Value-Based Medicine

Surgery Location & Healthcare Dollars

By Melissa M. Brown, MD, MN, MBA

For the year 1960, actuaries from the Centers for Medicare and Medicaid Services¹ calculated the entire US National Health Expenditure on healthcare as $27 billion. This amounted to 5.2% of the GDP (gross domestic product, or sum of all the goods and services produced annually in the country). Imagine that.

By 2010 the total annual expenditure had risen to $2.594 trillion, or 17.9% of the GDP. And what about 2020? The total National Healthcare Expenditure is estimated to be $4.638 trillion, or 19.8% of the GDP.¹

What do we have to show for the increased expenditure?¹ A life expectancy of 69.7 years in 1960, 74.7 years in 1985 and 78.7 years in 2010. Thus, each year of life gained from 1960 through 1985 was associated with a 1.1% increase in the percentage of National Healthcare Expenditure as a percent of the GDP. From 1986 through 2010, each year of life gained was associated with a 1.9% increase in the percentage of National Healthcare Expenditure as a percent of the GDP. The cost for each year of life gained is increasingly more expensive.

A reasonable question then is, “What percent of the total National Healthcare Expenditure as a percentage of the GDP is best for the American people?” The answer: “Currently unknown.”

The fact that cataract surgery results in a 20.8% increase in quality of life certainly suggests the removal of cataracts is a wise use of scarce healthcare dollars for this reason alone.² However, that's not the end of the story, not as far as national healthcare expenditures go. We ophthalmologists also need to consider what the data tell us regarding surgery location.

Questions of Cost

Let's examine the distribution of healthcare costs. Hospitals accounted for 31% of the 2010 National Healthcare Expenditure, while physicians accounted for 20% and prescription drugs for 10%. Nonetheless, hospital spending grew 6.4% in 2009 and 4.9% in 2010, while the respective physician services expenditure increased 3.3% in 2009 and 2.5% in 2010. Drug costs grew 5.1% in 2009 and 1.2% in 2010 due to the availability of more generic drugs and fewer new drug introductions. Thus, hospital expenses are rising the most rapidly of the major healthcare cost sectors.

Now for a cost-utility analysis. An incremental cost-utility analysis evaluates the dollars expended for the patient value gained versus the next best therapeutic option. I am unaware of any incremental patient value gain demonstrated by the performance of cataract surgery in a Hospital Out-patient Department (HOPD), rather than in an Ambulatory Surgery Center (ASC).

The average national Medicare payment, however, for cataract surgery in an HOPD is $1,691, 77% greater than the $953 average Medicare national reimbursement for cataract surgery performed in an ASC. Overall, the facility cost difference between ASCs and HOPDs was 16% in favor of the HOPDs in 2003, rising to 77% in favor of the HOPDs now.³

The Physician's Role?

I suggest we as a profession become active in looking for ways to save the needlessly spent dollars. Remember that there are limited numbers of dollars in the healthcare economic pie, especially in the case of Medicare, the agency that oversees payment for the great majority of cataract operations. Hospital administrators often seem more inclined to appreciate this concept of the whole pie and how it is divided, perhaps because physicians are too busy to pay attention.

While physician performance of cataract surgery in an HOPD might not immediately affect the future dollars available for cataract surgery, it will undoubtedly be noted by those who allocate healthcare resources and have the charge to maximize the use of healthcare dollars to provide the greatest gain in patient value (improvement in quality of life and/or length of life) to the greatest number of people.

Physician(s), heal thyself. Support value-based evidence that identify interventions and methodologies for which healthcare dollars are appropriately spent or watch healthcare costs rise above 20% of the GDP.

Assuming we want our scarce healthcare dollars to go the farthest in delivering the highest quality care to the most people, there is little doubt that cataract surgery performed in an ASC is the preferred treatment strategy referent to the same procedure performed in an HOPD.

The low-hanging fruits in the healthcare cost arena are many. The savings are conservatively estimated to be greater than $100 billion annually, and likely twice that amount, if cost-effectiveness is taken into consideration.⁴ At the same, time the quality of care will improve by identifying which interventions confer the greatest patient value. These data rightfully call into question whether the current trend toward HOPD-based ophthalmic surgery ultimately serves our patients well. OM

References

1. Office of the Actuary, Centers for Medicare and Medicaid Services. From the Internet @ National Health Expenditure (NHE) Amounts by Type of Expenditure and Source of Funds: Calendar Years 1965-2020 in PROJECTIONS format. From the Internet @ http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/tables.pdf, accessed 4-30-12.
2. Busbee B, Brown MM, Brown GC, Sharma S. Incremental cost-effectiveness of initial cataract surgery. Ophthalmology 2002;109:606-612.
3. ASCs are economical providers. From the Internet @ http://www.wasca.net/wp-content/uploads/2007/03/ASC-to-HOPD-Conversion-Costly-Consequences.pdf, accessed 4-29-12.
4. Brown MM, Brown GC, Sharma S. Evidence-Based to Value-Based Medicine. Chicago, American Medical Association Press, 2005, pp 1 324.

Melissa M. Brown, MD, MN, MBA, is president and CEO of the Center for Value-Based Medicine in Philadelphia. She can be reached via e-mail at mbrown@valuebasedmedicine.com.