Is there a business case for magnet hospitals? Estimates of the cost and revenue implications of becoming a magnet.

Background: Although Magnet hospitals (MHs) are known for their better nursing care environments, little is known about whether MHs achieve this at a higher (lower) cost of health care or whether a superior nursing environment yields higher net patient revenue versus non-MHs over an extended period of time.

Objective: To examine how achieving Magnet status is related to subsequent inpatient costs and revenues controlling for other hospital characteristics.

Data And Methods: Data from the American Hospital Association Annual Survey, Hospital Cost Reporting Information System reports collected by Centers for Medicare & Medicaid Services, and Magnet status of hospitals from American Nurses Credentialing Center from 1998 to 2006 were combined and used for the analysis. Descriptive statistics, propensity score matching, fixed-effect, and instrumental variable methods were used to analyze the data.

Results: Regression analyses revealed that MH status is positively and significantly associated with both inpatient costs and net inpatient revenues for both urban hospitals and all hospitals. MH status was associated with an increase of 2.46% in the inpatient costs and 3.89% in net inpatient revenue for all hospitals, and 2.1% and 3.2% for urban hospitals.

Conclusions: Although it is costly for hospitals to attain Magnet status, the cost of becoming a MH may be offset by higher net inpatient income. On average, MHs receive an adjusted net increase in inpatient income of $104.22-$127.05 per discharge after becoming a Magnet which translates to an additional $1,229,770-$1,263,926 in income per year.