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Hospitals Can Profit From Their Own Mistakes, Texas Health Resources Surgery Study Shows

Here’s a real problem — the more mistakes a hospital makes, the more money they get. What a crazy system.

Excerpts from an article in the Dallas Morning News:

Hospitals generate higher operating profit margins from most surgery patients who experience preventable complications than from those who don’t, according to a study to be published Wednesday in The Journal of the American Medical Association. In other words, hospitals are rewarded for their own mistakes.

The study was based on more than 34,000 surgery inpatients during 2010 at the dozen hospitals operated by Arlington-based Texas Health Resources, one of the largest health care providers in the Dallas-Fort Worth area.

“This has been suspected, but not very well demonstrated,” Mark Lester, a THR physician and one of the co-authors of the study, said of the findings. Surprised at how much margins could increase because of complications, Lester called it a national issue and said THR’s results can be generalized to hospital systems overall. The study’s other co-authors include Atul Gawande, the noted Harvard professor, surgeon and frequent contributor to The New Yorker magazine.

An accompanying editorial by Uwe Reinhardt, a Princeton economics professor and health care expert, called the findings “troublesome but not surprising.”He said the fault may be a payment system that rewards the volume of services rather than quality. It’s “an untoward payment system that hospitals, however, have long accepted with enthusiasm,” Reinhardt wrote.

In the study, 5.3 percent of THR’s surgery patients experienced at least one of 10 potentially preventable complications, ranging from infection to pneumonia, stroke and heart attack.

For privately insured patients, those who experienced complications had a contribution margin — patient revenue minus hospital variable costs — more than three times higher ($56,000 compared to $16,900) than those without complications. For Medicare patients, those with complications had a contribution margin roughly twice as high ($3,600 compared to $1,900) as those without. The two categories accounted for 85 percent of all the surgery patients.

Medicaid and self-pay patients with complications had lower contribution margins than those without.

Bob Kraft

I am a Dallas, Texas lawyer who has had the privilege of helping thousands of clients since 1971 in the areas of Personal Injury law and Social Security Disability.

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