Relationship between occurrence of surgical complications and hospital finances.

IMPORTANCE: The effect of surgical complications on hospital finances is unclear. OBJECTIVE: To determine the relationship between major surgical complications and per-encounter hospital costs and revenues by payer type. DESIGN, SETTING, AND PARTICIPANTS: Retrospective analysis of administrative data for all inpatient surgical discharges during 2010 from a nonprofit 12-hospital system in the southern United States. Discharges were categorized by principal procedure and occurrence of 1 or more postsurgical complications, using International Classification of Diseases, Ninth Revision, diagnosis and procedure codes. Nine common surgical procedures and 10 major complications across 4 payer types were analyzed. Hospital costs and revenue at discharge were obtained from hospital accounting systems and classified by payer type. MAIN OUTCOMES AND MEASURES: Hospital costs, revenues, and contribution margin (defined as revenue minus variable expenses) were compared for patients with and without surgical complications according to payer type. RESULTS: Of 34,256 surgical discharges, 1820 patients (5.3%; 95% CI, 4.4%-6.4%) experienced 1 or more postsurgical complications. Compared with absence of complications, complications were associated with a $39,017 (95% CI, $20,069-$50,394; P < .001) higher contribution margin per patient with private insurance ($55,953 vs $16,936) and a $1749 (95% CI, $976-$3287; P < .001) higher contribution margin per patient with Medicare ($3629 vs $1880). For this hospital system in which private insurers covered 40% of patients (13,544), Medicare covered 45% (15,406), Medicaid covered 4% (1336), and self-payment covered 6% (2202), occurrence of complications was associated with an $8084 (95% CI, $4903-$9740; P < .001) higher contribution margin per patient ($15,726 vs $7642) and with a $7435 lower per-patient total margin (95% CI, $5103-$10,507; P < .001) ($1013 vs -$6422). CONCLUSIONS AND RELEVANCE: In this hospital system, the occurrence of postsurgical complications was associated with a higher per-encounter hospital contribution margin for patients covered by Medicare and private insurance but a lower one for patients covered by Medicaid and who self-paid. Depending on payer mix, many hospitals have the potential for adverse near-term financial consequences for decreasing postsurgical complications.

Quantifying Geographic Variation in Health Care Outcomes in the United States before and after Risk-Adjustment.

BACKGROUND: Despite numerous studies of geographic variation in healthcare cost and utilization at the local, regional, and state levels across the U.S., a comprehensive characterization of geographic variation in outcomes has not been published. Our objective was to quantify variation in US health outcomes in an all-payer population before and after risk-adjustment. METHODS AND FINDINGS: We used information from 16 independent data sources, including 22 million all-payer inpatient admissions from the Healthcare Cost and Utilization Project (which covers regions where 50% of the U.S. population lives) to analyze 24 inpatient mortality, inpatient safety, and prevention outcomes. We compared outcome variation at state, hospital referral region, hospital service area, county, and hospital levels. Risk-adjusted outcomes were calculated after adjusting for population factors, co-morbidities, and health system factors. Even after risk-adjustment, there exists large geographical variation in outcomes. The variation in healthcare outcomes exceeds the well publicized variation in US healthcare costs. On average, we observed a 2.1-fold difference in risk-adjusted mortality outcomes between top- and bottom-decile hospitals. For example, we observed a 2.3-fold difference for risk-adjusted acute myocardial infarction inpatient mortality. On average a 10.2-fold difference in risk-adjusted patient safety outcomes exists between top and bottom-decile hospitals, including an 18.3-fold difference for risk-adjusted Central Venous Catheter Bloodstream Infection rates. A 3.0-fold difference in prevention outcomes exists between top- and bottom-decile counties on average; including a 2.2-fold difference for risk-adjusted congestive heart failure admission rates. The population, co-morbidity, and health system factors accounted for a range of R2 between 18-64% of variability in mortality outcomes, 3-39% of variability in patient safety outcomes, and 22-70% of variability in prevention outcomes. CONCLUSION: The amount of variability in health outcomes in the U.S. is large even after accounting for differences in population, co-morbidities, and health system factors. These findings suggest that: 1) additional examination of regional and local variation in risk-adjusted outcomes should be a priority; 2) assumptions of uniform hospital quality that underpin rationale for policy choices (such as narrow insurance networks or antitrust enforcement) should be challenged; and 3) there exists substantial opportunity for outcomes improvement in the US healthcare system.

Endovascular abdominal aortic aneurysm repair is more profitable than open repair based on contribution margin per day.

BACKGROUND: Earlier studies have reported that endovascular abdominal aortic aneurysm (EAAA) repair yields lower total profit margins than open AAA (OAAA) repair. This study compared EAAA versus OAAA based on contribution margin per day, which may better measure profitability of new clinical technologies. Contribution margin equals revenue less variable direct costs (VDCs). VDCs capture incremental resources tied directly to individual patients' activity (eg, invoice price of endograft device, nursing labor). Overhead costs factor into total margin, but not contribution margin. METHODS: The University of Michigan Health System's cost accounting system was used to extract fiscal year 2002-2003 information on revenue, total margin, contribution margin, and duration of stay for Medicare patients with principal diagnosis of AAA (ICD-9 code 441.4). RESULTS: OAAA had revenues of $37,137 per case versus $28,960 for EAAA, similar VDCs per case, and thus higher contribution margin per case ($24,404 for OAAA vs $13,911 for EAAA, P < .001). However, OAAA had significantly longer mean duration of stay per case (10.2 days vs 2.2 days, P < .001). Therefore, mean contribution margin per day was $2948 for OAAA, but $8569 for EAAA ( P < .001). CONCLUSIONS: On the basis of contribution margin per day, EAAA repair dominates OAAA repair. The shorter duration of stay with EAAA allows higher throughput, fuller overhead amortization, better use of scarce inpatient beds, and higher health system profits. Surgeons must understand overhead allocation to devices, especially when new technologies cut duration of stay markedly.

Aeromedical service: how does it actually contribute to the mission?

BACKGROUND: Aeromedical services are important but poorly understood elements of many health systems. The purpose of this study is to describe the value of aeromedical transportation to our health system. METHODS: We profiled the top 10 admitting services for our Survival Flight (SF) aeromedical patients, the top 10 inpatient diagnosis-related groups (DRGs) for SF patients, SF's contribution to the top 10 revenue DRGs, SF revenue by payer, downstream revenue of fiscal year (FY) 1997 SF patients, FY01 downstream revenue of SF patients transported during the previous 5 years, and both intensive care unit stay and overall length of stay of SF patients. RESULTS: SF brought 1,340 patients to the University of Michigan Health System (UMHS) in FY01. The top 10 admitting services for SF patients derived 11% of their patients and 22% of their revenues from SF. SF accounted for 11% of patients but 19% of revenue in the 10 top DRGs. The mean SF initial inpatient revenue was 46,279 US dollars, excluding professional fees. Measured downstream clinical activity generated incremental revenues amounting to 43% of the initial inpatient revenue. Hospital-wide, SF patients contributed 3% of admissions, 7% of inpatient days, 22% of intensive care unit days, 11% of UMHS revenues, and 15% of inpatient UMHS revenues. CONCLUSION: Survival Flight is critically important to UMHS research, patient care, and educational missions. Moreover, the aeromedical service provides large and relatively stable revenue streams to the health system.