Does Quality Improvement Save Money?

A studied look at CQI's greatest power.

Since the late 1980s, the theory that a health system can save money when it systematically raises the quality of care provided has been a driving force behind the quality improvement movement. This was the collateral benefit of better patient outcomes—lowered rehospitalization rates, fewer clinician office visits, improved patient health status.

A well-known, early proof of the power of implementing continuous quality improvement (CQI) was the experience of LDS Hospital in Salt Lake City, Utah (Burke JP. Maximizing appropriate antibiotic prophylaxis for surgical patients: an update from LDS Hospital, Salt Lake City. Clin Infect Dis. 2001 Sep 1;33 Suppl 2:S78-83). They used an evidence-based guideline to prevent hospital-acquired infections in patients undergoing surgical procedures (e.g., strictly adhering to prophylactic antibiotic regimens and other preventive actions). This experience lowered their hospital-infection rate drastically, shortened length-of-stay, and it was assumed to have saved money for the health system. Not so fast, it seems. Authors of an article in this past week’s New England Journal of Medicine ( believe that the money saved by implementing CQI efforts is illusory. From the Dartmouth Institute for Health Policy and Clinical Practice, Lebanon, NH, the same organization that developed the Dartmouth Atlas of Health Care (, Stephen Rauh, MBA, CFA and colleagues postulate that it doesn’t save money overall—it simply allows for more efficient care. One might think that more efficient care equals money saved. Well, not exactly. What it does mean is that the system has greater capacity to treat more patients, which can mean more revenue for the health system implementing CQI techniques. How would this translate for the LDS Hospital example? It means that the hospital can simply handle more patients because it has more beds open.

A counter argument may be that perhaps individual institutions or plans that have implemented quality improvement do see isolated cost savings in the areas addressed, but what the entity does with the savings is a different story—maybe they do use it to gain more revenue opportunities. Maybe the efficiencies and savings gained are more than offset by the desire to invest in expensive technology to attract more patients or to become more productive. In any case, CQI efforts haven’t seemed to contribute to slowing growth of healthcare expenditures overall, as the majority of organizations and health systems have committed to implementing some evidence-based quality improvement measures since the 1980s.

Rauh and co-workers stratified cost layers in the health system based on how savings may affect these categories of expenses. The first layer, typified by supplies and medication, may be where most savings can be obtained. If fewer medications are needed for patients who benefit from the CQI initiative, for example, the savings are easy to calculate and accrue.

The second layer, which includes profession time like nursing hours, respiratory therapy, and physical therapy can result in some savings, but only if the volume of labor hours is significantly reduced. A nursing unit discharging a single patient because of CQI efforts would not affect the running of the unit. The result would have to be either reducing the number of patients on the unit considerably to allow for fewer nursing hours to be needed, or closing the unit altogether to gain the maximum savings.

The third layer consists of semi-fixed costs of care, such as operating room expenses, physician salaries, or other related ancillary services, which are impervious to savings (except in terms of physician layoffs).

And the fourth layer includes billing, finance and mortgages—also not much affected by CQI, at least not until subsequent billing cycles, according to the authors.

They conclude, “Because of these cost behaviors, quality-improvement efforts that reduce lengths of stay or readmissions or increase radiology throughput do not create substantive bottom-line savings. They generally create capacity to treat additional patients.” This applies to the ability to treat more patients in the emergency room, conduct more surgeries, or see more patients in radiology.

Therefore, activities like CQI to raise the quality of care may not be cost saving, but simply need to be pursued to raise the quality of care.