Physicians Not Main Cause of Surgery-Cost Variation

November 07, 2011

November 7, 2011 — The care that patients receive immediately after they are discharged from the hospital is generally the main source of large cost variations for 4 kinds of surgery, lending credence to the suggestion that costs could be reduced through bundled payments, according to a study published online today in the journal Health Affairs.

Postdischarge care was the leading cause of payment differences for hip replacement, back surgery, and colectomy, accounting for 40.7% to 85.2% of the variation, depending on the kind of surgery, write David Miller, MD, MPH, and coauthors. For coronary artery bypass grafting, postdischarge care ranked second after hospitalization as the reason for cost variation. Physician services accounted for 8.6% to 12.8% of the variation among the 4 kinds of surgery.

Dr. Miller, an assistant professor of urology at the University of Michigan Medical School, Ann Arbor, and coauthors studied Medicare claims for the 4 surgeries from January 2005 through November 2007. They tallied payments for hospital, physician, and postdischarge care from the date of admission to 30 days after discharge. Excluded from the analysis were patients enrolled in Medicare managed care plans, those younger than age 65 years or older than age 99 years, and patients not enrolled in both Part A and Part B of Medicare at the time of the procedure.

Mean Medicare payments were $20,807 for elective hip replacement, $42,194 for coronary artery bypass grafting, $26,540 for back surgery, and $26,491 for colectomy.

The researchers ranked hospitals according to total episode payments and assigned them to 5 groups, or quintiles, adjusting the results for price, differences in demographic characteristics, comorbidity, and illness severity. After this tweaking, payments for hospitals in the highest-cost quintile were still 10% to 40% higher than those for hospitals in the lowest quintile, depending on the procedure. The biggest difference dollar-wise between the top and bottom hospitals was $7759 for back surgery. The smallest difference was $2549 for colectomy.

"Hospitals that were expensive for one procedure were not necessarily expensive for all surgical services," the authors note. "Thus it appears that variations in episode payments are specialty-specific, perhaps driven by differences in quality or practice style."

"We Don't Know What the Right Payment Is"

Architects of healthcare policy are curious about the kind of cost variations analyzed in the Health Affairs study because by reducing the variation, especially at the high end, they can save a lot of money. Medicare could set its rates below the current mean payment of $20,807 for hip replacement, for example, and tell hospitals and physicians in the highest-cost quintile to perform more like their counterparts in the lowest-cost quintile.

The Centers for Medicare and Medicaid Services (CMS) will attempt to reap such savings in a bundled-payment pilot project scheduled to begin next year. Under one model of the pilot project, physicians and hospitals would split a single payment — determined prospectively — for an inpatient episode, such as a hip replacement, that would include postdischarge services. The hope is that hospitals and physicians will work together more closely to coordinate a patient's care after discharge so that the patient will not bounce back as a readmission several weeks later.

The data from the Health Affairs study, write Dr. Miller and coauthors, suggest that hospitals have "considerable room to improve their cost efficiency." For example, they should "look for patterns of excess utilization" among surgical specialists and other specialists performing inpatient consults.

However, in an interview with Medscape Medical News, Dr. Miller cautioned that more research is needed to determine where the cost efficiencies are exactly.

"There's nothing in the study that compares payment level and quality," said Dr. Miller. "It doesn't provide any inferences on whether a practice pattern is right or wrong. That's the work we're currently doing.

"We don't know what the right payment is for these different surgical episodes. What we do know is that there is an unsustainable trajectory in expenditures. We need to engage in some introspection to find opportunities to save money while improving quality."

Find Out What "Adds Value"

In an interview with Medscape Medical News, Kevin Bozic, MD, MBA, chair of the healthcare systems committee of the American Academy of Orthopaedic Surgeons, said the Health Affairs study shows that there is "significant variability in the types of resources that patients utilize."

"Some are under the control of the physician, and some are under control of the patient," said Dr. Bozic, an associate professor of orthopaedic surgery at the University of California, San Francisco.

Dr. Bozic, whose specialty society views bundled payments as an opportunity for surgeons, said factoring a surgery patient's living status into discharge plans is critical for both quality of care and cost control.

"Let's say a patient lives alone in a walk-up apartment where there is no elevator," Dr. Bozic said. "If you can come up with a plan to get him or her up and down the stairs, and have someone provide meals, and other home services, you might be able to keep the patient out of a post–acute-care facility, which would drive up costs."

Physicians, Dr. Bozic said, can help the cause by looking at every step of patient care to determine whether it "adds value."

"If we routinely order a lab test, and it doesn't change how we manage the patient, we should eliminate it," he said. "But don't eliminate it just on the basis of cost. You'll end up cutting corners and impacting outcomes."

The study was supported by the Agency for Healthcare Research and Quality and the National Institute on Aging. Coauthors John Birkmeyer, MD, and Justin Dimick, MD, have equity interests in ArborMetrix, which provides software and services for profiling hospital quality and episode cost efficiency. The authors report that the company was not involved with the study in any way.

Health Affairs. Published online November 7, 2011.

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