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Screw up and get paid more – only in America’s health care “system”

Privately insured patients with post-surgical complications – infections, surgical errors, generate 2 – 3 times more margin for hospitals than patients without complications.

To be precise, the average surgery with complications generated $39,017 more “contribution margin” than those without errors or complications.  

According to the authors, “Depending on payer mix, many hospitals have the potential for adverse near-term financial consequences for decreasing postsurgical complications.” [emphasis added]

The authors – quite clearly – noted that there is no evidence, nor do they believe, that hospitals aren’t focused on eliminating these complications despite the obvious negative financial consequences.  And that’s not my point.

The point is this is yet another example of what happens when you pay providers to do things and not on the basis of how well they do them.  If you get a lousy meal in a good restaurant, they’ll usually comp it.  Bad hotel experience?  On the house.  Defective car?  It’s fixed under lemon laws.

But not health care.  If we based payment – at least in part – on the result, we’d likely see much more focus on that result.

What does this mean for you?

Why are you paying providers to fix problems they caused?


6 thoughts on “Screw up and get paid more – only in America’s health care “system””

  1. Thanks, Joe. And it is important to emphasize that neither hospitals nor physicians want surgical errors or avoidable adverse events. But your point is spot on: why should we pay for them? The incentives in US healthcare are topsy-turvy. Many have been advocating for years that what we need is a results-driven healthcare model. This study underscores that need.

  2. Joe, I think you should possibly re-check your facts. All hospitals now follow the Medicare preventable and adverse events policy for all lines of business, not just CMS. In fact, new contracts have language addressing this. There will always be “train wreck” cases where patients did not respond to treatment, had numerous co-morbidities, etc. But hospitals are not incentivized “to do harm”. This is pretty insulting.

    1. Marcia – thanks for the comment.

      I did NOT infer hospitals are “incentivized “to do harm” – that was your interpretation, and I’d suggest one that is not supported by the post. That said, is is clear – from the cited research – that hospitals do generate more margin from complications.

      Did you read the research? If you did you will note that the researchers are the ones who drew the conclusion I quoted.

      1. The research abstract states this was a retrospective review of 2010 cases/discharges from a 12 hospital system. Agree with Marcia new contracts have an expanded ‘never events’ clause so that CMS and private insurers are not paying more for complications. It is moving in the right direction. Hopefully they will redo the study in another year or so giving time for revised CMS and contract requirements to take effect.

        1. Kim – thanks for the comment. For those payers with hospital contracts containing language limiting reimbursement for controllable complications this is indeed less of an issue. I would note that the research was conducted on 2010 cases; these occurred AFTER CMS instituted changes that severely limited reimbursement for “never ever” events (2008, “no pay” rule).

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Joe Paduda is the principal of Health Strategy Associates



A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.



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