Abstract

BACKGROUND:

Uncomplicated surgical care has highly variable costs. High costs of complications have led payers to deny additional payments even for predictable complications.

HYPOTHESIS:

A payment warranty indexed to effective and efficient hospitals can promote quality and economic stewardship in surgical care.

DESIGN:

Analysis of hospital costs for elective colon surgery in the Healthcare Cost and Utilization Project's National Inpatient Sample from 2002 through 2005.

SETTING:

A 20% sample of acute care hospitals in the United States. Patients and

METHODS:

Data for elective colon resections were used to create predictive models for adverse outcomes (AOs) and costs. Total hospital costs were determined using cost-to-charge ratios. Costs of AOs were computed as total costs minus predicted costs of uncomplicated care. Surgical warranties were computed as the probability of AOs times per-case predicted costs of AOs. Final predictive models were calibrated using data only from effective and efficient hospitals.

RESULTS:

We studied 51 602 cases from 632 hospitals. There were 4048 (7.8%) AOs with 505 deaths (1.0%); 19 hospitals had excessive AOs and 95 hospitals had excessive costs. For 518 effective and efficient hospitals, total per-case costs for routine care were $9843 with an average warranty of $1294 and a $276 stop-loss allocation. This cost model would reduce national expenditures for colon surgery by 6%.

CONCLUSIONS:

Complications and costs of care can be indexed to quality performing hospitals. Warranties for surgical care can reward effective and efficient care and preclude the need for additional payments for complications.