Financial Incentives to Reduce Hospital-Acquired Infections Under Alternative Payment Arrangements

Abstract

OBJECTIVEThe financial incentives for hospitals to improve care may be weaker if higher insurer payments for adverse conditions offset a portion of hospital costs. The purpose of this study was to simulate incentives for reducing hospital-acquired infections under various payment configurations by Medicare, Medicaid, and private payers.DESIGNMatched case-control study.SETTINGA large, urban hospital system with 1 community hospital and 2 tertiary-care hospitals.PATIENTSAll patients discharged in 2013 and 2014.METHODSUsing electronic hospital records, we identified hospital-acquired bloodstream infections (BSIs) and urinary tract infections (UTIs) with a validated algorithm. We assessed excess hospital costs, length of stay, and payments due to infection, and we compared them to those of uninfected patients matched by propensity for infection.RESULTSIn most scenarios, hospitals recovered only a portion of excess HAI costs through increased payments. Patients with UTIs incurred incremental costs of $6,238 (P<.01), while payments increased $1,901 (P<.05) at public diagnosis-related group (DRG) rates. For BSIs, incremental costs were $15,367 (P<.01), while payments increased $7,895 (P<.01). If private payers reimbursed a 200% markup over Medicare DRG rates, hospitals recovered 55% of costs from BSI and UTI among private-pay patients and 54% for BSI and 33% for UTI, respectively, across all patients. Under per-diem payment for private patients with no markup, hospitals recovered 71% of excess costs of BSI and 88% for UTI. At 150% markup and per-diem payments, hospitals profited.CONCLUSIONSHospital incentives for investing in patient safety vary by payer and payment configuration. Higher payments provide resources to improve patient safety, but current payment structures may also reduce the willingness of hospitals to invest in patient safety.Infect Control Hosp Epidemiol 2018;39:509-515.

FIGURE 1

Incremental charges, costs, and payment, for patients with urinary tract infection and share of excess cost recovered by hospital compared to propensity-score matched controls.^a NOTE. ^aSee Appendix Table 1 for discussion of propensity score matching methodology. Regressions include all controls in Appendix Table 1. Error bars represent robust standard errors. Excludes self-pay patients. ^bHospital costs converted from charges using hospital system’s Medicare cost-to-charge ratio. ^cPayment calculated as Medicaid payment (including outliers) for Medicaid patients and Medicare payment (including outliers) for all other patients. **P < .01. *P < .05.

FIGURE 2

Incremental charges, costs, and payment, for patients with bloodstream infections and share of excess cost recovered by hospital compared to propensity-score matched controls.^a NOTES. ^aSee Appendix Table 1 for discussion of propensity score matching methodology. Error bars represent robust standard errors. Excludes self-pay patients. Regressions include all controls in Appendix Table 1. ^bHospital costs converted from charges using hospital system’s Medicare cost-to-charge ratio. ^cPayment calculated as Medicaid payment (including outliers) for Medicaid patients and Medicare payment (including outliers) for all other patients. **P < .01.

FIGURE 3

Share of excess costs of hospital-associated infections recovered under different assumptions about private payer payment methodologies and markups. Calculations are based on coefficients in Appendix Table 1 (ie, adjusted, private pay patients, excluding self-pay patients). Regressions include all controls in Appendix Table 1. NOTE. DRG, diagnosis-related group; HAI, healthcare-associated infection.