Becoming a Magnet Hospital Can Increase Revenue, Offset Costs of Achieving Magnet Status

New Study Finds Magnet Status Increases Hospital Revenue by an Average of More Than $1.2 Million, Annually

    • May 29, 2014

Princeton, N.J.—Hospitals accredited by the American Nurses Credentialing Center (ANCC) as Magnet Hospitals are recognized for having better nursing environments, promoting excellence in nursing practice, and providing high quality patient care. Now a new study, published in the May issue of Medical Care, finds that becoming a Magnet Hospital also increases revenue by an average of $1,229,770 to $1,263,926 annually.

The study, funded by the Robert Wood Johnson Foundation’s Interdisciplinary Nursing Quality Research Initiative, examined data from 1998-2006 for 2,541 non-Magnet Hospitals and 141 Magnet Hospitals from the American Hospital Association Annual Survey, the Hospital Cost Reporting Information System from the Centers for Medicare & Medicaid Services, and the ANCC. Data included information on hospital characteristics, as well as utilization, costs, charges, and other relevant financial information.

The interdisciplinary research team was led by Jayani Jayawardhana, PhD, assistant professor of health policy and management, University of Georgia; John M. Welton, PhD, RN, professor in the College of Nursing, University of Colorado Anschutz Medical Campus; and Richard C. Lindrooth, PhD, associate professor in the Department of Health Systems, Management and Policy in the Colorado School of Public Health, University of Colorado Anschutz Medical Campus.

Several studies have found that Magnet Hospitals have lower mortality rates, shorter lengths of stay, higher patient satisfaction, and better patient outcomes than non-Magnet Hospitals. They are also more likely to adopt National Quality Forum-approved patient safety practices. Until recently, though, little was known about the effect of Magnet status on hospital revenue.

According to the research team, the increase in revenue overshadowed changes in patient costs.  Net patient revenue increased on average by 3.89 percent compared to non-Magnet hospitals, while costs increased only by 2.46 percent.

“Since Magnet Hospitals have better patient outcomes, we suspect that these increases in revenue reflect increased reimbursement rates from private insurers, relative to non-Magnet Hospitals,” said Lindrooth. “That increased premium is related to the perceived higher quality of care and the desirability of including high-quality hospitals in insurers’ networks.  The higher costs likely reflect a combination of the cost of providing high quality care and, to a lesser extent, a shift toward treating more complex cases.”

To date, 393 U.S. hospitals have achieved Magnet status. On average, it takes a hospital 4.25 years to complete the process of attaining Magnet Status, at an average cost of $500,000 annually, for an average total investment of $2,125,000. At that cost, the researchers calculate that hospitals begin to realize payback from achieving Magnet Status in two to three years.

The Interdisciplinary Nursing Quality Research Initiative is funded by the Robert Wood Johnson Foundation. To learn more, visit www.inqri.org or follow on Twitter at @INQRIProgram.

About the Robert Wood Johnson Foundation

For more than 40 years the Robert Wood Johnson Foundation has worked to improve the health and health care of all Americans. We are striving to build a national Culture of Health that will enable all Americans to live longer, healthier lives now and for generations to come. For more information, visit www.rwjf.org. Follow the Foundation on Twitter at www.rwjf.org/twitter or on Facebook at www.rwjf.org/facebook.

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Melissa Blair

Robert Wood Johnson Foundation (609) 627-5937

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