Hospitals can reap a windfall when an insured patient has a preventable infection, and private health plans—not Medicare—foot the largest bills. Why aren't these payers doing more to help hospitals prevent infections?
Hospitals profit exorbitantly when privately insured patients get bloodstream infections and thus have "no incentive to invest in prevention," says hospital safety guru Peter Pronovost, MD.
"We've known hospitals profit from complications," the Johns Hopkins Medicine patient safety expert said in a phone interview Wednesday. "But we've never before had a study that looked at both the impact to the health insurer's pocketbook and the impact on hospitals, and seen how these dollars flow."
Here's another pie in the face of the healthcare payment system, since it follows a similar report last month from Atul Gawande, MD, and colleagues. They documented financial bonanzas for hospitals whose surgical patients developed complications such as strokes or blood clots. That report follows a noteworthy Health Affairs blog post last fall that said pay-for-performance efforts haven't documented improved patient outcomes.
What Pronovost, co-author Eugene Hsu, MD, and others found, published in the current online edition of the American Journal of Medical Quality, is both "unique" and "mind-boggling," Pronovost says. It points the finger at health plans and raises the question of why they shouldn't help hospitals do better.
Infected patients cost five times more
Although there were only 16 qualifying central line-associated bloodstream infections or CLABSIs, and only one hospital intensive care unit was involved in this study—flaws Pronovost acknowledges—the differences in cost were stunning depending on the payer.
Health plans got stuck with paying $494,655 to care for an infected patient, compared with $99,752 to care for a similar, matched patient who didn't get an infection. Government payers Medicare and Medicaid paid less, but the gap was still wide: About $154,832 per CLABSI patient compared with $58,237 for a matched patient without, the report says.
Additionally, the difference in margin, or profit for the hospital after expenses to care for these patients, was "enormous," Pronovost says. The average profit when all payers were combined was $54,906 when the patient had an infection versus $6,506 when the patient did not.
When the government alone was the payer, paying, the hospital did not profit.
"We saw that hospitals profit substantially when an insured patient has a preventable infection," Pronovost says. "But more important—and we had no idea it was this much—it's the insurers, not the government, that foot the largest bill."
Outliers trigger "windfall" profits
Most care reimbursement to hospitals is based on the nation's diagnosis-related group (DRG) payment structure or network negotiated charge for insurance plans, which groups patients by their condition based on a presumption of the typical care they'd need, such as length of stay, regardless of whether the patient is harmed or infected in the process.
But the DRG system flies out the window in virtually all CLABSI cases because these extremely sick patients are considered "outliers." That is, they have such long lengths of stay—in this study up to 24 days— that the normal DRG or network negotiated charges no longer apply. Instead, the hospitals' regular fee-for-service charges kick in.
"Hospitals then get paid essentially based on how much they bill," Pronovost explains. "This is a system that was designed at a time when we didn't really think about preventable harm. We said to hospitals, 'Oh well, if you have a patient complication requiring longer length of stay, you, the hospital, shouldn't be at risk, and you ought to be compensated.'
"But now we know that factors triggering people into that outlier status—such as CLABSIs—are indeed preventable. It's not a random illness."
Outlier patients are defined as those who require such intense care, that estimated hospital costs exceed a threshold, and "hospitals receive both a fixed rate and an additional amount equal to 75% to 80% of the charges beyond that loss threshold."
Under this system, which gives "windfall" profits to hospitals for treating outliers, Pronovost says, hospitals have had no incentive to implement "quality management infrastructure," like protocols and personnel, necessary to prevent patient harm, such as CLABSI.
"There's the Centers for Medicare & Medicaid Services' Partnership for Patients initiatives to reduce 10 types of harm. Yet when you look at what hospitals are working on, it's just one or two types of harm, not because their patients aren't at risk, but because they can't afford it."
PPACA pay cuts hurt
The Patient Protection and Affordable Care Act's "main mechanism to control costs is to pay hospitals less," Pronovost says. And that is starting to backfire. "Hospitals say, 'OK, I'm going to cut my quality programs. My nurses will care for seven patients instead of five,' which we know will make complications go up. Hospitalists will care for 20 patients instead of 10. But again, you have a positive bottom line."
Perhaps a more effective way, rather than just paying hospitals less, would be for payers who have a lot more skin in the game, like insurance plans, to financially support hospitals to build these infrastructures.
The return on investment would be "enormous. It's mind-blowing really," he says. "To think that an insurer could save $400,000 preventing one infection. That $400,000 would support an entire improvement project; our whole Michigan [Michigan Health and Hospital Association's Keystone] project, for example, cost only $500,000."
How would hospitals replace the revenue they now get when insured patients develop CLABSIs? For starters, with beds now empty, they could admit more patients and receive more DRG payments. If there weren't more patients needing admission? Well, Pronovost says, "maybe we have too many hospital beds in this country."
Pronovost says his research project was possible only because an insurance company, Blue Cross Blue Shield of Hawaii, and a hospital, Queen's Medical Center in Honolulu, agreed to cooperate.
"It required a great deal of trust for both of these groups to open up and be transparent about whose pocket a complication benefits, and who is paying. And because we focused on CLABSIs, which are almost entirely preventable, [the hospital] can't say this is a complication that we can't prevent. Because we can. We know there's no excuse. We know many hospitals can go for a year or more without having even one."
I asked Pronovost why health plans, which presumably are well aware how much they pay for these infections, hasn't seen on its own, what great business sense this makes.
"Everyone thought the buck was passing to someone else," he explains. "Insurers would often say, 'Well, we're paying for these infections but we don't really think we're saving a lot of money from investing in them.' The hospital CEOs said, 'Peter, I lose money when I prevent infection. It's good for the patients. But the insurers get a windfall.' "
"We wanted to see, let's try to find out where the dollars flow so we could better align incentives."
I also asked Susan Pisano, spokeswoman for America's Health Insurance Plans, and she says they are taking action. Sort of.
"Health plans are moving briskly toward new payment models, whether they are global, bundled, or ACOs," she says. "They pretty much all contain incentives and or bonuses in physician payments to improve quality. And much more are being geared to the hospital side."
However, she says, it's not the health plan's responsibility to pay for hospital improvements that prevent infections. "The fees that health plans have negotiated with hospitals already include setting up systems and quality improvement work that hospitals do."
That said, she adds, there are some initiatives. WellPoint, for one, is involved in just such a program.
Against the backdrop of the recent release of hospital pricing data, the issues Pronovost raises are all the more compelling. Now he, or someone with his energy and expertise, needs to broaden the research to include health plans, which are businesses just like hospitals.
It might just keep a few patients alive. According to the Centers for Disease Control & Prevention, as many as 13,300 critical care patients developed CLABSIs in 2011, with a mortality rate of 12% to 25%.
That's a lot of cost, and a lot of death. We know both can be prevented.