Measuring Patient Satisfaction's Relationship to Hospital Cost Efficiency: Can Administrators Make a Difference?

Objective: The aim of this study was to assess the ability and means by which hospital administrators can influence patient satisfaction and its impact on costs. Data Sources: Data are drawn from the American Hospital Association's Annual Survey of Hospitals, federally collected Hospital Cost Reports, and Medicare's Hospital Compare. Study Design: Stochastic frontier analyses (SFA) are used to test the hypothesis that the patient satisfaction-hospital cost relationship is primarily a latent management effect. The null hypothesis is that patient satisfaction measures are main effects under the control of care providers rather than administrators. Principle Findings: Both SFA models were superior to the standard regression analysis when measuring patient satisfaction's relationship to hospitals' cost efficiency. The SFA model with patient satisfaction measures treated as main effects, rather than latent, management effects, was significantly better comparing the log-likelihood statistics. Higher patient satisfaction scores on the environmental quality and provider communication dimensions were related to lower facility costs. Higher facility costs were positively associated with patients' overall impressions (willingness to recommend and overall satisfaction), assessments of medication and discharge instructions, and ratings of caregiver responsiveness (pain control and help when called). Conclusions: In the short term, managers have a limited ability to influence patient satisfaction scores, and it appears that working through frontline providers (doctors and nurses) is critical to success. In addition, results indicate that not all patient satisfaction gains are cost neutral and there may be added costs to some forms of quality. Therefore, quality is not costless as is often argued.