More on Capital Finance

Mixed benefits for hospitals reducing surgical complications

Eliminating surgical complications is something all hospitals strive towards, however, for some hospitals, savings gained by reducing or eliminating surgical complications can lead to reduced revenues.

[Also: Reimbursement models raise reform concerns]

According to a recent report published in the October edition of Health Affairs, while fewer surgical complications is an indicator of better patient safety and higher quality care, for a hospital performing 10,000 inpatient surgeries per year, annual cash flow could drop by $1.2 million for each 1 percent drop in the complication rate.

Researchers from the University of Michigan found that a hospital is reimbursed approximately $36,000 for a patient that experiences surgical complications, compared to around $24,000 for a patient with no complications.

Dan Krupka, an author of the report and the managing principal of Twin Peaks Group, a healthcare consulting firm in Lexington, Mass. said hospitals experiencing no growth in its surgical inpatient load would suffer a negative cash flow.

[Also: Patient experience a top priority for hospital executives]

"Hospitals in fact save a lot less due to fewer reimbursements from complications. At the same time, they do receive reimbursements associated with complications due to excessive care, so if they eliminate complications, the loss in reimbursements is higher than the amount saved from fewer supplies and staff needed," said Krupka. 

On the other hand, Krupka said, the situation changes for hospitals that do have growing surgical volumes.

"As you reduce complications, there are fewer patients in hospital, freeing up beds. If you reduce complications, you free up a lot of capacity. Therefore, hospitals have opportunities to grow their businesses," he said. "The analysis shows that the situation is very different when it's growing than when it's not."

In order for hospitals that are not seeing a growth in its number of surgical inpatients to benefit financially from reducing complications, the authors of the report recommend that they form a gain-sharing arrangement with payers so that they also share in any savings from surgical complication reduction programs.

"If you go through the struggle to reduce complications, a lot of times it's the payers that are making out well because they are not paying extra in reimbursements," said Krupka. "The hospital CFO needs to put together the numbers, go to the payers, and discuss the issue and cut a deal so that they are sharing in the benefits."

The bottom line is that reducing complications is important and "it's the right thing to do," said Krupka.

"I think there should be more effort put into reducing complications, and I sense that is happening," he said. "If you are reducing complications, you can attract more business to fill those empty beds and attract high-quality surgeons."

[Also: Quality initiative saves hospitals $557 million]

Show All Comments