I have long been under the impression that hospitals make the most profit from short-stay inpatients that require numerous lab tests and radiology procedures. Such tests and procedures have high profit margins as opposed to direct patient care which is labor intensive and not as remunerative. It turns out that this may not be entirely correct. A recent study suggests that patients who develop septicemias in ICUs, and thus have prolonged stays, may yield high profits for hospitals, at least when private insurance companies are involved (see: Dirty little secret: Hospitals PROFIT when patients develop bloodstream infections). Below is an excerpt from the article:
Johns Hopkins researchers report that hospitals may be reaping enormous income for patients whose hospital stays are complicated by preventable bloodstream infections contracted in their intensive care units. In a small, new study,...the researchers found that an ICU patient who develops an avoidable central line-associated bloodstream infection (CLABSI) costs nearly three times more to care for than a similar infection-free patient. Moreover, hospitals earn nearly nine times more for treating infected patients, who spend an average of 24 days in the hospital. The researchers also found that private insurers, rather than Medicare and Medicaid, pay the most for patient stays complicated by CLABSIs — roughly $400,000 per hospital stay — suggesting that private insurers would gain the most financial benefit from working with hospitals to reduce infection rates....
[An author of the study] says this situation is driven largely by a policy that reimburses hospitals more for patients who are considered more complicated to treat. Insurers generally pay most hospitals a predetermined amount for a typical patient’s stay, based on the average cost of providing care to a patient in a similar condition. The payment is set under a diagnostic related group (DRG) that pays a hospital a lump sum for a given patient’s episode of care, a system which incentivizes hospitals to reduce costs of each stay since their revenues are fixed and they can keep any money that goes unspent. However, some cases are more complicated — and therefore more costly to treat — and insurers are required to pay more for these cases, using a mechanism known as outlier payments, in which hospitals are paid as a percentage of charges. The more the hospital charges, the more it is reimbursed by its insurer. The majority of CLABSIs in the study were considered outliers and ensured a large payout....Private insurers pay more than government insurers for outliers, even when the triggering event was a preventable complication.
There is obviously no presumption here that hospitals are in any way pleased to have a large number of patients with central line-associated bloodstream infections (CLABSI) in their inpatient mix. A large number of such cases would be an indicator for poor quality of care and harm the reputation of the hospital. The major points of this article are the following: (1) when CLABSIs occur and the patient's payer is a private health insurance company, the hospital may not suffer financially from the case; and (2) the private health insurance companies have the most to gain financially by working with hospitals to decrease the rate of such hospital-acquired infections.
Bruce - just wanted to shoot you a note that your assumption about reimbursement is incorrect. In fact, hospitals make the most on patients who have fewer xrays, lab tests, etc. As inpatient stays are reimbursed based on the DRG, NOT the services provided. So, if we are both admitted with the same diagnosis and one of us has 2 CT scans and 40 lab tests more than the other, the hospital gets reimbursed the same for both of us regardless. So, the hospital gets "rewarded" if fewer services are provided.
Posted by: Bill Grolly | June 04, 2013 at 07:07 AM