Given the ever-changing nature of healthcare, few things are absolute. In recent years, there has been much talk about the organizational benefits of promoting patient experience and employee engagement. Hospital leaders know that data supports a positive correlation between patient experience and employee engagement with improved financial performance. But, what exactly does the data say? In order for hospital leaders to truly understand how patient experience and employee engagement impact their financial bottom line, it is crucial to first understand how they are related.
How exactly are patient experience, employee engagement and financial performance intertwined?
Recent research shows that hospitals that demonstrate improvement over time in specific HCAHPS survey areas of employee engagement and patient experience also experience improvements in patients’ global ratings of their care. According to the Harvard Business Review, each five-point increase in HCAHPS score is associated with a 1% increase in net profit margin. To add, further data analysis has revealed that there can be a compounding effect when an organization improved in both experience and engagement measures at the same time1.
The review also noted that “prior analyses of data collected by Press Ganey have shown that hospitals with better patient experience have better business performance (as well as better records in safety, technical quality, length of stay, and readmission rates). Similarly, better employee engagement correlates with better outcomes on all these parameters.
For example, hospitals that saw a performance gain of greater than one percent or more in both communication with nurses and employee engagement had an average performance gain of six points in overall hospital rating (upper right box). Conversely, when improvements were seen in just one domain or the other, associated gains in overall rating were either modest or negative, or there was no change. Thus, even with an improvement in one area — say, employee engagement — a decline in the other can offset it, resulting in an overall rating decline.
What’s more, we found a pronounced association between improvement in overall hospital rating and financial performance: for every one-point increase in hospital rating we saw a 0.2% increase in net operating profit margin. Put another way, a five-point increase in hospital rating is associated with a 1% increase in profit margin (based on linear regression analysis using data from 3,408 acute care hospitals, controlling for region, case mix, ownership category — i.e. private, nonprofit — and bed size)”1.
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1 Bullman, N. and Lee, T. (May 8, 2019) When Patient Experience and Employee Engagement Both Improve, Hospitals’ Ratings and Profits Climb