Average Medicare Research Articles

Vasopeptidase inhibitor reduces inhospital costs for patients with congestive heart failure: Results from the IMPRESS trial

Background The Inhibition of Metallo Protease by BMS-186716 in a Randomized Exercise and Symptoms Study in Subjects With Heart Failure (IMPRESS) clinical trial randomized patients with congestive heart failure to a daily regimen of either omapatrilat or lisinopril. At 24 weeks, patients randomized to omapatrilat had a significant reduction in the combined end point of death, hospitalization, or discontinuation of study drug for worsening heart failure when compared with patients randomized to lisinopril. They also had significantly fewer serious cardiac adverse events. Objective This study sought to determine the economic consequences of the lower event rates of patients who were given omapatrilat. Methods Economic outcomes (major hospitalizations and their associated medical costs) were compared between treatment groups and assessed by use of the societal perspective. Hospitalization information was obtained from the IMPRESS trial's standardized case report and serious adverse event forms. Hospital costs were evaluated by means of assigning each hospital admission a diagnosis-related group and an average cost for physician and hospital services. Emergency department visits were included only when they were made for worsening heart failure and were assigned costs equivalent to the average hospital and physician Medicare reimbursement for these visits in Duke University Medical Center's heart failure program. Drug costs were not assessed. Results Although the typical patient in both treatment groups was event-free, there was a trend toward a greater number of hospitalizations in the patients given lisinopril than in the patients given omapatrilat (P =.07). Differences in the distribution of cardiac hospitalizations between patients given lisinopril and patients given omapatrilat were significant (P =.03). There was a trend toward lower medical costs at 24 weeks in patients given omapatrilat versus patients given lisinopril ($1930 vs $2002, P =.09). Considering only cardiac medical costs, this trend toward reduced medical costs was significant ($1240 vs $1442, P =.03). Conclusions At 24 weeks, patients with heart failure treated with omapatrilat had fewer hospitalizations and lower medical costs than patients treated with lisinopril. However, drug treatment costs were not available for this analysis. (Am Heart J 2002;143:1112-7.)

A Decade of Decline: An Analysis of Medicare Reimbursement for Vascular Surgical Procedures

Despite inflation and a robust economy, standard Medicare reimbursements for vascular surgical procedures have progressively declined. The objective of this analysis was to quantitatively and objectively evaluate the decline of vascular surgical reimbursement over the past decade. In this study, data for the analysis of specific vascular surgical procedures was obtained from the National Center for Health Statistics-National Hospital Discharge Survey (NCHS-NHDS) for all vascular procedures as reported by ICD-9-CM codes. The average Medicare reimbursement for each of the specified procedures for 1990 was compared to that of 2001 and the percent change in average reimbursement over this period was calculated. Comparisons between 1990 and 2001 dollar amounts were made after correction for inflation using the consumer price index. This correction factor allows for the calculation of the actual percentage reduction in "real dollars" that is reflected in buying power. We found significant decreases in Medicare reimbursement for each of the vascular procedures included in this analysis. Despite national economic prosperity, there was an average 41% decrease in the buying power per case for vascular surgical procedures over the past decade. We feel that these reductions in reimbursement are overzealous and need to be reexamined.

Cost of pelvic organ prolapse surgery in the United States

OBJECTIVE: To estimate the annual direct cost to society of pelvic organ prolapse operations in the United States. METHODS: We multiplied the number of pelvic organ prolapse operations identified in the 1997 National Hospital Discharge Survey by national average Medicare reimbursement for physician services and hospitalizations. Although this reimbursement does not estimate the actual cost, it is a proxy for cost, which estimates what society pays for the procedures. RESULTS: In 1997, direct costs of pelvic organ prolapse surgery were $1012 million (95% confidence interval [CI] $775, 1251 million), including $494 million (49%) for vaginal hysterectomy, $279 million (28%) for cystocele and rectocele repair, and $135 million (13%) for abdominal hysterectomy. Physician services accounted for 29% ($298 million) of total costs, and hospitalization accounted for 71% ($714 million). Twenty-one percent of pelvic organ prolapse operations included urinary incontinence procedures ($218 million). If all operations were reimbursed by non-Medicare sources, the annual estimated cost would increase by 52% to $1543 million. CONCLUSION: The annual direct costs of operations for pelvic organ prolapse are substantial.

Annual direct cost of urinary incontinence

OBJECTIVE: To estimate the annual direct cost of urinary incontinence in 1995 US dollars. METHODS: Epidemiologically based models using diagnostic and treatment algorithms from published clinical practice guidelines and current disease prevalence data were used to estimate direct costs of urinary incontinence. Prevalence and event probability estimates were obtained from literature sources, national data sets, small surveys, and expert opinion. Average national Medicare reimbursement was used to estimate costs, which were determined separately by gender, age group, and type of incontinence. Sensitivity analyses were performed on all variables. RESULTS: The annual direct cost of urinary incontinence in the United States (in 1995 dollars) was estimated as $16.3 billion, including $12.4 billion (76%) for women and $3.8 billion (24%) for men. Costs for community-dwelling women ($8.6 billion, 69% of costs for women) were greater than for institutionalized women ($3.8 billion, 31%). Costs for women over 65 years of age were more than twice the costs for those under 65 years ($7.6 and $3.6 billion, respectively). The largest cost category was routine care (70% of costs for women), followed by nursing home admissions (14%), treatment (9%), complications (6%), and diagnosis and evaluations (1%). Costs were most sensitive to changes in incontinence prevalence, routine care costs, and institutionalization rates and costs. CONCLUSION: Urinary incontinence is a very costly condition, with annual expenditures similar to other chronic diseases in women.

Cost-effectiveness of Two Types of Dysphagia Care in Head and Neck Cancer: A Preliminary Report

We conducted a prospective, preliminary study to compare the cost-effectiveness of two different instrument-based techniques for diagnosing and managing dysphagia in 30 consecutive hospitalized patients with head and neck cancer. The two techniques are videofluoroscopy via modified barium swallow (MBS) and videoendoscopy via flexible endoscopic evaluation of swallowing with sensory testing (FEESST). Medicare was the primary insurer of all patients. Fifteen of these patients had their dysphagia diagnosed and managed by MBS and the other 15 by FEESST. Cost-effectiveness was assessed by determining the average Medicare reimbursement for each procedure. We found that the mean reimbursements were $451.01 (+/- $50.55) for MBS and $321.23 (+/- $3.01) for FEESST. The mean reimbursement for FEESST was significantly lower than that for MBS (p < 0.0001; Mann-Whitney U test). We conclude that FEESST appears to be more cost-effective than MBS for the inpatient management of dysphagia in patients with head and neck cancer.

Economic burden of influenza-like illness in long-term-care facilities.

Direct medical costs and medically related transportation costs incurred by patients in long-term-care facilities (LTCFs) as a result of influenza-like illness (ILI) were studied. The study was conducted from the payer's perspective. Charts were reviewed retrospectively for all patients who were residents of four Richmond, Virginia, LTCFs between January 1 and May 31, 1999. Consultant pharmacists gathered data on patient demographics, ILI status, vaccination for influenza and streptococcal pneumonia, diagnosis of asthma or chronic obstructive pulmonary disease, and utilization of health care services related to ILI. Services included the use of antimicrobials, antivirals, and respiratory drugs; emergency room visits; diagnostic tests; hospitalizations; and medically related transportation. Costs were based on average wholesale prices (for drugs) and Medicare or Medicaid reimbursement rates. Data were collected for 551 patients. Of these, 112 patients had been diagnosed with 128 cases of ILI during the study period. Twenty-two patients with ILI had 28 visits to emergency rooms, and 30 patients with ILI had 36 hospitalizations. The mean +/- S.D. cost per case of ILI was $1341 +/- $2063; inpatient hospital costs accounted for 84% of this amount. Centers for Disease Control and Prevention criteria for ILI provided a lower incidence of ILI and, consequently, a lower mean +/- S.D. cost of $968 +/- $1806 per case. ILI in patients in four LTCFs in Richmond, Virginia, generated substantial costs, the bulk of which resulted from hospitalization. A substantial percentage of the patients apparently were not immunized.

Cost-effectiveness of universal cystoscopy to identify ureteral injury at hysterectomy

Objective: To evaluate the cost-effectiveness of routine cystoscopy at the time of abdominal, vaginal, and laparoscopically assisted vaginal hysterectomy in terms of cost per ureteral injury identified and treated. Methods: Using a hospital-based perspective, a decision-analysis model was constructed to estimate the outcomes and costs of cystoscopy or no cystoscopy at the time of abdominal hysterectomy. A similar model was constructed for vaginal and laparoscopically assisted vaginal hysterectomy to account for the cost of conversion to laparotomy. Cost estimates were based on estimated costs of Duke University Medical Center and from average Medicare reimbursements for similar Diagnostic Related Groups from the Health Care Financing Administration. The incidence of ureteral injury was obtained from a review of the literature. Sensitivity analyses were performed for the following variables: ureteral injury rate, silent ureteral injury rate, cost of cystoscopy, and cost of therapeutic interventions. We assumed a silent renal death rate of 0%. Results: Routine cystoscopy at abdominal hysterectomy was cost-saving above a threshold ureteral injury rate of 1.5%. At a ureteral injury rate of 0.2%, the marginal increase in the cost of routine intraoperative cystoscopy was $108 per abdominal hysterectomy, with an associated cost of $54,000 per ureteral injury identified. In comparison, at a ureteral injury rate of 2%, routine cystoscopy gave a marginal cost savings of $44 per hysterectomy, with a cost savings of $2200 per ureteral injury identified intraoperatively. At the baseline ureteral injury rate of 0.5%, routine cystoscopy had a marginally increased cost of $83 per hysterectomy, with an incremental cost-effectiveness of $16,600 spent per ureteral injury identified. The model constructed for vaginal hysterectomy and laparoscopically assisted vaginal hysterectomy yielded a threshold ureteral injury rate of 2%, above which routine cystoscopy was cost-saving. In both models, the incidence of ureteral injury and the cost of readmission were the two variables with the greatest influence on cost-effectiveness. Conclusion: The cost-effectiveness of routine intraoperative cystoscopy depends on the rate of ureteral injury independent of the route of hysterectomy. If that rate exceeds 1.5% for abdominal hysterectomy and 2% for vaginal or laparoscopically assisted vaginal hysterectomy, then routine cystoscopy is cost-effective.

Cost-Effectiveness of Universal Cystoscopy to Identify Ureteral Injury at Hysterectomy

In Brief Objective To evaluate the cost-effectiveness of routine cystoscopy at the time of abdominal, vaginal, and laparoscopically assisted vaginal hysterectomy in terms of cost per ureteral injury identified and treated. Methods Using a hospital-based perspective, a decision-analysis model was constructed to estimate the outcomes and costs of cystoscopy or no cystoscopy at the time of abdominal hysterectomy. A similar model was constructed for vaginal and laparoscopically assisted vaginal hysterectomy to account for the cost of conversion to laparotomy. Cost estimates were based on estimated costs of Duke University Medical Center and from average Medicare reimbursements for similar Diagnostic Related Groups from the Health Care Financing Administration. The incidence of ureteral injury was obtained from a review of the literature. Sensitivity analyses were performed for the following variables: ureteral injury rate, silent ureteral injury rate, cost of cystoscopy, and cost of therapeutic interventions. We assumed a silent renal death rate of 0%. Results Routine cystoscopy at abdominal hysterectomy was cost-saving above a threshold ureteral injury rate of 1.5%. At a ureteral injury rate of 0.2%, the marginal increase in the cost of routine intraoperative cystoscopy was $108 per abdominal hysterectomy, with an associated cost of $54,000 per ureteral injury identified. In comparison, at a ureteral injury rate of 2%, routine cystoscopy gave a marginal cost savings of $44 per hysterectomy, with a cost savings of $2200 per ureteral injury identified intraoperatively. At the baseline ureteral injury rate of 0.5%, routine cystoscopy had a marginally increased cost of $83 per hysterectomy, with an incremental cost-effectiveness of $16,600 spent per ureteral injury identified. The model constructed for vaginal hysterectomy and laparoscopically assisted vaginal hysterectomy yielded a threshold ureteral injury rate of 2%, above which routine cystoscopy was cost-saving. In both models, the incidence of ureteral injury and the cost of readmission were the two variables with the greatest influence on cost-effectiveness. Conclusion The cost-effectiveness of routine intraoperative cystoscopy depends on the rate of ureteral injury independent of the route of hysterectomy. If that rate exceeds 1.5% for abdominal hysterectomy and 2% for vaginal or laparoscopically assisted vaginal hysterectomy, then routine cystoscopy is cost-effective. Routine cystoscopy at hysterectomy is cost-saving if the rate of ureteral injury is above 1.5% for abdominal and 2% for vaginal and laparoscopic cases.

The Direct Cost of Rheumatoid Arthritis

Objectives This analysis estimated the direct cost of rheumatoid arthritis (RA) from a societal perspective. Methods Primary and secondary data sets were used to determine the rate of medical resource utilization. National average Medicare or Medicaid reimbursement rates were used to value direct costs (in 1994 dollars). Results Persons with RA have, on average, $1702 in direct costs for treating RA annually. More than half of the total cost is for medications. Nursing home care accounts for nearly one fifth of the cost and hospitalizations and ambulatory care (combined) comprise another fifth of the total cost. Travel to medical appointments and medical supplies make up the remaining 10%. The projected annual US direct costs are $3.6 billion for treating RA. Conclusion The health care utilization in persons with RA is frequent and includes a number of components leading to high annual direct cost.

Walking the tightrope on Medicare reform.

A central controversy in the debate about Medicare is whether the program spends too much money or whether instead it should be expanded to cover more. I consider the value of increased Medicare spending. I argue that on average Medicare spending is worth it: the health gains brought by medicare have been greater than their cost. At the margin, however, services are overused and have low value. Medicare reforms need to promote the high average value of care while eliminating care of low value. Many of the proposed reforms fall short of this goal.

The Geography of Medicare

There is a great deal of geographic variation in Medicare spending. For example, while the average Medicare cost per beneficiary was around $5200 in 1996, Medicare spending, adjusted for diffences in regional prices and demographic composition, was about $8000 per person in Miami, but only $3500 in Minneapolis. In this paper, we explore the source of this variation. We find that a substantial amount can be explained by differences across areas in the health of the elderly population. This finding suggests that some of the geographic variation in Medicare spending is efficient. But even accounting for differences in the health of the population, significant variation remains. We have been able to explain some of the remaining variation. The strongest factors are supply variables: for-profit hospitals and specialist physicians both increase Medicare spending. If these factors are exogenous, public policy may want to consider the supply of medical services more than it currently does. We do not find that expensive places spend a disproportionate amount on those near death.

The Geography of Medicare

There is a great deal of geographic variation in Medicare spending. For example, while the average Medicare cost per beneficiary was around $5200 in 1996, Medicare spending, adjusted for diffences in regional prices and demographic composition, was about $8000 per person in Miami, but only $3500 in Minneapolis. In this paper, we explore the source of this variation. We find that a substantial amount can be explained by differences across areas in the health of the elderly population. This finding suggests that some of the geographic variation in Medicare spending is efficient. But even accounting for differences in the health of the population, significant variation remains. We have been able to explain some of the remaining variation. The strongest factors are supply variables: for-profit hospitals and specialist physicians both increase Medicare spending. If these factors are exogenous, public policy may want to consider the supply of medical services more than it currently does. We do not find that expensive places spend a disproportionate amount on those near death.

The Geography of Medicare

There is a great deal of geographic variation in Medicare spending. For example, while the average Medicare cost per beneficiary was around $5200 in 1996, Medicare spending, adjusted for differences in regional prices and demographic composition, was about $8000 per person in Miami, but only $3500 in Minneapolis. In this paper, we explore the source of this variation. We find that a substantial amount can be explained by differences across areas in the health of the elderly population. This finding suggests that some of the geographic variation in Medicare spending is efficient. But even accounting for differences in the health of the population, significant variation remains. We have been able to explain some of the remaining variation. The strongest factors are supply variables: for-profit hospitals and specialist physicians both increase Medicare spending. If these factors are exogenous, public policy may want to consider the supply of medical services more than it currently does. We do not find that expensive places spend a disproportionate amount on those near death.

Estimated Growth of Lung Volume Reduction Surgery Among Medicare Enrollees: 1994 to 1996

To estimate the number of lung volume reduction surgery procedures performed on Medicare enrollees from 1994 to 1996. Statistical analysis of national Medicare claims data. All Medicare enrollees with emphysema hating claims records for pulmonary resection procedures from January 1, 1993, through December 31, 1996. Estimated number of lung volume reduction procedures performed per month from July 1994 through December 1996. An estimated 1,212 lung volume reduction procedures were performed on Medicare enrollees between July 1994 and December 1995 (95% confidence interval, 1,012 to 1,408). Nearly one half of these procedures were performed in the last 3 months of 1995. At the time Health Care Financing Administration announced that it would suspend reimbursement for the procedure (December 1995), lung volume reduction surgery was being performed in 37 states. The number of claims per month decreased from a peak of 169 in December 1995, to 11 in March 1996. Average Medicare reimbursement per procedure was $31,398. Lung volume reduction surgery for patients increased rapidly following its reintroduction in 1994. The growth of lung volume reduction surgery demonstrates that widespread adoption and utilization of a surgical procedure can occur in the absence of data from controlled clinical trials. Medicare expenditures for lung volume reduction surgery were an estimated $30 million to $50 million. Performing the surgery for all current Medicare patients who meet the appropriate clinical criteria would cost an estimated $1 billion.

Postprostatectomy Urinary Incontinence: A Comparison of the Cost of Conservative Versus Surgical Management

Objectives. Post-radical prostatectomy stress incontinence occurs in up to 20% of patients. Postprostatectomy incontinence is initially treated with undergarments, pads, or drip collectors. Patients with persistent leakage are often treated with a transurethral bulking agent (Contigen) or placement of an artificial genitourinary sphincter (AGUS). We have compared the direct costs of each treatment at our institution over 10 years. Methods. The Mayo Clinic estimating office provided the Medicare and non-Medicare charges for patients receiving both collagen injection (outpatient) and AGUS placement (2-day hospitalization) during August 1995. The Mayo Store provided the current price of all undergarments, pads, and drip collectors carried. Two local grocery stores provided the cost of Depends undergarments. Results. The following items were the least expensive carried at the Mayo Clinic Store: Entrust undergarments, Active Style pads, and Conveen drip collectors at $0.99, $0.52, $1.05 each, respectively. The average cost of Depends undergarments was $0.52 each. The cost of wearing 5 of the least expensive undergarments or pads per day for 10 years is $9497. The average estimated Medicare and non-Medicare cost for outpatient (general anesthesia) collagen injection is $4300 and $5625, respectively. The average Medicare and non-Medicare cost for AGUS placement is $15,400 and $20,300, respectively. Factoring in our current 22.4% reoperation rate, the average per patient Medicare and non-Medicare cost for AGUS placement is $18,850 and $24,847, respectively. Conclusions. The cost of the AGUS placement compares favorably with the cost of transurethral collagen injection (under general anesthesia) in patients requiring several (more than three) collagen injection treatments or requiring the continued use of undergarments after collagen injection. Whereas the cost of transurethral collagen injection, when effective, compares favorably with conservative treatment, AGUS placement is significantly more expensive than conservative management for almost all patients except the exceedingly rare patient wearing more than 9 undergarments or pads per day. When the psychosocial benefit of urinary continence is considered, however, transurethral injection of collagen or AGUS placement often becomes the preferred treatment.

Hospital-physician arrangements and hospital financial performance.

The introduction of the Medicare Prospective Payment System and the more recent rise of managed care plans have greatly increased the importance of effective hospital financial management. Because physicians play a central role in directing hospital resource use, policies to influence physician behavior and to align physician and hospital interests more effectively are being advocated increasingly. This article evaluates the effect of nine strategies to facilitate physician involvement and integration into the hospital on hospital financial performance. Data came primarily from the Prospective Payment Assessment Commission's hospital-physician relations survey of 1,485 hospitals and the Medicare Cost Reports. Both ordinary least squares and first differencing models were used to evaluate the effect of physician integration on hospital financial performance. Hospitals with lower margins and higher costs were more likely to have implemented strategies to integrate physicians and to modify physician behavior than their counterparts. Analysis using first differencing models indicated that making department heads responsible for the profits and losses had a significant positive effect on margins, whereas including medical staff on the hospital's board and offering physicians management services had a significant negative impact on average Medicare costs. In addition the number of strategies implemented was associated positively with financial performance. The paper also emphasizes the importance of model specification in evaluations of hospital-physician arrangements. Changes in hospital-physician relations may have been one reason why hospitals have been relatively successful at containing costs and retaining profitability in recent years. More research needs to be done on which specific arrangements affect hospital financial performance, as well as their effect on the quality of patient care.

State variations in Medicare expenditures.

This study examined variations in Medicare expenditures across states. 1992 data on average Medicare expenditures per enrollee, users of services per 1000 enrollees, service use per user, and payment per unit of service were compared across states for various services. Weighted least squares regression analysis was employed to examine total Medicare expenditures per enrollee by state. Variation in Medicare expenditures across states is driven more by average number of service users per 1000 enrollees and average service units per user than by average payment per service unit. Medicare expenditures per enrollee by state are primarily a function of Medicare HMO penetration rate (P = .000), urban area (P = .001), hospital bed supply (P = .005), elderly mortality rate (P = .012), Medicare physician assignment rate (P = .026), percentage of primary care practitioners (P = .042), and interactions between urban elderly and percentage of primary care physicians (P = .005) and Black elderly and nursing home bed supply (P = .012). Before sweeping Medicare cuts are undertaken or excessive reliance on managed care occurs, attention should be focused on the current disproportionate distribution of expenditures across states.

The changing distribution of a major surgical procedure across hospitals: were supply shifts and disequilibrium important?

This paper describes and analyzes the changing distribution across hospitals in the U.S. of total hip replacement surgery (THR) for the period 1980-1987. THR is one of the most costly single procedures contributing to health care expenses. Also, the use of THR exhibits a particularly high degree of geographic variation. Recent research pointed to shifts in demand as one plausible economic explanation for increasing use of THR. This paper questions whether shifts in supply may have been large enough to explain changes in patient mix and the relationship of patient mix to the number of procedures performed at a particular hospital. In addition, the relationship between total use of THR and the local availability of orthopaedic surgeons as well as the average allowable Medicare fee for standardized physician services is analyzed. These relationships might yield evidence to support a scenario of induced demand beyond the optimum for patients' welfare, or evidence of supply increase within a disequilibrium scenario. This study, using data for all THR patients in a large sample of hospitals, tends to reject the formulation of a market with independent supply and demand shifts where the supply shifts were the dominant forces. Hospitals with a larger number of THRs performed did not see a higher percentage of older, sicker, and lower income patients. It was more likely that demand shifts generated increases in capacity for surgical services. Moreover, there was little evidence for a persistent disequilibrium and only weak evidence for inducement. Also, we found little evidence that hospitals responded to financial incentives inherent in the Medicare payment system after 1983 to select among THR candidates in favour of those with below average expected cost. We did observe increased concentration over time of THR procedures in facilities with high volume--suggesting plausible demand shifts towards hospitals with a priori quality and cost advantages or who obtained those advantages with a high volume of patients.

Vascular laboratory cost analysis and the impact of the Resource-Based Relative Value Scale payment system.

This study compares the actual cost of performing noninvasive laboratory studies with reimbursement under the previous Medicare Part B system and under current resource-based relative value scale (RBRVS) guidelines. We calculated the cost to operate our own laboratory and estimated national costs for small- and large-model laboratories. Reimbursement under Medicare Part B was calculated for each Current Procedural Terminology code from average Medicare reimbursement allowances and national case volumes in 1990, which were obtained from the Health Care Financing Administration. All data were expressed as dollars per hour of study time to allow universal comparison of costs and reimbursement among tests that require differing lengths of time for completion. Technical costs for laboratory time ranged from $143 to $173 per study hour. The largest components of laboratory expenses were fixed costs, including personnel (37% to 46%), equipment (30% to 42%), and facilities (6% to 8%). Variable costs such as billing (9% to 10%) accounted for most of the remainder. More efficient allocation of equipment resulted in lower costs in large laboratories, whereas continued use of depreciated equipment resulted in lower costs in our own laboratory ($127/hr). We project that technical reimbursement under RBRVS will be $82/hr nationally and $80/hr locally, whereas global reimbursement (technical plus professional) will be $116/hr and $110/hr, respectively. On the basis of 1990 case volumes, the RBRVS system will decrease national global reimbursement by at least 35% compared with the previous Medicare Part B system. Under the new system, technical reimbursement will decrease by an estimated 27% nationally, whereas professional reimbursement will decrease by 52%. Revenue under RBRVS will not meet the cost to perform studies either nationally or locally. Technical reimbursement is 37% to 54% below actual technical costs, and even global reimbursement is 13% to 34% less than technical costs. Our analysis revealed that costs will exceed reimbursement despite maximization of operating efficiency. This analysis applies to outpatients only. A case mix including inpatients will further reduce reimbursement, because only the professional component is allowed. By setting reimbursement of vascular laboratories below actual costs, the new RBRVS system may ultimately reduce the availability of noninvasive vascular testing for elderly patients.

Vascular laboratory cost analysis and the impact of the Resource-Based Relative Value Scale payment system

Purpose: This study compares the actual cost of performing noninvasive laboratory studies with reimbursement under the previous Medicare Part B system and under current resource-based relative value scale (RBRVS) guidelines.Methods: We calculated the cost to operate our own laboratory and estimated national costs for small- and large-model laboratories. Reimbursement under Medicare Part B was calculated for each Current Procedural Terminology code from average Medicare reimbursement allowances and national case volumes in 1990, which were obtained from the Health Care Financing Administration. All data were expressed as dollars per hour of study time to allow universal comparison of costs and reimbursement among tests that require differing lengths of time for completion.Results: Technical costs for laboratory time ranged from $143 to $173 per study hour. The largest components of laboratory expenses were fixed costs, including personnel (37% to 46%), equipment (30% to 42%), and facilities (6% to 8%). Variable costs such as billing (9% to 10%) accounted for most of the remainder. More efficient allocation of equipment resulted in lower costs in large laboratories, whereas continued use of depreciated equipment resulted in lower costs in our own laboratory ($127/hr).Conclusions: We project that technical reimbursement under RBRVS will be $82/hr nationally and $80/hr locally, whereas global reimbursement (technical plus professional) will be $116/hr and $110/hr, respectively. On the basis of 1990 case volumes, the RBRVS system will decrease national global reimbursement by at least 35% compared with the previous Medicare Part B system. Under the new system, technical reimbursement will decrease by an estimated 27% nationally, whereas professional reimbursement will decrease by 52%. Revenue under RBRVS will not meet the cost to perform studies either nationally or locally. Technical reimbursement is 37% to 54% below actual technical costs, and even global reimbursement is 13% to 34% less than technical costs. Our analysis revealed that costs will exceed reimbursement despite maximization of operating efficiency. This analysis applies to outpatients only. A case mix including inpatients will further reduce reimbursement, because only the professional component is allowed. By setting reimbursement of vascular laboratories below actual costs, the new RBRVS system may ultimately reduce the availability of noninvasive vascular testing for elderly patients.