Author Insights: Reimbursement Systems May Hinder a Hospital’s Ability to Reduce Postsurgical Complications

Atul A. Gawande, MD, MPH, a surgeon at Brigham and Women’s Hospital in Boston, and colleagues found hospitals may benefit financially if a patient with private insurance or Medicare develops a postsurgical complication. (Image: Fred Field)

Atul A. Gawande, MD, MPH, a surgeon at Brigham and Women’s Hospital in Boston, and colleagues found hospitals may benefit financially if a patient with private insurance or Medicare develops a postsurgical complication. (Image: Fred Field)

A complication after surgery is something patients and physicians want to avoid, but certain types of payments to hospitals appear to reward suboptimal care and penalize quality care, according to study findings appearing today in JAMA. The study found that postsurgical complications were associated with higher hospital “contribution margins” (revenue minus variable costs) among patients covered by private insurance or Medicare; among patients covered by Medicaid or who paid out of pocket for their care, postsurgical complications were associated with a reduced contribution margin. The findings suggest hospitals with many private insurance and Medicare patients might make considerably less money caring for surgical patients if they succeed in reducing postsurgical complications.

The researchers found that compared with absence of postsurgical complications, complications were associated with about a $39 000 higher contribution margin per patient with private insurance and about a $1700 higher contribution margin per patient with Medicare. Medicaid coverage was associated with a loss of about $24 000 in the contribution margin for a patient with Medicaid coverage who had a complication and a loss of about $27 000 for a patient paying out of pocket.

The findings are based on retrospective analysis of administrative data for all inpatient surgical discharges during 2010 from a nonprofit 12-hospital system in the southern United States. The analysis included data for 34256 surgical discharges with 1820 patients experiencing 1 or more postsurgical complications.

Coauthor Atul A. Gawande, MD, MPH, a surgeon at Brigham and Women’s Hospital in Boston, discusses his team’s findings:

news@JAMA: Why did you do this study?

Dr Gawande: We are trying to unravel why simple quality measures have been so slow to penetrate into health care, and finances are clearly part of the picture. The incentive is to pay for quantity, not quality.

news@JAMA: Were you surprised by the results?

Dr Gawande: It was no surprise that we are paying for quantity of care and not quality of care, but the magnitude was eye-popping. Complications resulted in massively higher profit margins for those with commercial insurance. It is now becoming apparent that the financial system is a serious barrier to implementing quality programs.

news@JAMA: Don’t private, commercial insurers know the financial incentives are askew and that they are rewarding quantity care over quality care?

Dr Gawande: It hasn’t been clear to commercial insurers. They will hear hospitals complain that they’re not compensated for quality, but it’s been hard to quantify. This study points a pathway forward. It clearly shows there is a substantial loss of money for the payer to have a complication. But since the hospital doesn’t get any significant benefits from investing in quality control, it’s very difficult for anyone to succeed.

news@JAMA: How can this be fixed?

Dr Gawande: Hospitals need to work with their insurers to renegotiate their contracts to not be penalized if they reduce complications. They want to make sure there are not losses in implementing quality-control programs.



Categories: Conflict of Interest, Medical Practice, Quality of Care, Surgery