Managing Healthcare Costs: surgery

Dark bars represent new interns on the ward. Click to enlarge

I know, this won’t generate the number of hits that the CDC got when it provided a step-by-step manual to prepare for an onslaught of flesh-eating zombies! But the title is irresistible.

A colleague pointed out that there was a small interesting study in this month's Archives of Surgery entitled “Surgical vampires and rising health care expenditure.”

The researchers simply told surgical interns and residents how much was being spent on daily laboratory tests per person on three surgical wards at Rhode Island Hospital. Then, they calculated the daily charges, which started at over $140 per person, and settled closer to $120.

This was a small study, and only lasted 11 weeks. There is no long-term followup. When a new group of interns rotated onto these wards, the costs went up again (represented by darker blue bars in the graph above).

The researchers missed some major benefits from their intervention. One is that patients were stuck with fewer phlebotomy needles. They lost less blood, but more importantly, they suffered less discomfort. Further, aberrant but self-correcting or erroneous abnormalities were not identified, which could have saved patients from unnecessary follow-ups, some of which could have involved imaging or other diagnostic tests not captured in this study. The worst outcome from an unnecessary test is when it leads to more unnecessary tests!

The researchers provided only the charges, not the actual price paid by payers. The price paid to the hospital probably didn’t change at all, since most patients were on Medicare or other health plans that pay DRG (diagnosis related group) bundled payments for hospitalization. The costs seen by the system were probably, therefore, unchanged.

Further, the marginal costs for a hospital to perform a few more laboratory tests are probably quite small. A hospital doing 1000 complete blood counts per day saves very little in the way of laboratory supplies if it is only doing 990!. There are some potential savings in personnel, so there could have been less phlebotomist overtime due to this intervention.

Putting the reins on surgical vampires is not a silver bullet – but stopping doing unnecessary tests is a good idea.

(Click image to enlarge)

This month’s Archives of Surgery (Harvard Link) has an impressive article showing that orthopedists who own their own ambulatory surgery centers are substantially more likely to recommend surgery compared to physicians who don’t have an ownership interest in the surgery center.

The author, Jean Mitchell, went through state filings and insurance company records and made phone calls to ascertain physician ownership of surgery centers. She then analyzed claims data from a large private insurer (representing about 40% of the Idaho market) and determined what percentage of patients with specific presenting complaints had a surgical procedure. She reports on the differences in behavior between owners and nonowners.

Surgery rates were 33-100% higher for shoulder rotator cuff surgery, and 27-78% higher for arthroscopic surgery. The differences among surgeons increased dramatically around 2005, as more surgery centers were opened. (The exception is carpal tunnel surgery, where the orthopedists who owned centers did far more surgery, but the difference predated the surgery centers opening).

The increase in utilization when physicians financially gain from self-referral has been well documented for years. See this post for a review of the literature as of a few years ago.

In 1995, Idaho had 37 hospitals and 4 specialty hospitals owned by physicians. By 2005, there were 42 ambulatory surgery centers, 39 of which are owned entirely by referring physicians.

There is no easy answer. Regulations have not proven to be especially effective. Physicians opened up “limited use” or single specialty hospitals because federal legislation prohibited referral physician ownership of general use ambulatory facilities. High margins are one of the problems – if surgery was not over-reimbursed, it’s not likely that capital would be available to set up such centers. We don’t see a self-referral problem for low margin procedures. The AMA and physician specialty societies could take a stand against this self-dealing, but this self-referral increases the income of many leading specialists. It’s hard to take income away from physicians.

Speaking of conflict-of-interest, this study was funded by the American Hospital Association. Hospitals have been the big losers as physicians have built competing ambulatory surgery centers, which drain the higher margin procedures from the hospital. The Archives of Surgery fully discloses this potential conflict. Not all the physicians who own surgical facilities disclose this potential conflict to their patients.

ADDENDUM: USA Today notes that health care reform will force physician-owners to disclose their ownership interest when they refer patients to their own imaging equipment, and offer nearby options.