Report ranks 10 most cost-efficient hospitals in the U.S., identifies $8B in potential Medicare savings

A new ranking of the 10 most cost-efficient hospitals in the U.S. reveals that if all hospitals matched their performance, $8 billion could be saved in Medicare dollars.

The ranking, conducted by healthcare think tank Lown Institute, was based on Medicare data from 2016 through 2018 on more than 3,000 hospitals focusing on what they billed and how many patients died. For the analysis, it adjusted both mortality rates and cost based on patient risk. It found that costs across hospitals vary widely per patient irrespective of their mortality rates. In other words, there is almost no correlation between mortality rates and costs.

The 10 most cost-efficient hospitals identified had the lowest mortality rates and the lowest associated costs.

“If we want to keep costs low for the Medicare program and provide quality care for the 60 million Americans who depend on it, hospitals must be as efficient as possible,” said Vikas Saini, M.D., president of the Lown Institute, in a press release. “The best hospitals prove that you can save Medicare dollars and deliver great patient outcomes at the same time.”

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For the purposes of the analysis, hospitals with a low mortality rate and a reasonably low cost were more likely to land on the list than those with a lower cost but a slightly higher mortality rate, Saini told Fierce Healthcare.

Here are the 10 most cost-efficient hospitals in the U.S., according to the Lown Institute: 

1. Pinnacle Hospital (Crown Point, Indiana)
2. Saint Mary’s Regional Medical Center (Reno, Nevada)
3. Mercy Medical Center Dubuque (Dubuque, Iowa)
4. Encino Hospital Medical Center (Encino, California)
5. Park Ridge Health (Hendersonville, North Carolina)
6. Oroville Hospital (Oroville, California)
7. Saint Michael’s Medical Center (Newark, New Jersey)
8. UnityPoint Health – Meriter (Madison, Wisconsin)
9. East Liverpool City Hospital (East Liverpool, Ohio)
10. Maple Grove Hospital (Maple Grove, Minnesota)

In general, Saini said, hospitals that tend to manage costs best are larger urban hospitals, nonprofits or major teaching hospitals. But the Lown’s ranking includes several smaller hospitals, perhaps ones that focus a lot on managing costs. 

The Lown Institute also compared the cost of care between two hospitals with similar mortality rates based in the same city across 10 different U.S. cities. While in any given city, two hospitals’ mortality rates hardly differed, their average 30-day cost per patient varied notably. The difference between those costs was then multiplied by their volume of patients to estimate potential Medicare savings. 

The lowest potential savings came to $12.8 million in Washington, D.C., while the highest potential savings was in Boston at $33.4 million. Saini said these savings estimates were “probably conservative.”

The aim of the analysis was to determine whether cost is based on how sick patients are. Once it became clear that the answer was no, Lown wanted to pose the question of how to improve on existing variability, Saini said.