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Publication Briefs

Study Examines Relationship between Cost of Care and Quality of Care for Two Conditions in Non-VA Hospitals


  • The relationship between (non-VA) hospitals' cost of care and quality of care for a particular condition was small and differed by condition. However, evidence did not support the 'penny-wise and pound foolish' hypothesis that low-cost hospitals discharge patients with congestive heart failure (CHF) or pneumonia earlier, only to increase readmission rates and incur greater inpatient cost of care over time.
  • Low-cost hospitals had similar or slightly higher 30-day readmission rates compared with high-cost hospitals (24.7% vs. 22.0% for CHF and 17.9% vs. 17.3% for pneumonia).
  • Compared with hospitals in the lowest-cost quartile for CHF care, hospitals in the highest-cost quartile had higher quality-of-care scores (89.9% vs. 85.5%) and lower mortality (9.8% vs. 10.8%). For pneumonia, the opposite was true. Compared with low-cost hospitals, high-cost hospitals had lower quality-of-care scores (85.7% vs. 86.6%) and higher mortality (11.7% vs. 10.9%).
  • Risk-adjusted costs of care for CHF and pneumonia varied widely between hospitals, although hospital cost-of-care patterns seemed stable over time.

Nationally, there are widespread efforts to systematically report on hospital quality of care. The Centers for Medicare and Medicaid Services has taken the lead in routinely reporting more than 30 quality-of-care measures for all U.S. hospitals. Beginning in August 2008, these reports were enlarged to include information about cost of care for common conditions to encourage patients to seek low-cost providers. This observational cross-sectional study focused on (non-VA) U.S. hospitals discharging Medicare patients for congestive heart failure (number of hospitals = 3146) or pneumonia (number of hospitals = 3152) in 2006. Using Medicare data, investigators examined the association between hospital cost of care and the following variables: process quality of care, 30-day mortality rates, readmission rates, and 6-month inpatient cost of care.


  • This study was limited to Medicare beneficiaries and examined care for only two conditions.
  • Patient satisfaction and health services overuse were not assessed.
  • Because this was an observational analysis, no conclusions regarding causality could be drawn.

This study was partly supported by HSR&D. Dr. Chen is part of HSR&D's Center for Clinical Management Research in Ann Arbor, and Dr. Jha is part of VA's Massachusetts Veterans Epidemiology Research and Information Center in Boston.

PubMed Logo Chen L, Jha A, Guterman S, Ridgway A, Orav E, and Epstein A. Hospital Cost of Care, Quality of Care, and Readmission Rates “Penny Wise and Pound Foolish?” Archives of Internal Medicine February 22, 2010;170(4):340-346.

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What are HSR Publication Briefs?

HSR requires notification by HSR-funded investigators about all articles accepted for publication. These journal articles are reviewed by HSR and publication briefs or summaries are written for a select number of articles that are then forwarded to VHA Central Office leadership to keep them informed about important findings or information. Articles to be summarized are selected by HSR based on timeliness of the findings, interest of leadership, or potential impact on the organization. Publication briefs are written for only a small number of HSR published articles. Visit the HSR citations database for a complete listing of HSR articles and presentations.

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