Fitch Ratings Finds Positive Correlation Between Hospital Profitability and Advanced Health IT

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In a review of 291 hospitals, Fitch Ratings found hospitals who adopted advanced health IT systems or received quality awards were also more likely to demonstrate increased utilization and profitability, according to a recently released report by the company.

For its review, Fitch assessed 291 hospitals that were part of the company's rated portfolio in 2009. Of the total portfolio hospitals, 75 hospitals received some form of recognition for high quality of care and 24 hospitals were deemed HIMSS stage 6 or stage 7 hospitals for high rates of adoption of electronic health records, CPOE and many other advanced systems.

Not surprisingly, among its findings Fitch reported the size of a hospital's revenue, unrestricted case and investments were directly linked to "achievements in both quality and IT infrastructure." Quality hospitals' average total revenue was nearly 30 percent higher than portfolio hospitals, and IT hospitals' average total revenue was 46 percent higher than portfolio hospitals. Twelve hospitals that fit both qualifiers had 76 percent greater total revenue than portfolio hospitals.

Fitch also pointed out patients are likely to choose hospitals based on quality measure performance. Compared to portfolio hospitals, which saw an increase in admissions of 1.4 percent per year, quality and IT hospitals experienced increased admissions of 0.5 percent and 4.7 percent, respectively. The 12 hospitals that fit both qualifiers experienced a 4.4 percent per year boost in patient admissions.

For length of stay averages, portfolio hospitals saw an average increase of approximately 0.1 percent per year. On the other hand, quality and IT hospitals saw a decrease in length of stay by 0.4 percent and 1.0 percent per year, respectively. The 12 hospitals that fit both qualifiers experienced an average 1.8 percent per year drop in length of stay.

In addition to increased admissions and lower length of stay, quality and IT hospitals experienced increased operating margins and cash flow than the portfolio hospitals' averages.

Related Articles on Fitch Ratings:
North Carolina, Pennsylvania Hospitals Receive Credit Rating Downgrades in Last 30 Days
Fitch Ratings: Non-Profit Hospitals Stable for 2011
Fitch Assigns ̎AA- ̎ Rating to University of Chicago Medical Center

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