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In October 2102, Warren Sandberg, Bill Weeks and I published an article in Health Affairs demonstrating that when hospitals, whose inpatient surgical volumes are not growing, reduce surgical complications they suffer negative cash flow.  In April 2013, Dr. Sunil Eappen and his colleagues, relying on more extensive data, came the same conclusion in an article in JAMA (Relationship Between Occurrence of Surgical Complications and Hospital Finances).  The New York Times considered their finding significant enough to warrant a front-page story on April 16, announcing “Hospitals Profit From Surgical Mistakes, Study Finds.”

The JAMA article was accompanied by an editorial by Prof. Uwe Reinhardt of Princeton University who called the conclusion “troublesome but not surprising.” After making several important observations regarding the consequences of different reimbursement policies illustrated in the study (private, Medicare and Medicaid), Prof. Reinhardt took Eappen et al. to task for their arbitrary allocation of fixed costs to patients with and without complications.  The arbitrary allocations led to the misleading conclusion that the total margin for patients without complications is a negative 6.4 thousand dollars, suggesting – incorrectly – that the hospitals lose money on patients with complications.

Undeterred by Prof. Reinhardt’s criticism of the arbitrary allocation of fixed costs, Rich Umbdenstock, the president of the American Hospital Association jumped into the fray to draw attention to the financial plight of the hospitals on which the study was based: “[T]he hospitals studied are reimbursed less than the overall cost of caring for patients with surgical complications by 6.4 percent.” (Letter to the Editor of the New York Times, dated April 18 and published on April 25).  I don’t know where in the article by Eappen and his colleagues Mr. Umbdenstock found the 6.4 percent figure, but he appears to ignore Prof. Reinhardt’s valid critique.  Moreover, he seems to imply that hospitals should not lose money on complications.  Mr. Umbdenstock, then chastises the study for failing “to recognize that hospitals physicians, nurses and other caregivers work every day to do the right thing for their patients and provide the best care possible.”

I side with the Dr. Eappen and his colleagues, one of whom, Atul Gawande, is the champion of the surgical safety checklist.  First, they cite an article reporting the slow pace of adoption of the surgical checklist.  The slow pace suggests that the commitment to improving care is not as high as implied by Mr. Umbdenbstock.  Second, I am disappointed at the low participation of hospitals in the American Surgical Association’s National Surgical Quality Improvement Program (NSQIP): Only about ten percent of this country’s hospitals participate.  Yet NSQIP provides a rigorous, unbiased assessment of a hospital’s surgical outcomes.  The limited participation suggests that most hospitals are not willing to invest in a program that allows them to compare their surgical performance to their peers and to take advantage of one of the benefits of NSQIP membership – learning from the top participating performers.

Talk about the power of financial incentives!