Failures Fuel the US Healthcare System

Posted by Sten Westgard, MS

A lot of interesting studies coming out this month, unfortunately none of them with encouraging news about the US healthcare system.

The latest, from Sunil Eappen, MD, Atul Gawande, MD et al, Relationship Between Occurence of Surgical Complications and Hospital Finances, JAMA, April 17, 2013, Vol. 309, No. 15 1599-1606

Take a guess: do US hospitals make more money when things go wrong, or less?

The answer, sadly, is that hospitals make more money when complications occur in surgery:

Private insurers paid $55,593 when a patient had a surgical complication, but only $16,936 when the surgery had no complications.
for Medicare patients, the federal government paid $3,629 when there was a complication, but only $1,880 if the surgery had no complications.

Of course, it makes sense in our fee-for-service model that complications cause more reimbursement. After all, more care is required. But for hospitals, it's a perverse incentive if complications allow them to triple their fees. I don't want to suggest that hospitals or surgeons try to make complications happen on purpose. That's ridiculous and completely antithetical to the profession. But this financial system probably makes it harder to generate enthusiasm and real motivation to fix the problems. In other words, if everyone makes more money under the current system, it's harder to get them to change to a better system, because while it will be better for the patient, it will be financially problematic for the hospitals and clinicians.

If you're wondering why the Affordable Care Act and other healthcare reform efforts are trying to realign the US system toward bundled payments, look no further. If we bundle the payments to a hospital and tell them, "If you get the surgery wrong, we're not going to pay for the complications," hospitals will get a lot more serious about improving their care.

One other concerning finding in this study: they looked at 24,245 surgical discharges from a 12-hospital system. Within that pool, 1,820 patients experienced one or more complications. That's a 5.3% rate, or about 3.1 Sigma on the short-term scale. Thus, surgery is just barely above the minimum performance threshold, according to Six Sigma standards. There's a lot of room for improvement.

Another report on this study can be found here: