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Gawande: Hospitals Profit When Surgeries Go Wrong

Cheryl Clark, for HealthLeaders Media, April 17, 2013

The analysis revealed that private insurers paid $55,953 when the patient had a surgical complication but only $16,936 when the procedure went without a hitch−more than three times or $39,017 more.

Some 1,820 patients experienced one or more complications from their surgeries in this system.

For Medicare, the cost difference was much smaller, but still significant. When patients had a complication, the federal government reimbursed hospitals $3,629, compared with $1,880 if the surgery was complication-free, or $1,749 more.

In the hospital system studied, 40% of the patients were covered by private insurance, so complications represented a substantial profit for that organizations, Gawande says.

"The presumption was that when you have a DRG (diagnostic related group) payment, it's a global fee, and therefore the hospital absorbs the cost when you have a complication. But in fact what happens is that [the hospital] moves to other DRG codes if a surgical case goes wrong. It may be billed as an ICU patient rather than a surgical patient, and then you start seeing substantial margins rise."

For patients covered by Medicaid or self-pay, profit margins were much lower or the hospital lost money.

Nancy Foster, vice president for quality and patient safety for the American Hospital Association, heatedly disputed the report's implications that hospitals aren't incentivized to avoid complications.

She pointed to a table in Gawande's paper that proves this 12-hospital system, overall, lost money when its patients developed complications, with a negative margin of about 6.4% across all payers.

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4 comments on "Gawande: Hospitals Profit When Surgeries Go Wrong"


16788044 (4/18/2013 at 12:37 PM)
No kidding, the doctor has to do more work because of a complication and additional revenue is generated, who would have thought. Why is this article is printed, it doesn't take a genius to see this risk. So what's the solution, all procedures have to be taped and review to ensure doctors are not be unethical. Come on, this risk has always been there and always will be. Are there doctors that take advantage of this, yes, and again, there always will be. Do the vast majority of doctors have the ethical sense not to do this, yes, and they always will.

Naomi Price (4/17/2013 at 7:52 PM)
What a cascade of horrors. It's good that your surgeon has been kind and compassionate and that your hospital at least apologized. However, it's impossible to know from your comment, at least, the source of the infection. It could trace to the surgeon. Or not. I do hope you continue to improve and that your knee replacement goes well. As for "paperwork" interfering with safety, what kind of paperwork interferes with hand hygiene? With use of surgical checklists, each and every time? With CLABSI prevention protocols? With attention to environmental cleaning? With pre-surgery MRSA screening & education of patients? With VTE & DVT protocols? This study dealt solely with surgical/post-surgical care, nothing else.

Tara Bukowsky (4/17/2013 at 12:12 PM)
Approximately a year and a half ago, I underwent a simple knee arthroscopy for a torn medial meniscus at Cox Walnut Lawn in Springfield, Mo. Following surgery, I developed a severe enterococcus hospital acquired infection deep in the joint resulting in septic arthritis. Five additional surgeries, 2 inpatient hospitalizations, drains, a picc line, seven weeks of IV antibiotics, a DVT, Lovenex injections, home health nursing and months of lab draws were required to treat the infection. I lost my job and my health care coverage as a result of this ordeal. The hospital billed my insurance company (that I had at the time), then balance billed me. My surgeon, who I feel was not responsible for this infection in any way not only saved my life, but remained compassionate and supportive throughout this entire ordeal. I do feel though that the hospital was responsible, but they feel differently and have offered an apology for the immense physical, emotional and financial strain this has placed on me and on my husband. I have remained under care, still unable to work and now require a total knee replacement. The hospital could have responded to my repeated requests to assist with some of the financial burden, but said I was a "statistic" and they felt that I had not received improper care. My care was appropriate for the circumstance, but was required due to an event that should never have occured in the first place.