Do higher prices mean better quality? With some things, they might—but what about health care? We recently updated our Texas Hospital Payer Data to include quality data from both Leapfrog Group and the Centers for Medicare and Medicaid Services (CMS) and what we found might surprise you.
How do Texas Hospitals Score in Quality and Safety?
Only 26% of Texas hospitals received a 4 or 5-star quality rating from CMS, and only 59% of Texas hospitals received a safety grade of B or higher from Leapfrog Group.
Does price correlate with quality?
While there are times when you might pay more for better quality care, that’s not always the case. In fact—it’s rarely the case.
When we examined the relationship between hospital prices and Leapfrog’s safety grades, we found R2 = 0.001. In other words, there was no statistically significant relationship between quality and price.
For the CMS ratings, we found R2 = 0.052, indicating a weak correlation—for every 1-point increase in the CMS rating, there was on average a 20% increase in price. So while there is a statistically significant relationship between quality and price, it is a weak one.
Employers can cut expenses without sacrificing quality.
If there’s no correlation between price and quality—or a very weak one at best—employers have a real opportunity to cut expenses without sacrificing quality by taking advantage of price and quality transparency data to craft intelligent benefit plans that provide their employees with the care they need at an affordable price.