Hospitals profit from post-surgical complications

Profit margins for insured patients more than triple when complications occur
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Hospitals that reduce post-surgical complications could be cutting into their profits, concludes a study published yesterday in The Journal of the American Medical Association.

The study by The Boston Consulting Group, Texas Health Resources and Ariadne Labs found a 330 percent higher profit margin when insured surgical patients experienced a complication, according to an announcement of the findings. The margin increase for Medicare patients experiencing post-surgical complications totaled 190 percent.

"This clearly indicates that health care payment reform is necessary," study author Atul Gawande, M.D., a surgeon and a professor at Harvard School of Public Health, said in a statement. "It's been known that hospitals are not rewarded for quality, but it hadn't been recognized exactly how much more money they make when harm is done."

Sudy co-author Barry Rosenberg, M.D., a Chicago-based partner in the consulting group, was even more blunt: "The U.S. healthcare system is paying for harm," he noted, by "rewarding hospitals for complications."

Moreover, hospitals should not suffer financially for improving outcomes, added David Sadoff, another co-author from the consulting group.

The researchers examined costs related to more than 34,000 surgical inpatient procedures at a 12-hospital system in 2010, including 1,820 that involved complications.

"The magnitude of the numbers was eye-popping," Gawande said in an interview with NPR. "It was much larger than we expected."

It's not that hospitals are trying to cause complications, Gawande told NPR. "But we've seen a lot of hospitals where you say, 'Why aren't you investing in reducing risk, the way other industries do?' "

A similar study last year also found that eliminating surgical complications hurts hospitals' cash flow. Hospitals lose about $1.2 million in annual reimbursement revenue for each 1 percent drop in the complication rate, according to the article in Health Affairs. In that case, researchers recommended hospitals with "limited growth prospects" form a gain-sharing arrangement with payers to share in any savings from surgical complication reduction programs, FierceHealthcare previously reported.

To learn more:
- read the announcement
- here's the abstract in JAMA
- see the NPR article
- check out the study in Health Affairs

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