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Joel Hay: What’s wrong with American hospitals?

Orange County Register, 2/10/14

By JOEL HAY / Contributing Writer / Opinion

Published: Feb. 7, 2014 Updated: 2:14 p.m.

Fifteen years ago the Institute of Medicine released “To Err is Human,” reporting that 98,000 Americans died each year due to hospital mistakes – equivalent to four jumbo jets crashing per week.

In 2010, the Medicare program inspector general reported that the death toll from hospital errors had risen to 180,000 annually just in the Medicare program alone. A more recent study found that as many as 440,000 deaths each year result from hospital errors – equivalent to two daily jumbo jet crashes.

How long would the airline industry survive if two large commercial jets crashed every day in the U.S.? How long would the auto industry survive if driving were twenty times more dangerous than it actually is and getting riskier every year? Despite 15 years of concerted effort to improve hospital safety, medical errors and complications have actually gotten worse, affecting one in three hospitalized patients.

It would be one thing if hospitals were inexpensive, but we spend nearly a trillion dollars on hospital care each year; one-third of total health care spending. According to a recent Journal of the American Medical Association study, the average hospital netted a median profit of $18,900 per surgery, but when the surgery went badly the hospital’s average profit rose to $49,400. Complications doubled profits if the patient was covered by Medicare and tripled profits if the patient had private insurance. “If a patient has colon cancer surgery, Medicare pays a certain fee, but if the patient gets a post-operative infection that leads to pneumonia and has to be put on a ventilator for several days, the payment for ventilator care is higher and more profitable than the payment for the original surgery,” said Dr. Rosenberg, a study author.

David Goldhill, a cable network CEO and author of “Catastrophic Care: How American Health Care Killed My Father,” wrote, “Five weeks after my father died from a hospital-borne infection in the intensive-care unit of a New York City hospital, my mother received a bill for his treatment – $635,695.75! The bill was broken down into 17 items. Had I booked Dad a room at the most expensive hotel in town for the five weeks of his illness, filled the room with a million dollars’ worth of hospital equipment leased for $15,000 a month, given him round-the-clock nursing care, and paid a physician to spend an hour a day with him (roughly 50 minutes more than at the hospital), it would total roughly $150,000.”

Another recent JAMA Internal Medicine study found that the average non-profit hospital chief executive makes over $600,000 per year, with some making nearly $6 million per year. Their annual compensation is totally unrelated to important hospital quality indicators, including mortality rates, readmission rates, or the amount of charity care these institutions provide. Ironically, efforts to reduce hospital costs per admission or per readmission could actually jeopardize the non-profit status of these hospitals, since it could raise their net revenues.

The study found that hospital executive compensation is positively related to how many high-cost high-tech devices were available in their hospitals, with robotic surgery devices being one of the hottest recent acquisitions. Such devices can cost $1.7 million each and require $150,000 in annual upkeep. In some cases, the non-profit hospital CEO’s compensation is explicitly tied to utilization rates for these high-tech devices. When expensive new pieces of hospital equipment are acquired, their rates of utilization climb, whether medically justified or not.

Hospitals have risen from the sixth- to the third-leading cause of death in the U.S. since 1999. In a bizarre twist on Moore’s law, hospital costs and fatal error rates double about every decade. Since hospitals and their CEOs are financially rewarded for providing poor quality and expensive care, it is not surprising that they do just that. What is surprising is that the rest of us are so complacent about this. All of us will check into a hospital when we are at our sickest, frailest and most vulnerable. It would be nice if we had a decent chance of checking out in better health and without having to give up an arm, a leg or even more for the experience.

Joel W. Hay is a professor at the USC Schaeffer Center for Health Policy and Economics.

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