Payment cuts can threaten patient safety

A new study suggests lower profits may decrease hospitals' ability to invest in safety improvements, leading to an increase in preventable errors.

By Myrle Croasdale, AMNews staff. July 4, 2005.

Declining hospital profit margins may prompt a slide in quality of care within the institutions experiencing them, according to new research by the Agency for Healthcare Research and Quality.

"Hospital payments make a big difference in patient safety," said William Encinosa, PhD, lead author of the study, which was published in the spring issue of Inquiry. "If hospital payments are cut too drastically that can affect patient safety."

Implications for policy-makers are clear, said Didem Bernard, PhD, study co-author. Cost cutting should be done carefully and watched closely for unintended consequences, she said.

"This is the first study that finds an association between financial pressure and patient outcomes," Dr. Bernard said.

The duo looked at data from 1996 to 2000 when Medicare payments to hospitals were being reduced due to the Balanced Budget Act of 1997. Florida hospitals were chosen because they were also being pressured by a 130% increase in managed care penetration, Dr. Encinosa said, along with a rise in the number of uninsured patients.

The researchers also looked at Florida's data on nursing-related, surgery-related and preventable patient safety errors during this time frame. What they found was that all of these errors increased at hospitals with the lowest profit margins.