April 16, 2013 / 8:16 PM / 6 years ago

Reducing complications may cost hospitals money

NEW YORK (Reuters Health) - U.S. hospitals may have a financial incentive not to implement strategies and techniques that are known to reduce surgery-related complications, according to a new study.

The findings do not mean that “any hospital out there is saying, ‘we can make more money if we have more complications,’” said Dr. Atul Gawande, the study’s senior author from Brigham and Women’s Hospital and the Harvard School of Public Health in Boston.

But Gawande and his colleagues found that a hospital system in the southern U.S. ended up with more profit per patient - technically referred to as “contribution margin” - when its patients had one or more complications after surgery.

Depending on the procedure, between 3 and 17 percent of procedures will involve complications, which on average add about $11,500 of costs per patient, wrote the researchers in Tuesday’s issue of JAMA.

Previous research had suggested complications actually hurt hospitals’ bottom lines, but hospitals typically get paid per treatment and can get more money if - for example - a person getting their hip replaced ends up on a ventilator.

For the new study, the researchers reviewed how much money 12 hospitals located in the southern U.S. spent and received after caring for over 34,000 surgical patients in 2010.

In total, 1,820 patients experienced one or more complications after surgery that ranged from infections at the surgical site to strokes and cardiac arrests.

The researchers found the hospitals saw a profit per patient when patients were either privately insured or on Medicare, the federal health insurance program for the disabled and elderly.

On average, hospitals ended up with about $17,000 of profit for privately-insured patients who didn’t have a complication after surgery. That compared to about $56,000 in profit for privately-insured patients who had one or more complications.

Among Medicare patients, the hospital profited about $1,900 when there were no complications. That compared to about $3,600 in profit when Medicare patients had one or more complications.

In contrast, the hospitals lost money - regardless of whether or not there was a complication - when their surgeons operated on patients who paid for their own surgery or were on Medicaid, the federal and state health insurance program for the poor. These people only made up about one in 10 of the hospitals’ patients.

Overall, hospitals ended up with about $8,000 profit for every complication.


According to the researchers, despite the apparent profit, the hospital system included in the new study ended up losing money at the end of the year once fixed cost - such as light and water bills and other facility costs - were included.

But the per-patient profit is what hospitals worry about, Uwe Reinhardt, a healthcare economics researcher from Princeton University in New Jersey, told Reuters Health.

“These are (fixed) costs that are sunk. All you can hope is that you recover all or some of the cost of the patient care,” Reinhardt said.

Nancy Foster, vice president for quality and patient safety policy at the American Hospital Association, told Reuters Health the study shows hospitals are actually punished when they introduce quality-improvement programs, because their loss would be even greater.

“The payment structure have been set in a way that sometimes when hospitals move to do something that is clearly in the patients’ interests… They may suffer a financial setback from doing what’s right for the patient,” said Foster, who wasn’t involved in the new research.

Gawande told Reuters Health that their results suggest it’s in the hospitals’ interest to move to a payment system that incentivizes the adoption of quality control measures, such as check lists. (Gawande is author of The Checklist Manifesto.)

One of those payment systems, says Gawande, is a bundled payment system, where hospitals receive one payment for a patient’s entire stay.

Reinhardt wrote in an accompanying editorial that Medicare, which has been bundling payments since the mid-1980, may be considered a “smarter payer” than private insurers based on the findings.

“Medicare appears to have largely avoided rewarding hospitals financially for avoidable mistakes,” wrote Reinhardt.

Gawande said his group has seen reductions in complications and deaths after working with the group of southern hospitals to renegotiate contracts with insurers and introduce quality-improvement programs.

“We don’t know the answer to the next step of the question - whether the reduction will hold over time and whether it will help them flip from loss to gain,” he said.

SOURCE: bit.ly/JOTmp1 The Journal of the American Medical Association, online April 16, 2013.

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