Economies of scale, physician volume for neurosurgery patients, and the diagnosis-related group prospective hospital payment system

Abstract

Hospitals face an increasingly competitive environment in the era of diagnostic related group (DRG) prospective pricing. Further reductions in Medicare outlays relative to hospital costs are likely, given the looming federal deficit. We analyzed the relationship of individual neurosurgical volume, hospital costs, and outcome. All neurosurgical patients (n = 1002) treated for a 3-year period at our large academic medical center were grouped into those treated by low-volume neurosurgeons versus those treated by high-volume neurosurgeons (arbitrarily defined by us); 95% of patients admitted for neurosurgical procedures fit into one of these two categories. Patients of low-volume neurosurgeons had higher hospital costs (even after correction for DRG case-mix and severity of illness) (P less than 0.01), a much worse financial position under DRGs (P less than 0.01), but a similar outcome for both emergency and nonemergency admissions when compared to patients of higher volume neurosurgeons. Pearson correlation showed an inverse relationship between declining cost per patient and increasing neurosurgical volume for both nonemergency patients -0.340 (P less than 0.0001), and emergency patients, -0.321 (P less than 0.0001). These findings suggest that the volume of neurosurgical procedures performed by an individual neurosurgeon is related to hospital resource utilization. This study also suggests that the DRG prospective payment system could provide incentives that may affect both neurosurgical practice and the access to neurosurgical care.