Leapfrog Defends Hidden Surcharge Calculator Methodology

August 10, 2013

The American Hospital Association wrote to Modern Healthcare last week, calling Leapfrog tool 'seriously flawed', unhappy with Leapfrog Group's calculator that helps purchasers identify the millions of dollars in surcharges they are paying for hospital errors. Purchasers have a right to know how much errors are costing them when their employees visit the hospital, and we hope the calculator, which earned the rare Gold Standard designation by the Disease Management Purchasing Consortium, will serve as a useful tool for purchasers making important healthcare decisions.

Because we don't differentiate between "total cost," "charges incurred" and "estimated additional cost," the AHA suggests purchasers aren't justified in identifying the millions of dollars they pay for hospital errors. But thanks to some good research in the past few years from the Agency for Healthcare Research and Quality and CMS, purchasers no longer have to allow the smoke and mirrors of hospital finance to obscure the cold reality that they are paying real dollars for harm to their employees.

The studies we used to define the surcharges, which are all made publicly available through our calculator methodology and originated from reliable sources such as JAMA and AHRQ, identified what Medicare paid for errors. By developing the surcharge calculator based on what Medicare paid, we found that on average, hospitals with a Hospital Safety Score of A had fewer such errors than hospitals with a B, C, D or F. Since the errors cost Medicare money, and since private purchasers pay rates higher than Medicare, we logically surmised that they cost purchasers even more money.

The AHA also asserts that the calculator does not account for patients with multiple medical conditions and the additional treatment they require. But in fact, the calculator is powered by the number of admissions rather than the number of patients. Because employers use their own claims data, they can estimate their surcharge based on current usage patterns for employees admitted to hospitals, regardless of the complexity of their conditions.

The beauty of the calculator is that it is fully transparent and customizable. If a purchaser believes, as the AHA does, that certain variables or assumptions don't correlate to its performance, with a few clicks of the mouse that assumption can be taken out of the calculation.

For additional reference points and validation beyond what is reported in Modern Healthcare, I would encourage the AHA and others to visit our website for citation of the studies that validate our cost estimates and the assumptions we used. You can also visit the Disease Management Purchasing Consortium to view the calculator's Gold Standard validation of Leapfrog's methodology.

In recent years, the AHA has demonstrated leadership as an advocate for increased transparency and public reporting, and their leadership in patient safety is impressive. We applaud these efforts. The more information we have on healthcare quality and costs, the fewer assumptions we'll have to make about the extent of the problem. But in the meantime, we have more information than we ever did before, and purchasers and consumers deserve to know all that they can about protecting their lives and their pocketbooks.

Leah Binder, President and CEO
The Leapfrog Group


This statement can also be accessed on Modern Healthcare's website.





Visit Newsletter