a hospital system with $2 billion in revenue would have to cut 460 jobs, based on an average loaded salary of $100,000, to accomplish the same 2.3 percent margin growth that improving customer satisfaction might bring.

"Hospitals that are the fastest to adopt patient experience and digital health best-practices will be best positioned to improve their reputations, reap the financial rewards and outperform their peers," Accenture said.

Twitter: @BethJSanborn

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