Financial Margins for Prostate Cancer Surgery: Quantifying the Impact of Modifiable Cost Inputs in an Episode Based Reimbursement Model.

Abstract

The United States health care system is rapidly moving away from fee for service reimbursement in an effort to improve quality and contain costs. Episode based reimbursement is an increasingly relevant value based payment model of surgical care. We sought to quantify the impact of modifiable cost inputs on institutional financial margins in an episode based payment model for prostate cancer surgery. A total of 157 consecutive patients underwent robotic radical prostatectomy in 2016 at a tertiary academic medical center. We compiled comprehensive episode costs and reimbursements from the most recent urology consultation for prostate cancer through 90 days postoperatively and benchmarked the episode price as a fixed reimbursement to the median reimbursement of the cohort. We identified 2 sources of modifiable costs with undefined empirical value, including preoperative prostate magnetic resonance imaging and perioperative functional recovery counseling visits, and then calculated the impact on financial margins (reimbursement minus cost) under an episode based payment. Although they comprised a small proportion of the total episode costs, varying the use of preoperative magnetic resonance imaging (33% vs 100% of cases) and functional recovery counseling visits (1 visit in 66% and 2 in 100%) reduced average expected episode financial margins up to 22.6% relative to the margin maximizing scenario in which no patient received these services. Modifiable cost inputs have a substantial impact on potential operating margins for prostate cancer surgery under an episode based payment model. High cost health systems must develop the capability to analyze individual cost inputs and quantify the contribution to quality to inform value improvement efforts for multiple service lines.