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Tag: Eli Perencevich

Why Surgical Complications May Actually Hurt Profits Despite What You’ve Just Read

There’s a high-profile and important paper in JAMA this week by Sunil Eappen and colleagues. The study looked at surgical discharges during 2010 from a single 12-hospital system and came to the conclusion that admissions that include a surgical complication were associated with a higher profit (defined as the contribution margin) than admissions without complications. The authors conclude that this creates a disincentive for hospitals preventing surgical complications since they might see reduced profits as a result.  This is a very provocative finding and it’s getting a lot of well-placed media attention, as you might expect. There is an important caveat with the study that I would like to highlight.

In the study, the authors report that admissions with surgical complications result in $39,000 higher “profits” if the care is reimbursed via a private payer and $1800 if Medicare is the payer. However, as Dr. Reinhardt correctly noted in the editorial,

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.

His concern dealt mostly with how the authors allocated fixed costs in their calculations. My concern has to do with what the authors assumed happens to an empty bed once a patient is discharged in a US hospital.

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