Orthopedics

Feature Article 

Surgical Cost Disclosure May Reduce Operating Room Expenditures

Luke S. Austin, MD; Fotios P. Tjoumakaris, MD; Alvin C. Ong, MD; Nicholas J. Lombardi, BS; Charles D. Wowkanech, BS; Michael J. Mehnert, MD

Abstract

Health care expenditures are rising in the United States. Recent policy changes are attempting to reduce spending through the development of value-based payment systems that rely heavily on cost transparency. This study was conducted to investigate whether cost disclosure influences surgeons to reduce operating room expenditures. Beginning in 2012, surgeon scorecards were distributed at a regional health care system. The scorecard reported the actual direct supply cost per case for a specific procedure and compared each surgeon's data with those of other surgeons in the same subspecialty. Rotator cuff repair was chosen for analysis. Actual direct supply cost per case was calculated quarterly and collected over a 2-year period. Surgeons were given a questionnaire to determine their interest in the scorecard. Actual direct supply cost per rotator cuff repair procedure decreased by $269 during the study period. A strong correlation (R2=0.77) between introduction of the scorecards and cost containment was observed. During the study period, a total of $39,831 was saved. Of the surgeons who were queried, 89% were interested in the scorecard and 56% altered their practice as a result. Disclosure of surgical costs may be an effective way to control operating room spending. The findings suggest that providing physicians with knowledge about their surgical charges can alter per-case expenditures. [Orthopedics. 2017; 40(2):e269–e274.]

Abstract

Health care expenditures are rising in the United States. Recent policy changes are attempting to reduce spending through the development of value-based payment systems that rely heavily on cost transparency. This study was conducted to investigate whether cost disclosure influences surgeons to reduce operating room expenditures. Beginning in 2012, surgeon scorecards were distributed at a regional health care system. The scorecard reported the actual direct supply cost per case for a specific procedure and compared each surgeon's data with those of other surgeons in the same subspecialty. Rotator cuff repair was chosen for analysis. Actual direct supply cost per case was calculated quarterly and collected over a 2-year period. Surgeons were given a questionnaire to determine their interest in the scorecard. Actual direct supply cost per rotator cuff repair procedure decreased by $269 during the study period. A strong correlation (R2=0.77) between introduction of the scorecards and cost containment was observed. During the study period, a total of $39,831 was saved. Of the surgeons who were queried, 89% were interested in the scorecard and 56% altered their practice as a result. Disclosure of surgical costs may be an effective way to control operating room spending. The findings suggest that providing physicians with knowledge about their surgical charges can alter per-case expenditures. [Orthopedics. 2017; 40(2):e269–e274.]

The rising cost of health care in the United States is a well-documented issue that is gathering increasing national attention. Affordable care organizations and bundled medical payments have been implemented to combat the cost increases. These arrangements are designed to motivate health care providers and systems to decrease the cost of care and subsequently share in any cost savings. For these processes to work, cost data must be made readily available. Surgeon scorecards report surgeons' quarterly mean costs for specific procedures. Thus, surgeons within the same subspecialty may be compared by their costs for respective procedures.

The increasing cost of medical technology is a significant contributor to higher health care spending.1 The implementation of new medical technology accounts for 38% to 65% of increases in health care spending.1 New technology expands the range of treatment options; however, it typically does so by replacing lower-cost options with higher-cost services.2 Most payments for medical procedures go to hospitals and device manufacturers. Therefore, technology and hospital costs have had a greater effect on rising overall health care costs than payments to physicians and clinical care providers.3 Further, physicians may be unaware of the cost of care delivery within the health care system and often are excluded from purchasing and negotiation agreements. A survey of 503 surgeons and surgical residents conducted by researchers at Kaiser Permanente Moanalua Medical Center in Honolulu, Hawaii, showed that only 21% of attending physicians and 17% of residents correctly estimated the cost of implantable devices, and 36% of surgeons and 75% of residents rated their knowledge of implant costs as “below average” or “poor.”4 More than 80% of respondents reported that the cost of implants is “moderately” to “extremely” important to know.4

This study investigated whether cost disclosure influences surgeons to reduce operating room expenditures. The hypothesis was that public disclosure of surgical costs would influence surgeons to reduce operating room expenditures. The authors also queried surgeons about their level of interest in the surgeon scorecard and whether it influenced a change in their practice.

Materials and Methods

On April 1, 2012, a regional health care system began to distribute a scorecard (Figure 1) to each surgeon. This report detailed the cost of certain operating room cases, broken down by surgeon subspecialty and detailing the volume and cost of that procedure. Rotator cuff repair was chosen for analysis, based on its high volume and relatively low case-to-case fluctuation in cost. Direct supply cost per case was calculated quarterly and collected over a 2-year period (January 2012 to January 2014) (Figure 2, Table 1). Data were disclosed not only to the surgeons and the hospital but also to referring physicians within the affordable care organization. The goal was to advise all parties involved in the hospital system of cost per case, including the surgeons and referring primary care physicians. The study received institutional review board approval.


Sample scorecard showing operating room (OR) case time and a summary of quarterly cost data. The surgeons are informed of their cost expenditures relative to their peers. The top quartile represents the lowest cost. Abbreviations: PI, patient in room; PO, patient out of room.

Figure 1:

Sample scorecard showing operating room (OR) case time and a summary of quarterly cost data. The surgeons are informed of their cost expenditures relative to their peers. The top quartile represents the lowest cost. Abbreviations: PI, patient in room; PO, patient out of room.


Average cost per rotator cuff repair (RCR) case and RCR case volume calculated quarterly (Q) over a 2-year period.

Figure 2:

Average cost per rotator cuff repair (RCR) case and RCR case volume calculated quarterly (Q) over a 2-year period.


Cost of Rotator Cuff Repaira

Table 1:

Cost of Rotator Cuff Repair

The primary outcome measure was the actual direct supply cost per case of a specific procedure. Cost per case for a particular surgeon was then compared with the direct supply cost for other surgeons in the same subspecialty. Cost was determined and reported by an independent third party. SurgiNet (Cerner, Kansas City, Missouri) was used as the operating room documentation system, and McKessen Pathways Materials Management (Cerner) was used for item pricing. The costs recorded were the actual amounts paid by the hospital for direct supply costs (ie, implants, reusable and disposable equipment, drapes, fluids, medications). Indirect supply costs (ie, operating room time, salaries, insurance) were not included.

Case volume was calculated quarterly and collected over the same 2-year period. During the study period, a total of 423 rotator cuff repair procedures were performed at 2 hospitals within a regional health care system. Using case volume and the difference in cost per case from the index value (see calculations), the authors calculated the cost savings achieved during the study period. Simple linear regression was performed to evaluate the relationship between cost per case and time after introduction of the scorecards.

The quantity of nonimplantable surgical items used during each quarter of the study period was obtained. Items were organized into groups, and the total number of items used per case was calculated quarterly (Figure 3). Simple linear regression was performed to evaluate the relationship between items used per case and time after introduction of the scorecards.


Nonimplantable surgical items per case, calculated quarterly (Q) over a 2-year period.

Figure 3:

Nonimplantable surgical items per case, calculated quarterly (Q) over a 2-year period.

Data on the number of anchors per case, number of anchorless repairs performed, and number of outlier cases (use of greater than 6 anchors per case) were collected quarterly over the 2-year study period (Table 2). Data were evaluated with a Poisson regression model to determine whether there was a change in the use of anchors during the study period.


Quarterly Use of Anchors

Table 2:

Quarterly Use of Anchors

Surgical procedures were performed by a total of 11 private practice surgeons from various practices. All rotator cuff repairs performed during this period were included in the analysis. In the same period, no new contract negotiations occurred between the hospital and the implant manufacturers, and the price per implant remained constant. In the second quarter of 2013, 2 surgeons began to use an arthroscopic anchorless technique for rotator cuff repair.

All 11 surgeons were administered a questionnaire to determine their interest in the scorecard and whether it influenced their practice. The questionnaire consisted of 5 questions (Table 3). Of the 11 surgeons, 9 (81.8%) completed the questionnaire.


Questionnaire

Table 3:

Questionnaire

Calculations

To determine actual cost changes during the study period, the index value (cost per case for quarter 1) was subtracted from the cost per case for each quarter. This difference was multiplied by the case volume for each month to produce the actual cost variation, in total dollars, achieved that quarter. Shown is an example representing how the cost variation for rotator cuff repairs during the second quarter (Q) of 2012 was calculated:



(
Case
 
volume
 
Q
2
 
2012
)
×
(
[
Rotator
 
cuff
 
repair
 
cost
/
Case
 
Q
2
 
2012
]
-
[
Rotator
 
cuff
 
repair
 
cost
/
Case
 
Q
1
 
2012
]
)
=
Actual
 
cost
 
variation
 
for
 
Q
2
 
2012

This calculation was performed for each quarter in 2012 and 2013, and the sum of the 8 quarters produced the total cost savings achieved during the study period.

Results

Average supply cost per case for rotator cuff repair decreased $269 during the study period. After an initial increase of $141 per case was observed during the second quarter of 2012, the average supply cost per rotator cuff repair case either decreased or remained constant (within $25) over the remainder of the study period, resulting in the decrease in costs noted earlier. A strong correlation was found (R2=0.77) between introduction of the scorecards and costs. During the study period, $39,831 was saved (Table 1).

No significant decrease was found in the number of anchors used per case during the study period (Table 2). A Poisson regression model was used to predict the range of number of anchors per quarter and year within a 95% confidence interval. Use of anchors per year and use of anchors per quarter (as categorical variables) were not found to be significantly different during the study period (use per year, P=.30; use per quarter, P=.33). An arthroscopic transosseous, anchorless rotator cuff repair technique was used starting in the second quarter of 2013. The instrument came at the cost of 1.4 anchors, but allowed for the repair of small to massive tears. Theoretically, the use of this technique should have reduced the number of anchors per case. However, this outcome was not seen, possibly because of the increased number of outlier cases in the third and fourth quarters of 2013 (Table 2).

Changes in direct supply costs between quarters depended on surgeons' use of disposable and reusable equipment along with implants. Analysis of the use of non-implantable surgical items showed mixed relationships between use and time during the study period. No correlation between the use of group 1 items and introduction of the scorecard was observed. A very weak correlation between increased use of group 2 items and introduction of the scorecard was observed. Strong and moderate correlations were observed between reduced use of group 3 and group 4 items, respectively, and introduction of the scorecard (Figure 3).

Of the participating surgeons, 89% reported moderate to extreme interest in the scorecard (Figure 4). Table 3 shows the responses to the 5 questions. Notably, 56% of surgeons made changes in their practice as a result of the dissemination of surgeon scorecards.


Surgeon self-reported interest level in the surgical scorecard.

Figure 4:

Surgeon self-reported interest level in the surgical scorecard.

Discussion

Value-based care is changing the landscape of medicine. Through transparency of cost and quality, affordable care organizations are attempting to reduce costs while maintaining quality. Further, recent health care law has created an environment that encourages physicians to realign with hospitals and away from industry. Whether these organizations can create cost savings while maintaining quality of care has yet to be determined. This study was conducted to investigate whether cost disclosure influences surgeons to reduce operating room expenditures.

Earlier research evaluated the effect of physician education on spending and cost and found that education is essential to reducing the cost of care. For example, a simple educational intervention is effective in changing test ordering behavior in internal medicine residents, resulting in cost savings.5 Costs associated with patient stay in the trauma intensive care unit were reduced without sacrificing quality through regular informal daily bedside discussions between residents and attending physicians about relative patient costs of diagnostic and therapeutic interventions.6 Limiting the use of antibiotics before endoscopic and laparoscopic procedures contributes to cost control. In the same study, informing physicians of marked differences in the cost of postoperative antiemetics led to practice changes and cost savings.7 Sending providers weekly phlebotomy cost reports for surgical patients who are not in the intensive care unit also led to cost savings.8

Clearly, in orthopedics, controlling operating room spending is an opportunity to cut costs, particularly given the wide variability in the cost of orthopedic implants.9,10 Reducing surgical costs while maintaining quality care requires surgeons' awareness of operating room costs and participation in cost reduction strategies. Making surgeons aware of absolute and relative costs may motivate them to adopt more cost-efficient practices, as shown for rotator cuff repair during the study period.

During the reporting period, costs associated with rotator cuff repair decreased after physicians became aware of operating room costs. This result emphasizes the importance of informing surgeons of total operating room costs, including implants, equipment, and surgical technique. Given such detailed knowledge, surgeons were better informed as to when and how they could reduce costs. In the case of rotator cuff repair surgery, surgeons can affect cost through changes in exposure (open vs arthroscopic) and technique (single-row vs double-row vs anchorless repair). Simple adjustments, such as the use of drapes, dressings, slings, and immobilizers, can lead to substantial decreases in cost. High-volume surgical procedures, such as rotator cuff repair, can create significant cost savings over time, even with small reductions in cost per case. The current study found cost savings during the study period, but the use of anchors remained the same. This finding suggests that savings came from a change in other factors, such as the use of nonimplantable items. A concern associated with a value-based payment system is that value can remain neutral when outcomes are reduced as long as cost is also reduced. However, in the current series, surgeons did not sacrifice the use of critical fixation devices, and anchor use did not vary in the 2-year period.

Surgeons are becoming more aware of cost as fee-for-service models are being replaced by value-based payment methods. Bundled payments are an example of an alternative payment method that drives an alignment between surgeons and hospitals. A single bundled payment motivates surgeons and hospitals to work together to reduce costs and increase shared profitability. The current study showed that 89% of surgeons were moderately or extremely interested in the surgeon scorecards, indicating that surgeons have a heightened interest in the changing health care payment structure. Of participating surgeons, 89% compared their own mean operating room cost with those of other surgeons in their subspecialty, and 56% subsequently changed the way they performed surgery. For instance, 2 surgeons began to use a new arthroscopic anchorless repair technique that has been found to reduce cost compared with anchored repair.11 The data showed that most surgeons, when given cost data, are willing to adapt to the changing landscape of medicine in an effort to reduce costs. Finally, 33% of surgeons believe that reducing costs will drive referrals to their practice, indicating the power of disclosure of cost data.

Limitations

This study was limited by the lack of cost data before initiation of the surgeon scorecard. The accounting program that was used to determine cost became available concurrently with the introduction of the surgeon scorecards. Therefore, no previous data were available and the authors could not evaluate any cost trends before the start of the study that may have affected the outcomes. However, during the year before the study and throughout the study period, no new contract negotiations occurred between the hospital and the implant manufacturers. Therefore, the cost savings identified during the study period were not the result of decreased direct supply costs.

Conclusion

The health care environment is changing to a value-based system. Transparency in cost and quality will place pressure on physicians and motivate a more cost-conscious approach to care. After the introduction of scorecards, average supply cost per rotator cuff repair procedure decreased (R2=0.77), and $39,831 was saved during the study period. Cost savings were mainly the result of decreased use of disposable equipment (ie, drapes, dressings, slings), although anchor use did not decrease during the study period. Of the participating surgeons, 89% reported moderate or extreme interest in the surgeon scorecards, 56% changed the way they performed surgery, and 33% believed that reducing costs can drive referrals to their practice. This study showed that surgeons are interested in cost data and willing to adjust practice patterns to reduce operating room expenditures.

References

  1. Robert Wood Johnson Foundation. What are the biggest drivers of cost in U.S. health care? http://www.rwjf.org/content/dam/farm/reports/issue_briefs/2011/rwjf71331. Accessed November 20, 2014.
  2. Aetna. The facts about rising health care costs. http://www.aetna.com/health-reform-connection/aetnas-vision/facts-about-costs.html. Accessed November 20, 2014.
  3. Goodman L, Norbeck T. Who's to blame for our rising healthcare costs? http://www.forbes.com/sites/realspin/2013/04/03/whos-to-blame-for-our-rising-healthcare-costs/#5513580c2a93. Accessed November 20, 2014.
  4. Okike K, O'Toole RV, Pollak AN, et al. Survey finds few orthopedic surgeons know the costs of the devices they implant. Health Aff (Millwood). 2014; 33(1):103–109. doi:10.1377/hlthaff.2013.0453 [CrossRef]
  5. Covington MF, Agan DL, Liu Y, Johnson JO, Shaw DJ. Teaching cost-conscious medicine: impact of a simple educational intervention on appropriate abdominal imaging at a community-based teaching hospital. J Grad Med Educ. 2013; 5(2):284–288. doi:10.4300/JGME-D-12-00117.1 [CrossRef]
  6. Blackstone ME, Miller RS, Hodgson AJ, Cooper SS, Blackhurst DW, Stein MA. Lowering hospital charges in the trauma intensive care unit while maintaining quality of care by increasing resident and attending physician awareness. J Trauma. 1995; 39(6):1041–1044. doi:10.1097/00005373-199512000-00004 [CrossRef]
  7. Allen JW, Hahm TX, Polk HC Jr, . Surgeon-led initiatives cut costs and enhance the quality of endoscopic and laparoscopic procedures. JSLS. 2003; 7(3):243–247.
  8. Stuebing EA, Miner TJ. Surgical vampires and rising health care expenditure: reducing the cost of daily phlebotomy. Arch Surg. 2011; 146(5):524–527. doi:10.1001/archsurg.2011.103 [CrossRef]
  9. Robinson JC, Pozen A, Tseng S, Bozic KJ. Variability in costs associated with total hip and knee replacement implants. J Bone Joint Surg Am. 2012; 94(18):1693–1698. doi:10.2106/JBJS.K.00355 [CrossRef]
  10. Weiss AJ, Elixhauser A. Trends in Operating Room Procedures in U.S. Hospitals, 2001–2011. Rockville, MD: Agency for Healthcare Research and Quality; 2014.
  11. Black EM, Austin LS, Narzikul A, Seidl AJ, Martens K, Lazarus MD. Comparison of implant cost and surgical time in arthroscopic transosseous and transosseous equivalent rotator cuff repair. J Shoulder Elbow Surg. 2016; 25(9):1449–1556. doi:10.1016/j.jse.2016.01.003 [CrossRef]

Cost of Rotator Cuff Repaira

Variable2012 Quarter2013 Quarter


12341234
Cost per case$1670$1811$1611$1527$1532$1553$1436$1401
Cost difference$0$141−$59−$143−$138−$117−$234−$269
Volume6551534669534442
Estimated difference in quarterly spending$0$7191−$3127−$6578−$9522−$6201−$10,296−$11,298
Estimated difference in spending from beginning of study period$0$7191$4064−$2514−$12,036−$18,237−$28,533−$39,831

Quarterly Use of Anchors

Time FrameNo.

Anchors per CaseAnchorless RepairOutliersa
2012
  Quarter 12.80
  Quarter 23.3307, 8
  Quarter 33.2307, 10
  Quarter 43.1907, 7
2013
  Quarter 13.2507
  Quarter 23.4417, 7
  Quarter 32.93512
  Quarter 43.668, 10, 12
Average3.211.5

Questionnaire

QuestionYesNo
Choose the option that best describes your interest level in the cost
data detailed in the surgeon scorecard provided by the hospital accountable care organization.Refer to Figure 4
Do you look at the surgeon scorecard provided to you by the hospital accountable care organization?89%11%
Do you look at other surgeons' scorecards?89%11%
Has the disclosure of your cost data changed the way you performed the surgical procedure in any way (eg, implant, equipment use)?56%44%
Are you concerned about the effect that cost may have on referrals to your practice?33%67%
Authors

The authors are from the Rothman Institute of Orthopaedics (LSA, FPT, ACO, CDW, MJM), Thomas Jefferson University, Egg Harbor Township, New Jersey; and the Lewis Katz School of Medicine (NJL), Temple University, Philadelphia, Pennsylvania.

Dr Tjoumakaris, Dr Ong, Mr Lombardi, Mr Wowkanech, and Dr Mehnert have no relevant financial relationships to disclose. Dr Austin has been a paid educational course instructor for DePuy.

Correspondence should be addressed to: Luke S. Austin, MD, Rothman Institute of Orthopaedics, Thomas Jefferson University, 2500 English Creek Ave #1300, Egg Harbor Township, NJ 08234 ( lukesaustin@gmail.com).

Received: May 10, 2016
Accepted: October 03, 2016
Posted Online: November 23, 2016

10.3928/01477447-20161116-03

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