Financial Implications of a Hospital’s Specialization in Rare Physiologically Complex Surgical Procedures

Abstract

The authors previously identified a hospital that has a unique role in its region for surgical care. In children aged 0-2 yr, the hospital performed 64% of all physiologically complex procedures statewide (>or= 8 American Society of Anesthesiologists Relative Value Guide basic units). For all age groups combined, 48% of the physiologically complex procedures performed at that hospital were rare, defined as < 1/workday statewide. The authors tested the hypothesis that financially important differences can result from performing relatively large numbers of such specialized procedures. Methods were developed to compare contribution margin (revenue from facility and professional fees minus variable costs) per operating room hour (CM/OR hour) between patient groups and different types of surgical procedures. CM/OR hour was significantly larger by a financially important amount (> 250 dollars/OR hour) for pediatric versus geriatric patients (P <or= 0.002), primarily because of higher professional reimbursements, with no difference in hospital reimbursements. Unexpectedly, CM/OR hour was also significantly greater by at least 250 dollars when a rare procedure was involved (P < 0.001 for all ages combined), primarily because of greater hospital reimbursements. For cases involving implant charges of 10,000 dollars or greater, overall CM/OR hour was negative because increased revenues did not compensate for the high variable costs. Other hospitals can use these methods to perform a similar analysis of the financial impact of those patient populations or surgical procedures that are unique to their own roles in their regional healthcare systems, and to identify the sources of financial losses and gains experienced by the hospital.