The Impact of Conformance and Experiential Quality on Healthcare Cost and Clinical Performance

The quality of operational processes is an important driver of performance in hospitals. In particular, processes that reliably deliver both evidence-based and patient-centered care, which we call conformance and experiential quality, respectively, have been argued to result in better clinical outcomes. However, hospitals, in general, struggle to perform well on these quality dimensions. Operations management theory suggests that this may be due to the cost involved in combining these dimensions. In other words, there may be a tradeoff between clinical and financial performance. To investigate this issue in detail, we use longitudinal data from 3458 U.S. acute care hospitals and examine the relationships between conformance and experiential quality and two important dimensions of hospital performance: cost efficiency and clinical outcomes. We find that hospitals with high levels of both conformance and experiential quality demonstrate better clinical outcomes as measured by length of stay and readmissions, but have worse performance with regard to cost efficiency. This may result in hospitals' inability to invest in both conformance and experiential quality due to the greater financial burden. We conclude by highlighting that although hospitals may need to persevere through a short term financial hardship to achieve high levels of both conformance and experiential quality, financial performance benefits are likely to emerge in the longer term. Our results have implications for researchers and policy makers investigating the operational processes, clinical outcomes, and financial performance of hospitals.