The analysis revealed that private insurers paid $55,953 when the patient had a surgical complication but only $16,936 when the procedure went without a hitch−more than three times or $39,017 more.
Some 1,820 patients experienced one or more complications from their surgeries in this system.
For Medicare, the cost difference was much smaller, but still significant. When patients had a complication, the federal government reimbursed hospitals $3,629, compared with $1,880 if the surgery was complication-free, or $1,749 more.
In the hospital system studied, 40% of the patients were covered by private insurance, so complications represented a substantial profit for that organizations, Gawande says.
"The presumption was that when you have a DRG (diagnostic related group) payment, it's a global fee, and therefore the hospital absorbs the cost when you have a complication. But in fact what happens is that [the hospital] moves to other DRG codes if a surgical case goes wrong. It may be billed as an ICU patient rather than a surgical patient, and then you start seeing substantial margins rise."
For patients covered by Medicaid or self-pay, profit margins were much lower or the hospital lost money.
Nancy Foster, vice president for quality and patient safety for the American Hospital Association, heatedly disputed the report's implications that hospitals aren't incentivized to avoid complications.
She pointed to a table in Gawande's paper that proves this 12-hospital system, overall, lost money when its patients developed complications, with a negative margin of about 6.4% across all payers.