How Does Patients’ Acuity Affect a Hospital’s Expenses?

This study won the Best Paper award at the 2002 Society for Health Systems conference.

This study disproves the popular belief that a hospital’s Case Mix Index, commonly used as a proxy for inpatient acuity, is the main driver of hospital expense. Case Mix Index should not be granted the singular importance it has historically enjoyed as a scapegoat for high hospital costs. And, since there is a weak statistical correlation between Case Mix Index and inpatient expenses, CMI should never be used as an adjustment factor in comparative expense analysis.

Benchmarking FTEs Is Not Enough

Healthcare analysts must be very careful when benchmarking hospital FTEs because of a peer’s potential to outsource some or many labor functions. In hospital departmental benchmarking, measuring total departmental expenses is much more accurate and meaningful than measuring FTE productivity.