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Surgical Complications Can Mean Good Business for Many Hospitals

According to an article published this April in the Journal of the American Medical Association (JAMA), rather than lose money when things go wrong, hospitals typically profit from the medical mistakes they make, whether or not negligence is involved. Interestingly, hospitals are compensated by insurers when patients stay hospitalized longer and additional care is required to address surgical complications and post-surgical errors.

The study, “Relationship Between Occurrence of Surgical Complications and Hospital Finance,” looked at the results of nearly 35, 000 surgical discharges, the most common surgical procedures and complications, and how those were handled by insurers. The researchers also examined the hospital costs and revenue at discharge by payer type for 12 nonprofit hospital systems in the southern U.S. They compared the hospital costs and revenues for patients with and without surgical complications. The findings suggest that the occurrence of postsurgical complications led to higher hospital contribution for patients who were covered by Medicare and private insurance, and a lower hospital contribution when the patients were covered by Medicaid and self-paid.

Surgical complications happened with varying frequency, from 3 to more than 17 percent, depending on the procedure. And while there have been numerous studies and recommendations on effective methods for reducing most surgical complications, critics say hospitals have been slow to implement them. Though the likelihood that hospitals are loathe to update procedures for nefarious reasons is doubtable; it is much more likely that implementing new procedures and care for a multi-shift staff across multiple facilities is simply daunting for a large-scale administrative-heavy entity. But it is also true that reducing the surgical complication rates at surgical facilities would potentially reduce hospital revenues; complications often lead to additional diagnoses and extended patient stays.

The analysis, led by Sunil Eappen, M.D., of Harvard Medical School, Boston, looked at 34,256 surgical discharges. More than five percent (1,820 patients) had experienced one or more postsurgical complications, which led to higher hospital costs, regardless of the type of insurance used: Medicare was used by 45 percent of patients; private insurance was used by 40 percent of patients; Medicaid was used by 4 percent of patients; and self-pay was used by 6 percent of patients – comparable to what an average U.S. hospital saw at the time (2010).

The majority of patients who are treated in U.S. hospitals are covered by private payers or by Medicare. Any programs to reduce surgical and post-surgical complications, the researchers concluded, may worsen a hospital’s near-term financial performance. But for the U.S. hospitals which treat patients covered primarily by self-payment or Medicaid — often known as “safety net” facilities — may see financial improvement if they focus on complication reduction.