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The Association Between Hospital Margins, Quality of Care, and Closure or Other Change in Operating Status

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Hospitals face increased pressure to improve their quality of care in an environment of dwindling hospital payments. It is unclear whether lower hospital margins are associated with worse quality of care or closure.


To determine the association of hospital margins with quality of care and changes in operating status.


We conducted an observational cross-sectional study analyzing hospitals’ margin, quality of care (process quality, risk-adjusted readmission rates, and risk-adjusted mortality rates), and changes in operating status (rates of closure, merger and acquisition, and conversion to a critical access hospital) for 3,262 non-public U.S. hospitals with data from the Hospital Quality Alliance and Medicare Cost Reports.


Compared to those in the bottom 10% of operating margin, those in the top 10% had higher process quality (e.g. 95.3 vs. 93.7, p = 0.002 for acute myocardial infarction [AMI]) and lower readmission rates (e.g. 19.7% vs. 22.4%, p < 0.001 for AMI). We found no association between margins and mortality rates. Hospitals in the bottom 10% were more likely than those in the top 10% to close (5.7% vs. 2.0%), merge or become acquired (4.0% vs. 0.3%), or convert to a Critical Access Hospital (5.4% vs. 0.6%). Over 15% of hospitals in the lowest decile of hospital margin changed operating status in the subsequent year.


Low hospital margins are associated with worse processes of care and readmission rates and with changes in operating status. We should monitor low-margin hospitals closely for declining quality of care.

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We would like to acknowledge George H. Pink for his help with calculating the hospital margins.


None disclosed.

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Correspondence to Dan P. Ly MPP.

Online Appendix

Below is the link to the electronic supplementary material.

Appendix Table 1

Hospital Quality Alliance Performance Measures for Acute Myocardial Infarction, Congestive Heart Failure, and Pneumonia in 2007 (DOC 31 kb)

Appendix Table 2

The Association of Operating Margin and Performance on Process Indicators, Risk Adjusted Readmissions, and Risk Adjusted Mortality Rates: Coefficients on Operating Margin (DOC 34 kb)

Appendix Table 3

The Association of Total Margin and Quality Performance Measured by Process Indicators, Risk Adjusted 30-day Readmissions, and Risk Adjusted 30-day Mortality (DOC 21.0 kb)

Appendix Figure 1

The Association of Total Margin and Rates of Closure, Merger/Acquisition, or Conversion to a Critical Access Hospital in 2005 (DOC 52 kb)

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Ly, D.P., Jha, A.K. & Epstein, A.M. The Association Between Hospital Margins, Quality of Care, and Closure or Other Change in Operating Status. J GEN INTERN MED 26, 1291–1296 (2011).

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