Post-surgical complication contribute significantly to hospital profit margins, says a new study published in the journal JAMA. Is that why hospitals are slow to implement changes to reduce post-surgical complication rates?
The per-encounter hospital contribution margin was highest among patients who were covered by private insurance and Medicare and lowest among those covered by Medicaid and self-paid.
The study included a total of 35,000 surgical discharges. The researchers identified that the rate of inpatient surgical complications is actually quite high (from about 3 to 17.4 percent) and varied, depending on the type of procedure and some other factors.
As background information, the authors wrote:
“The rate of inpatient surgical complications is significant, with estimates ranging from 3 percent to 17.4 percent, depending on type of procedure, type of complications, length of follow-up, and data analyzed.
In addition to patient harm, major complications add substantial costs, previously estimated at $11,500 per patient. Effective methods for reducing surgical complications have been identified. However, hospitals have been slow to implement them.”
There are reasons why hospitals are slow to implement these changes, in many cases by reducing surgical complications hospitals would lose considerable revenue through either per diem reimbursement schemes or revenue related to diagnosis related changes.
The researchers added: “Previous estimates suggest that reducing surgical complications could harm hospital financial results but have been limited by use of small data sets or simplified surrogates such as patient length of stay.”
The team analyzed the financial impact that post-surgical complications have on hospital revenue. They evaluated the fixed and variable costs as well as revenue associated with post-surgical complications among people who self-paid or were covered by Medicare, Medicaid, or private insurance.
The researchers gathered data concerning post-surgical complications from a nonprofit 12-hospital system in the southern region of the U.S. They analyzed a total of 10 major complications across all patients – of all different coverage types. They gathered data about hospital costs and revenue from the hospital accounting systems, and compared the hospital costs, revenues and contribution margin among patients with or without surgical complications.
A total of 5.3 percent of the 34,256 patients discharged after surgery experienced a post-surgical complication. Patients with post-surgical complications had considerably higher hospital bills.
In addition, patients who experienced at least one post-surgical complication had a significantly higher contribution margin than patients with no complications, this was the case across all payer types.
The contribution margin was $39,017 higher among those who had a complication and were covered with private insurance ($55,953 vs. $16,936) and $1,749 higher among those who had a complication under Medicare ($3,629 vs. $1,880).
The authors wrote: “In contrast, for Medicaid and self-pay procedures, those with complications were associated with significantly lower contribution margins than those without complications.”
The occurrence of complications in the hospital system accounted for a $8,084 higher contribution margin per patient ($15,726 vs. $7,642).
Most of the patients who were treated were either covered by Medicare (45 percent) private insurance (40 percent) or Medicaid (4 percent). Only 6 percent of patients self-payed.
The authors concluded:
“Most U.S. hospitals treat patient populations primarily covered by Medicare or private payers, and programs to reduce complications may worsen their near-term financial performance. Some U.S. hospitals, often referred to as safety net hospitals, treat populations primarily covered by Medicaid or self-payment, and complication reduction efforts might improve their financial performance.”
Written by Joseph Nordqvist