The Impact of Combining Conformance and Experiential Quality on Hospitals’ Readmissions and Cost Performance

To investigate the opportunity for hospitals to achieve better care at lower cost, we examine two key process quality measures, conformance quality and experiential quality, and two measures of performance, readmission rate and cost per discharge. Conformance quality represents a hospital’s level of adherence to evidence-based standards of care, whereas experiential quality represents the level of interaction between hospital’s caregivers and patients. Analyzing six years of data from 3,474 U.S. acute care hospitals, we find that combining conformance and experiential quality results in lower readmission rates. However, conformance quality and experiential quality each independently increase cost per discharge, which suggests that a readmissions–costs trade-off is unavoidable. To investigate this further, we conduct post hoc analyses by distinguishing between the granular elements of experiential quality (EQ) based on task type: response-focused EQ and communication-focused EQ. Response-focused EQ measures caregivers’ ability to respond to patient’s explicit needs, whereas communication-focused EQ measures caregivers’ ability to engage in meaningful conversations with the patient. We find that combining communication-focused EQ with conformance quality reduces readmission rates. Moreover, as conformance quality increases, the cost of improving communication-focused EQ decreases, indicating complementarity. Response-focused EQ in combination with conformance quality also results in reduced readmission rates. However, as conformance quality increases, the cost of improving response-focused EQ also increases, suggesting that these dimensions might compete for resources. Taken together, our results suggest that hospital administrators can mitigate the trade-off between reducing readmissions and controlling costs by prioritizing communication-focused EQ over response-focused EQ. This paper was accepted by Serguei Netessine, operations management.