By Josh Gray, VP Analytic Services
If your risk-adjusted case-mix index (CMI) is not running at least 1% above average, you are leaving money on the table. Meaningful improvement is challenging but achievable if you have ambitious goals and a road map for achieving them.
My colleagues and I at Health Data Analytics Institute (HDAI) believe that goals for revenue capture improvement for inpatient care should be measured by observed to expected case mix index (OE CMI). This number reflects your results compared with others where case mix index is adjusted for the severity of patients. This is a critical metric. A hospital with a net margin of 2% that improves OE CMI from 1.00 to 1.01 essentially increases margins by 50%.
The graph below shows how much OE CMI changed between 2023 and 2025 for the 250 US hospitals with the largest number of Medicare fee-for-service patients. The key takeaway is that improving CMI is hard but achievable. Of the 250 hospitals we studied, 36 (14.4%) improved OE CMI by a full percentage point or more over two years. Yet improvement is achievable: of the hospitals we studied, the top quintile saw CMI improvements averaging 1.4 percentage points.
As executives look forward, it is important to establish an ambitious but feasible revenue cycle improvement target. We have developed a tool that has already calculated your OE CMI as of Q2 2026, and compares you to the top 10% performers, and, most importantly, provides a discrete path to increase your OE CMI. If you’d like to know where your improvement opportunities are, please reach out.
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