In my last post, I ranked the highest paying DRGs from the Medicare Inpatient Charge Dataset that lists the average charges and average Medicare payments to hospitals for different diagnoses. One of the possible conclusions from analyzing this dataset is that we may be inadvertently incentivizing doing more tracheostomies.
When a patient is admitted to the hospital with respiratory failure requiring endotracheal intubation and is placed on a mechanical ventilator, we try to get that patient off of the ventilator as quickly as possible. If the patient cannot be extubated within a few days, there are 3 options for managing that patient:
- Leave the patient intubated with an endotracheal tube and on a mechanical ventilator for as long as it takes for them to get better and get off of the ventilator. The advantage of this approach is that it avoids doing a surgical procedure on the patient and once that patient is off of the ventilator, they can generally be discharged home or to a nursing home for recovery. The disadvantage is that sometimes it can take many days or weeks to “wean” the patient off of the ventilator and so that patient’s hospital length of stay can be quite long, resulting in higher hospital expenses, without higher Medicare or insurance payments to the hospital. In other words, this approach can result in the hospital losing money on that patient.
- Have a palliative care discussion with the patient or family and discontinue life support with an expectation of death. The advantage of this approach is that it provides realistic goals of care discussion with the family so that they can make informed decisions about the patients end-of-life care. Also, this can result in a shorter hospital length of stay, thus on the surface reducing the hospital’s expenses for that patient and improving the hospital’s financial margin. The disadvantage is that the patient dies.
- Place a surgical tracheostomy and then transfer that patient to another level of care facility for ventilator weaning, most commonly, a long-term acute care hospital. The advantage of this approach is that the patient’s hospital length of stay is shorter, thus reducing hospital expenses and improving the hospital’s financial margin. It can also be easier and more comfortable for the patient to wean from the ventilator when they have a tracheostomy. The disadvantage is that sometimes these patients never get better and it can give the patient or their family false hope of ever getting off of the ventilator – instead of prolonging the patient’s life, it can sometimes just prolong their death.
These advantages and disadvantages are what critical care physicians and palliative medicine physicians discuss with patients and their families every day in the intensive care unit. But there is another implication of the tracheostomy that no one ever talks about: the benefit of doing a tracheostomy to the hospital’s financial margin.
In the 
Medicare Inpatient Charge Dataset, the average medicare payment for any given DRG (diagnosis-related group) is listed by individual hospital and as an aggregate average for all hospitals in the United States. Let’s look at the 2 common diagnoses that result in a patient being admitted to the intensive care unit, intubated, and on a mechanical ventilator: sepsis and respiratory failure and then let’s look at the financial effect of whether or not those patients get a tracheostomy.
If a patient is admitted to the ICU with respiratory failure requiring mechanical ventilation but they are not septic, they will likely get assigned DRG 189: “pulmonary edema & respiratory failure” and the average hospital will get paid $7,799 from Medicare. However, if that same patient remains on mechanical ventilation for at least 4 days and gets a tracheostomy, then the hospital can assign DRG 004 and gets paid $71,098 from Medicare – nearly $62,000 more!
If a patient is admitted to the average hospital ICU with sepsis and is only on mechanical ventilation for less than 4 days, the hospital will use DRG 872 and get paid $6,392 from Medicare. If that same patient additionally has major complications or comorbidities (which is by far the more common situation), then the hospital can use DRG 871 and gets paid $11,632 from Medicare. If the patient with sepsis remains on the ventilator for more than 4 days, then the hospital can use DRG 870 and gets paid $40,174 from Medicare – nearly $29,000 more! However, if that same patient who is on the ventilator for more than 4 days gets a tracheostomy, then the hospital can bill DRG 004 and get paid $71,098 from Medicare – nearly $31,000 more!
So, what are the financial implications of all of this? The cynic in me can identify a few:
- When a patient looks like they are ready to wean from the ventilator after 3 days, if you can leave them on the ventilator 1 extra day, the hospital gets paid a lot more.
- When a patient is on a ventilator for at least 4 days, the hospital gets paid a lot more if that patient gets a tracheostomy.
- When a patient is on a ventilator and palliative care discussions result in that patient having life support terminally withdrawn, the hospital will save some money by reducing the ICU length of stay. However, the hospital loses even more money by not performing a tracheostomy, thus missing out on the opportunity to bill DRG 004.
- When a patient is admitted with respiratory failure, the hospital is better off financially if that patient gets a tracheostomy after 4 days on a ventilator and then gets discharged to a long-term acute care hospital (as opposed to giving that patient a week or 10 days to see if they can wean from the ventilator before doing a tracheostomy.
The hospital’s greatest financial margin occurs when all patients with respiratory failure get a tracheostomy after 4 days on the ventilator and then get discharged to a long-term acute care hospital on the 5th day.
The frequency of doing tracheostomies for patients with respiratory failure may be a marker of ICU quality of care – a lower frequency indicating that the hospital is more appropriately using palliative care resources and is successfully weaning patients from mechanical ventilation before needing a tracheostomy. However, a higher frequency of tracheostomy can be a marker of greater ICU profitability.
The Scottish economist and philosopher, Adam Smith, said about capitalism that the invisible hand of free market economies will drive business decision making. I cannot help but wonder what Adam Smith would say about how the invisible hand of healthcare economics drives tracheostomy decision making.
June 6, 2019
