Findings of an analysis that included nearly 35,000 surgical discharges from a 12-hospital system suggest that the occurrence of postsurgical complications was associated with a higher per-encounter hospital contribution margin for patients covered by Medicare and private insurance but a lower one for patients covered by Medicaid and who self-paid, according to a study in the April 17 issue of JAMA.
"The rate of inpatient surgical complications is significant, with estimates ranging from 3 percent to 17.4 percent, depending on type of procedure, type of complications, length of follow-up, and data analyzed. In addition to patient harm, major complications add substantial costs, previously estimated at $11,500 per patient. Effective methods for reducing surgical complications have been identified. However, hospitals have been slow to implement them," according to background information in the article. The authors write that there may be several factors for slow implementation. Reductions in surgical complication rates "can reduce revenues under per diem reimbursement schemes and even diagnosis related group-based reimbursement because complications can result in severity adjustments or diagnosis related group changes that increase revenues. … Previous estimates suggest that reducing surgical complications could harm hospital financial results but have been limited by use of small data sets or simplified surrogates such as patient length of stay."
Sunil Eappen, M.D., of Harvard Medical School, Boston and colleagues conducted a study to measure the financial implications associated with postsurgical complications. The goal was to evaluate the fixed and variable hospital costs and revenues associated with the occurrence of 1 or more major postsurgical complications for 4 primary payer types—private insurance, Medicare, Medicaid, and self-payment. The analysis included administrative data for all inpatient surgical discharges during 2010 from a nonprofit 12-hospital system in the southern United States. Discharges were categorized by principal procedure and occurrence of 1 or more postsurgical complications. Nine common surgical procedures and 10 major complications across 4 payer types were analyzed. Hospital costs and revenue at discharge were obtained from hospital accounting systems and classified by payer type. Hospital costs, revenues, and contribution margin (defined as revenue minus variable expenses) were compared for patients with and without surgical complications according to payer type.
Of 34,256 surgical discharges, 1,820 patients (5.3 percent) experienced 1 or more postsurgical complications. The researchers found that the occurrence of 1 or more complications was associated with higher hospital costs in all payer types. The relative difference in hospital revenue varied by payer type. Patients experiencing 1 or more complications were associated with a higher contribution margin of $39,017 per patient with private insurance ($55,953 vs. $16,936) and $1,749 per Medicare patient ($3,629 vs. $1,880) compared with that of patients without complications. "In contrast, for Medicaid and self-pay procedures, those with complications were associated with significantly lower contribution margins than those without complications."
For this hospital system, occurrence of complications was associated with an $8,084 higher contribution margin per patient ($15,726 vs. $7,642) and with a $7,435 lower per-patient total margin.
The studied hospital system's inpatient surgical payer mix (Medicare, 45 percent; private, 40 percent; Medicaid, 4 percent; and self-pay, 6 percent) was comparable to that of an average U.S. hospital in 2010.
"Most U.S. hospitals treat patient populations primarily covered by Medicare or private payers, and programs to reduce complications may worsen their near-term financial performance. Some U.S. hospitals, often referred to as safety net hospitals, treat populations primarily covered by Medicaid or self-payment, and complication reduction efforts might improve their financial performance," the authors write.
In an accompanying editorial, Uwe E. Reinhardt, Ph.D., of Princeton University, Princeton, N.J., comments on the findings of this study.
"The study by Eappen et al in this issue of JAMA provides important data on a pressing clinical and financial problem affecting hospitals: how to attribute revenue and cost to specific service lines. Allocating profit and loss is exquisitely sensitive to the many assumptions made in economic modeling and must be performed carefully to provide useful evidence about the financial ramifications of surgical complications and other services."
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