The impact of ineffective and inefficient care on the excess costs of elective surgical procedures

Abstract

Background: Ineffective and inefficient elective surgical care has been identified as a major factor accounting for excessive costs of elective surgical procedures. The identification of cost-effective hospitals permits objective measurement of excessive surgical costs and development of strategies to improve outcomes and efficiency.

Study design: We used the 2002 to 2005 National Inpatient Sample from the Healthcare Cost and Utilization Project for colorectal resections, elective coronary bypass grafts, total hip replacement, and hysterectomy to assess hospitals' risk-adjusted adverse outcome rates and costs. Adverse outcomes were defined as inpatient deaths or prolonged risk-adjusted postoperative lengths of stay (RApoLOS). Risk-adjusted costs were determined for all patients, using hospital-specific cost-to-charge ratios to convert charges to costs. Effective, efficient hospitals were identified to serve as a reference standard. Outlier hospitals for ineffectiveness (p < 0.005) and inefficiency (p < 0.0005) were analyzed to measure excessive costs relative to reference hospitals.

Results: Hospital costs for the 4 operations combined were $325 million greater (8%) than predicted based on the reference standard. A total of 95% of excessive costs were due to inefficiency and only 5% were due to higher-than-predicted adverse outcomes rates. Elimination of predicted excess costs of all adverse outcomes for all 4 procedures at all hospitals studied would result in smaller savings than elimination of inefficiency-associated costs at inefficient hospitals alone.

Conclusions: Inefficiency is substantially more important than suboptimal outcomes in accounting for the excessive hospital costs of elective surgical care in this study population.