When Massachusetts made its hospitals report their finances every quarter instead of once a year, the hospitals became more profitable and patients fared worse. Deaths from heart failure and pneumonia rose by about 8% at the affected hospitals, according to a new working paper.
The study is by Bin Li of Vanderbilt University, Mohan Venkatachalam of Duke University, Xinyi Xie of Purdue University Fort Wayne and Vincent (Qiru) Zhang of Santa Clara University. It was posted on SSRN on May 4, 2026.
A state rule change as a natural experiment
In February 2011, the Massachusetts Division of Health Care Finance and Policy issued regulation 114.1 CMR 42.00. It required every acute-care hospital in the state to file quarterly financial reports, which were then released to the public after a 20-day review.
The researchers compared 62 Massachusetts hospitals with 227 acute-care hospitals in Connecticut, New Hampshire, New York, Rhode Island and Vermont, where reporting rules did not change. Their sample covered 1,702 hospital-years from 2008 to 2013. About 87% of the hospitals were nonprofits, and the average total margin was roughly 0.5%.
The setup let them ask whether more frequent reporting improves oversight, or instead pulls managers’ attention toward short-term numbers at the expense of harder-to-measure goals such as patient care.
Better margins from cutting staff and equipment
After the mandate, total profit margins at Massachusetts hospitals rose by about one percentage point compared with the neighbouring states, driven entirely by operating margin. Net patient income relative to assets rose by 2.3 percentage points.
Revenue did not explain it. Net patient revenue barely moved, while operating expenses fell by 3.5%. Paid full-time staff, such as physicians and nurses, fell by 7.2%, while unpaid labour from residents, trainees and volunteers rose by 11.7%.
Hospitals also cut investment in fixed and movable equipment, producing a decline of about 12% in long-term capacity, mostly in the first year after the rule. Patient volumes and case complexity stayed about the same.
More deaths, more readmissions, unhappier patients
The authors then checked Medicare quality data for heart failure, pneumonia and heart attack. Deaths from heart failure and pneumonia each rose by about 8%, which they calculate as 215 and 219 additional deaths per year across the treated hospitals. Mortality rates for both conditions rose by 0.3 percentage points.
Thirty-day readmissions rose by 3.9% for heart failure and 4.7% for pneumonia. Patient survey scores also slipped, including overall ratings, willingness to recommend the hospital, communication about medicines and cleanliness.
Profit margins in the two groups moved in parallel before 2011 and diverged only after the rule took effect. The authors ended their window in 2013 to avoid overlap with Massachusetts price transparency rules that took effect around 2014.
They read the evidence as support for an attention-based view: what gets measured gets managed. In their words, greater reporting frequency “shifts the equilibrium in the trade-off between margin and mission.”
The finding matters beyond Massachusetts. Colorado adopted quarterly hospital reporting in 2024 and Rhode Island in 2025, the paper notes.
Study Details:
- Title: Primum Non Nocere: The Unintended Consequences of Financial Reporting Frequency in Healthcare
- Authors: Bin Li, Mohan Venkatachalam, Xinyi Xie, Vincent (Qiru) Zhang
- Journal: Vanderbilt University Working Paper (SSRN)
- Publication Date: May 4, 2026
- DOI: 10.2139/ssrn.6622598