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As Hospital Complications Increase — So Do Profits


In the United States most hospitals operate for profit so it’s a bit disturbing when a report says that complications actually work to increase the profits of a hospital. In other words, as complications increase, profits increase.

Not that anyone is intentionally increasing the complication rate, but the Boston Consulting Group reports that patients on Medicare or private insurance who experience complications after surgery may provide higher profits for that hospital.

Published in the Journal of the American Medical Association (JAMA), researchers from Harvard Medical School found when a patient experiences a blood clot, stroke, septic shock or cardiac arrest the hospital’s profit margin jumps 330 percent higher when compared to a patient with no complications.

That translates to $56,000 for a privately insured patient compared to $17,000 when the outcome is complication-free. For a Medicare patient hospitals will receive $3,600 for a patient with complications versus $1,800 for a complication-free surgery.

When a hospital has fixed costs for patients covered by Medicaid or the patient covers their own care, the hospital will make less money if it has to cover the costs of a complication.

One co-author believes the incentive process is backward.  Instead of rewarding a hospital with fewer complications, those with the most problems actually make more money on patients who have to stay in the hospital longer and receive additional care.

The Boston Consulting Group analyzed data from more than 34,000 surgeries performed at the 12-hospital system of Texas Health Resources. Among those 5.3 percent of patients or 1,820 experience some type of types of complications.

While it’s always been known there is no incentive system for quality hospitals it was never understood before just how badly things had swung in the opposite direction. An investment in reducing risk may not help underwrite hospital costs but it goes a long way in improving patient confidence and outcomes and underscores the need to focus on payment reform in conjunction with healthcare reform.

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