Complex Surgery Costs 10.5% Less With Hospital Consolidation

August 02, 2017 - Overall healthcare charges for complex pancreatic and hepatic surgeries were 13.4 percent lower in markets with higher levels of hospital consolidation than charges for the same operations in unconcentrated and moderately concentrated markets, a recent JAMA Surgery study showed.

Hospital costs were also 10.5 percent lower in markets with greater consolidation compared to costs at facilities in unconcentrated markets.

“These findings support the notion that increased hospital market consolidation and regionalization may represent the best value proposition for highly complex surgical procedures: better quality of care with control of costs and charges,” researchers stated.

The study’s findings counter other recent research projects that claim hospital consolidation and other hospital merger activities increase healthcare costs and charges.

A 2006 study from the Robert Wood Johnson Foundation showed that hospitals without local competitors charged almost 16 percent more on average compared to hospitals in markets with four or more competitors, representing a difference of about $2,000 per admission.

A recent study from the New York State Health Foundation showed similar hospital consolidation and charges trend in 2016. Hospitals with greater market share charged 2.7 times more than their peers in more competitive hospital markets.

Healthcare stakeholders have also argued that increased hospital consolidation disincentivizes organizations to lower their healthcare costs. The Medicare Payment Advisory Commission (MedPAC) recently found that median Medicare costs per case were 2 percent more than the national median at hospitals with greater private payer profits.

Conversely, hospitals with lower private payer profits reported median Medicare costs 9 percent below the national median.

MedPAC explained that hospital consolidation increased the market power for facilities in the concentrated markets, giving the organizations more pull to negotiate higher private payer claims reimbursement rates. With higher rates, the hospitals did not feel pressure to reduce their overall costs.

However, researchers using nine years of data from the Agency for Healthcare Research and Quality’s Nationwide Inpatient Sample and Hospital Market Structure files found that hospital consolidation could result in fewer charges for complex surgeries, such as pancreatic and hepatic resections.

The study examined complex hepatopancreatic surgeries because the procedures are sensitive to the volume-outcome effect in which higher volumes of the procedure lead to improvements in morbidity and mortality. The surgeries are also linked to wide care variations in complications, lengths of stay, and hospital readmissions.

Hospital charges for the 38,711 patients who underwent a pancreatic resection during the study’s period were 8.3 percent lower in markets with greater hospital consolidation.

In contrast, hospital costs were 5.5 percent higher in markets with lower hospital market concentration.

For the 52,284 patients who underwent hepatic resection, costs at facilities in markets with greater hospital consolidation were 8.4 percent less than hospitals in unconcentrated markets.

Researchers also reported the following key findings for hospital costs and charges by market concentration:

• Median adjusted hospital charges for pancreatic resection ranged from $96,844 in highly concentrated markets to $105,660 in moderately concentrated markets

• Median unadjusted costs for patients experiencing a pancreatic resection varied less, with costs ranging from $29,902 in highly concentrated markets to $32,463 in moderately concentrated markets

• For hepatic resections, median adjusted hospital charges ranged from $55,982 in markets with greater hospital consolidation to $64,647 in moderately concentrated markets

• Median costs for patients undergoing a hepatic resection ranged from $17,938 in moderately concentrated markets to $21,651 in unconcentrated markets

Lower hospital costs and charges particularly appeared among high-volume centers in consolidated markets.

High-volume centers in markets with the greatest level of hospital consolidation had 15.8 percent lower adjusted charges and 11.6 percent lower adjusted costs for pancreatic resections than similar centers in unconcentrated markets.

Similarly, high-volume centers in markets with increased hospital consolidation reported 22.7 percent lower adjusted charges and 9.1 percent lower adjusted costs for hepatic resections than their peers in unconcentrated markets.