By Dan C. Krupka, Warren S. Sandberg, and William B. Weeks The Impact On Hospitals Of Reducing Surgical Complications Suggests Many Will Need Shared Savings Programs With Payers ABSTRACT Reducing the complications that patients experience following surgery has garnered renewed attention from the medical and policy community. Reducing surgical complications is, foremost, critically important for patients. Moreover, in a competitive environment increasingly characterized by transparency of outcomes, the surgical complication rate is an important measure of hospital performance that could strongly influence choices of care and care sites made by patients and payers. However, programs to achieve such improvements can reduce hospital revenues, as reimbursements to treat patients for complications decrease. In this article we examine the business case for hospitals’ consideration of programs to reduce surgical complications. We found that if a hospital’s surgical inpatient volume is not growing, such a program results in negative cash flow. We also found that if a hospital’s surgical volume is growing, and if the hospital can sufficiently reduce the average length-of-stay for surgical patients without complications, the cash flow could be positive. We recommend that hospitals with limited growth prospects that are nonetheless contemplating a surgical complication reduction program establish agreements with payers to share in any savings generated by the program. S urgical complications are receiving considerable attention because low complication rates are increasingly recognized as an important measure of hospital performance. 1–4 The sur- gical community believes that hospitals’ compli- cation rates can credibly be compared if they are “risk-adjusted”—that is, normalized by taking into account risk factors such patients’ ages and comorbidities prior to surgery. 5 There is also evidence that complication rates are a more re- liable indication of a hospital’s quality than the institution’s compliance with perioperative process of care guidelines. 6 Indeed, the ratings of coronary artery bypass grafting at 221 coro- nary surgery programs, announced in Consumer Reports, 7 were based on a combination of risk- adjusted outcomes and process measures, with the weight assigned primarily to outcomes. 8 A successful program to improve the quality of care by reducing surgical complications may re- quire a substantial reallocation of resources that might traditionally have been committed to other projects. For example, Surrey Memorial Hospital, in Surrey, British Columbia, has simul- taneously deployed approximately fifty physi- cians and nurses in its perioperative area and surgical ward to work on projects to reduce catheter-associated urinary tract infections, in- fections associated with breast surgery and colo- rectal surgery, and postoperative pneumonia (Peter Doris, Surrey Memorial Hospital, per- sonal communication, March 15, 2011). Even after reducing the overall complication rate by doi: 10.1377/hlthaff.2011.0605 HEALTH AFFAIRS 31, NO. 11 (2012): 2571–2578 ©2012 Project HOPE— The People-to-People Health Foundation, Inc. Dan C. Krupka (dan.krupka@ twinpeaksgroup.com) is the managing principal of Twin Peaks Group, a health care consulting firm that works to improve the performance of the perioperative system, in Lexington, Massachusetts. Warren S. Sandberg is chair of the Department of Anesthesiology and a professor in the Departments of Anesthesiology, Surgery, and Biomedical Informatics at the Vanderbilt University School of Medicine, in Nashville, Tennessee. William B. Weeks is a professor of psychiatry and of community and family medicine at the Geisel School of Medicine at Dartmouth, in Hanover, New Hampshire. November 2012 31:11 Health Affairs 2571 Web First Downloaded from HealthAffairs.org on May 29, 2020. Copyright Project HOPE—The People-to-People Health Foundation, Inc. For personal use only. All rights reserved. Reuse permissions at HealthAffairs.org.