Hospitals Make More Money When Things Go Wrong

A surgical complication increases a procedure’s average contribution margin by 330 percent for the privately insured and 190 percent for Medicare patients, according to a study published this week in the Journal of the American Medical Association…

When a surgical complication occurred, the profit margin jumped from $16,936 to $55,953. For Medicare patients, profits grew from $1,880 to $3,269.

HT: Sarah Kliff.

Comments (15)

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  1. Jacob Druisdael says:

    This is something I find highly unlikely. Perhaps it’s my misguided faith that physicians still hold to the Hippocratic oath.

  2. Jack says:

    This sort of makes sense though.. Complications mean more work.

  3. Jimmy Dean says:

    This is a terrible part of healthcare. However, Im not to sure as to how easily fixed this is.

  4. Saket says:

    So let me get this, it almost seems like that within this practice it is more profitable to make mistakes. As economists, should we be skeptical of this.

  5. Sandeep says:

    What is interesting here is that medicare patients have a smaller number. What is the reason for this?

  6. Desai says:

    Hospitals make money when things go wrong, this is because we pay hospital to do more work, and doing things wrong means they have to do more to fix their mistakes, hence, more money.

  7. Patel says:

    I think Desai brings up an important point, we are reimbursing health care providers for doing more procedures than required, this is a flawed incentive structure. We need to change that!

  8. Deepak says:

    @ Patel

    We already know this has been the problem for some time, but the next step is how are we going to make the transition within this system. What do we have to do to re-engineer this broken system.

  9. Chopra says:

    We should be focused on health int the ways that minimize hospital visits, so the important step is how we make sure health care is a daily practice.

  10. Sam says:

    Wow! That is an astounding difference of costs! Almost $40k increase! It’s unfortunate because their is undoubtedly a ton of waste.

  11. Tommy Beyer says:

    Makes you wonder if some hospitals “influence” complications in order to increase revenue. I wouldn’t be surprised if this was happening since our health care system is so dysfunctional, inhumane, and corrupt as it is.

  12. Ron says:

    Under our current system, makes you want to be one of those rare humans who never need medical attention and live until their too old.

  13. MarkH says:

    Glib requoting of people who don’t know what they’re talking about. A more sophisticated analysis should allay the fears that this effect even exists. And trust me, no amount of money for the hospital is going to make a surgeon wish for complications. Surgeons own their complications, and their mistakes for life. The hospital making additional (marginal) profit has no bearing, directly or indirectly, on the surgeons interest. The smarmy implication being that somehow the hospitals’ profits somehow trickle down to the surgical team. Nonsense.

  14. Erik says:

    We need to pay for outcomes not FFS. That is what PPACA is trying to do. You get X amount of dollars to treat disease Y and that is it. If there are complications you have to eat those costs. Seems fair to me. Most business work that way.

  15. Bob Hertz says:

    Yet another bad consequence of highly graded fee schedules.

    By ‘graded’ I mean that a quadruple bypass pays more than a single vessel bypass, a drug coated stent implacement pays more than a regular stent, etc etc.

    The cheaper alternative is a budget driven fee schedule that pays hospitals on a per diem basis, whatever they do in those days.

    This does require a control on hospitals keeping you for 10 extra days to make money, but that is doable.