Hospitals profit more from surgical complications

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Doctors perform perhaps the most important tasks of any professional: keeping us healthy. Considering the magnitude of their work, all medical care providers are held to high standards, as the consequences of mistakes are as serious as it gets. Quality patient care must be the priority at all times, and nothing can be allowed to get in the way of that. Yet, time and again some medical care providers place profits over patients. Instead of making all decisions based on the best interest of those who are relying on them, these parties look first to their own bottom line.

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© SquaredpixelsCNN and Channel 4 are reporting  on a study from the Boston Consulting Group which finds complications after surgery leads to higher profits  for hospitals.  In fact, privately insured surgical patients who had a complication provided hospitals with a 330% higher profit margin than those without a complication,  Medicare patients with a complication produced a 190% higher margin. The findings mean that, for hospital managers, efforts to reduce surgical complications could result in substantially worsened financial performance.  The study appears in the April 17, 2013 issue of the Journal of the American Medical Association (JAMA).

The report isn’t suggesting that complications are caused intentionally, said Dr. Barry Rosenberg, a co-author of the study. But he hopes the findings provoke discussion on the “absolute need for payment reform,” he said.  Hospitals make more money the longer a privately insured or Medicare patient stays, said Rosenberg, a partner with BCG’s health care practice. As a result, they may lack financial incentives to take steps to reduce surgical complications, he said.   “Insurers are rewarding hospitals when there are complications,” he said. “This is not the type of incentive you want … in the health care system for your family.”

An estimated $400 billion is spent on surgical procedures each year in the U.S. While effective methods to reduce complications have been identified, hospitals have been slow to implement them. Financial incentives may be a reason. The goal of the study was therefore to evaluate the hospital costs and revenues associated with having one or more major complications with surgical patients covered by four primary insurance types — private insurance, Medicare, Medicaid, and self-payment.
 
The researchers analyzed data from 34,256 surgical inpatients discharged in 2010 in a non-profit, 12-hospital system in the southern U.S. They looked at ten severe, preventable surgical complications and the contribution margin — revenue minus variable expenses — per patient. Hospitals receive $56,000 in working revenues on average when a privately insured patient has a complication, but only $17,000 when they’re complication-free, according to the report. They receive $3,600 when Medicare patients have a complication, vs. $1,800 when they’re free of complications.

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This sort of conduct is unconscionable.  It is important for both the civil and criminal law to be used to ensure these parties be held responsible for their actions.

1 Comment

  1. Jacksonville Personal Injury Lawyer: Medical Malpractice Law Firm: Edwards and Ragatz says:

    […] There was a fascinating article  posted by Matt Dixon in the Florida Times Union several days ago.  The Times Union researched and did a comparison of what Northeast Florida hospitals  charge for porocedures.  He found out that it can vary by thousands of dollars.  To treat a Medicare patient with chest pain, Orange Park Medical Center charges almost $36,000 ” more than three times the cost at the Mayo Clinic.  But when the federal government sends payment, the Hospital Corporation of America-owned hospital (OPMC)  gets paid $3,300. It’s a far cry from their listed charge and $1,000 less than the Mayo Clinic will receive for the same procedure, according to data released this month by the Centers for Medicare and Medicaid Services showing the hospital charge and the rate Medicare paid for the 100 most popular procedures in 2011.  Analysts and hospital leaders say the disparities result from a system where charges are often just a jumping-off point for negotiations with insurers, and reimbursements vary depending on how sick a patient is and whether hospitals have teaching programs, higher overhead or offer more charity care. The charges rarely have a direct impact on what patients pay, and the charges for the same procedures vary widely among hospitals in Northeast Florida.  Based on a Times-Union analysis of 15 of the most common procedures in Florida, Memorial Hospital and Orange Park Medical Center, the two for-profit hospitals owned by HCA, most often listed the highest charge, though they typically received the lowest payment back from Medicare and Medicare. Mayo Clinic consistently set the lowest charge and got the highest reimbursement.    Related Stories: Hospitals profit more from surgical complications […]

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