Are Post-Surgical Complications Money Makers?

While neither surgeons nor patients ever want to face post-surgical complications, a new study has revealed that certain types of payments to hospitals reward suboptimal care and penalize quality care.

Published in the Journal of the American Medical Association, the study found that for patients who had private insurance or Medicare coverage, post-surgical complications were associated with higher hospital “contribution margins” calculated by subtracting variable costs from revenue. But the reverse was true for patients who were either covered by Medicaid or uninsured, because in those populations, post-surgical complications were associated with reduced contribution margins. Therefore, the researchers hypothesized that reducing post-surgical complications may negatively affect hospital income, especially among hospitals that serve higher proportions of privately insured and Medicare patients.

The researchers then conducted a retrospective analysis of administrative data from a nonprofit, 12-hospital system in the southern United States with a goal to determine why simple quality measures — many of which prevent complications — have been slow to penetrate health care systems. After examining all inpatient surgical discharges (N=34,256) during 2010, they found that one or more post-surgical complications occurred in 1,820 patients.

Comparing the patients who had no post-surgical complications to those who did, the researchers discovered that complications were associated with an approximately $39,000 higher contribution margin per privately insured patient and a roughly $1,700 higher contribution margin per Medicare patient. Whenever a complication occurred, Medicaid coverage was associated with a loss of about $24,000 in the contribution margin and a loss of about $27,000 per uninsured patient.

The finding demonstrated that the US health system still pays for quantity of care as opposed to quality of care and illustrated that the financial system is a serious barrier to implementing quality programs. With clear data showing that payers lose a considerable amount of money when patients have post-surgical complications, the researchers hope that all stakeholders in the health care financial system will take steps to look at quality. One possible solution that the authors proposed is for insurers to renegotiate their contracts in order to eliminate the financial impact of hospitals implementing quality-control programs and reducing complications.