How Hospitals Actually Reap Greater Profits For Making Surgical Mistakes

As medical costs continue to soar, the prices for health care services have been rising across the entire industry. That’s especially true for hospital care, where an average trip to the ER costs 40 percent more than what most Americans spend on their monthly rent. Partly because doctors often don’t know the cost of the tests and procedures they’re recommending, hospitals can rack up massive profits for the services they provide — even, as it turns out, when they end up going wrong.

Even when hospitals make surgical mistakes, they still profit off of those botched surgeries, according to the results from a new study published in the Journal of the American Medical Association (JAMA). The researchers, who analyzed over 30,000 surgical procedures that took place at a 12-hospital chain in the South, found that hospitals actually profit even more off of their mistakes than they do when their surgeries go smoothly. Hospitals make about $30,000 more from the patients whose procedures result in at least one complication than they do from patients who don’t have any issues. Their profit margins tripled for privately insured people who experienced surgical complications, and doubled for Medicare patients.

“Policy makers talk about pay-for-performance, but instead Medicare and private payers are rewarding hospitals for complications,” Barry Rosenberg, one of the study’s co-authors, pointed out. “The U.S. healthcare system is paying for harm.”

How could our health care system possibly be rewarding errors so handsomely? It’s because complications resulting from surgery often necessitate follow-up care and a longer hospital stay. Of the more than more than the ones that resulted in complications forced those patients to stay in the hospital for triple the amount of time. So, when hospitals have to provide additional services resulting from one of their own mistakes, they end up being able to collect more from private insurers and the Medicare program.

Fortunately, the rate of surgical errors is already pretty small. About 95 percent of surgeries go smoothly — and the authors certainly aren’t suggesting that any hospitals are deliberately botching surgical procedures in order to rake in more profit. But they are worried that the current system dissuades hospitals from working to improve, since they could actually lose money for taking better care of people.

Obamacare already attempts to encourage doctors to strive for better care by penalizing hospitals when the same patients have to be readmitted for additional services. The study’s authors have a few additional ideas that could also help address the issue. They suggest that insurers should stop paying hospitals for the extra services that result from surgical errors, and start giving out bonuses to reward instances of excellent care. Requiring hospitals to publicly disclose their complication rates, which would allow Americans to choose to patronize hospitals with the best quality of care, could also put pressure on them to get those rates down.