Financial incentives to reduce hospital-acquired infections under alternative payment arrangements

OBJECTIVE The 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.DESIGN Matched case-control study.SETTING A large, urban hospital system with 1 community hospital and 2 tertiary-care hospitals.PATIENTS All patients discharged in 2013 and 2014.METHODS Using 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.RESULTS In 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.CONCLUSIONS Hospital 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.