Surgical Complication Costs Provide Hospitals, Payers With Incentive to Improve Quality: Study

A new study highlights the impact of surgical complications costs on profits for both hospitals and third party insurance companies, indicating that there is an incentive to reduce the risks and improve the quality of care for both patients and the bottom line.

Researchers indicate that the average hospital costs were nearly $20,000 higher for patients with complications following surgery than for those without. Those surgeries caused nearly double the costs for hospitals and third-party insurance payers, impacting profit margins drastically. The findings were published this week in the medical journal JAMA Surgery.

The observational study merged complication data from the Michigan Surgical Quality Collaborative and internal cost accounting data from the University of Michigan Health System from January 2, 2008 through April 16, 2015.

Researchers found a total of 5,120 episodes of surgical care for 24 surgical procedure groups, including general surgery, vascular, and gynecologic.

Surgical complication rates for all procedures was 14.5%, and complication rates were 14.7% for general surgery, 15.5% for vascular surgery, and 10.7% for gynecologic surgery.

For all studied procedures, average hospital costs were $19,626 higher for patients with complications. Patients with complications paid on average $36,060 compared to $16,434 for patients with no complications.

Average third-party reimbursement for those surgeries were $18,497 higher for patients with complications. Reimbursements for patients with complications averaged $35,870, compared to $18,497 for those without complications.

Researchers found that with increased costs and reimbursements for patients who suffered complications during surgery, profit margin on those surgeries decreased from 5.8% for patients without complications to 0.01% for patients with complications.

In the new study, decreases in profits were seen for both patients with private and public insurance. Patients with private insurance who experienced complications during surgery, researchers determined hospitals led to a decreased profit margin of 7.6% compared to patients without complications at 9.9%.

Among patients with public insurance, hospitals lost money with or without complications, however among patients with complications the losses were greater. Hospitals saw a -6.3% profit margin for patient with complications compared to -1.6% for patients without complications.

New policy changes among hospitals have been implemented focusing on incentivizing high-quality care, shifting the burden of complications and low quality care to hospitals by holding them accountable for the costs of complications. Hospitals and third-party payers have increased financial incentive to reduce complications and promote surgical quality among surgeons and surgery staff.

However, previous research found that linking patient infections to hospital penalties failed to curb the rates of certain infections, according to a 2012 study in the New England Journal of Medicine. The study revealed Medicare penalties and reduced payments for preventable hospital infections implemented in 2008 in the hopes of reducing infections did not lead to decreased infection rates.