By Matt Waltrich, RemitDATA
As healthcare organizations wring out wasteful spending, reducing cost variations of surgical procedures is one area being closely scrutinized. Surgical care represents one of the most costly aspects of the U.S. healthcare system, with more than $400 billion spent each year on the care of surgical patients, according to a January 2017 report by the American Journal of Surgery. And yet of that $400 billion, costs for surgical procedures can vary from location to location.
A 2015 study by Blue Cross and Blue Shield looked at three years of independent Blue Cross and Blue Shield (BCBS) companies’ claims data for typical knee and hip replacement surgeries to further assess cost variations across the U.S. The study, which evaluated these procedures across 64 markets, found the average cost for a total knee replacement was $31,124 in the markets reviewed. This cost reflected knee replacement, without complications.
Nationally, the cost varied widely. In Montgomery, AL the cost was as low as $11,317 and as high as $69,654 in New York City. Extreme cost variations can also exist within a single market. For example, in Dallas, the study found a 267 percent cost variation for a total knee replacement, ranging from $16,772 to $61,585, depending on the hospital. There are many reasons for these cost differences, ranging from geographic location to the individual patient and their post-surgical needs.
One way to help reduce these price variances is to drill down to the surgeon’s site of service. In general, many surgeons performing the same procedure at multiple facilities are unaware of the reimbursement rates that each facility has negotiated with individual health plans. While the surgeon is typically reimbursed the same amount no matter where they perform the procedure, the facility’s reimbursement rates can vary greatly.
Using comparative analytics, health plans can identify which surgeons are practicing at multiple facilities during the pre-authorization process and then guide or incentivize surgeons to conduct the service at the lower cost facilities where they currently practice. As a result, health plans and their patients will both realize cost savings without reducing the surgeon’s reimbursement.
In one such example, a large national carrier was presented with surgeon site of service data based on in-network pricing for colonoscopies conducted in mid-western states. Leveraging this data, the health plan identified the financial impact of redirecting surgeons from a high-cost to a lower-cost facility. Surgeons are only redirected to facilities where they are actively practicing. The savings opportunity identified for a specific procedure averaged $1.8 million for each state involved in the analysis.
Additional ways to help educate and encourage surgeons to perform procedures at lower cost facilities include:
- Focusing on higher-volume procedures that have the greatest variation in cost, and dive into site of service patterns for those procedures.
- Educating your provider networks on referral patterns, cost variances and impact. Share insights with provider networks by highlighting the impact the episode of care costs have on members.
- Adjusting pre-authorization protocols based on high frequency procedures such as colonoscopies, endoscopies and other high-cost procedures. Looking at existing data, you can identify procedures that are prone to wasteful utilization, and inform providers about costs related to a specific site of service.
Leverage data and educate surgeons that they can continue to perform their procedures at the same facilities in which they are already familiar at their same pay rate, while lowering the costs for the health plans and members.