Low-Cost Hospitals in California Control Costs Better Than High-Cost Competitors

Low-cost hospitals in California were more aggressive at controlling their costs than high-cost hospital in the state in 2012, a study from Worthington, Ohio-based Cleverley & Associates — a hospital consulting firm — has found.

The study was based on survey responses from 74 non-teaching California hospitals that had annual revenues of $100 million to $300 million. For the study, researchers analyzed data from 2012 Medicare cost reports and California Office of Statewide Health Planning and Development data.

The study made the following findings:

• Net patient revenue per discharge was an average of $1,504 more at higher-cost hospitals than lower-cost facilities.

• Lower-cost hospitals had an average profit margin of 4.7 percent, compared with a 1.6 percent deficit at higher-cost hospitals.

• Lower-cost hospitals spent an average of 27 percent less on pharmacy services than higher-cost hospitals.

• Higher-cost hospitals spent approximately 25 percent more on employee benefits.

• Higher-cost hospitals spent 10 percent more on supplies than lower-cost facilities.

 The results of the study were presented at the Healthcare Financial Management Association's Annual National Institute in Las Vegas.

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