Regionalization versus competition in complex cancer surgery

Abstract

The empirical association between high hospital procedure volume and lower mortality rates has led to recommendations for the regionalization of complex surgical procedures. While regionalization may improve outcomes, it also reduces market competition, which has been found to lower prices and improve health care quality. This study estimates the potential net benefits of regionalizing the Whipple surgery for pancreatic cancer patients. We confirm that increased hospital volume and surgeon volume are associated with lower inpatient mortality rates. We then predict the price and outcome consequences of concentrating Whipple surgery at hospitals that perform at least two, four, and six procedures respectively per year. Our consumer surplus calculations suggest that regionalization can increase consumer surplus, but potential price increases extract over half of the value of reduced deaths from regionalization. We reach three conclusions. First, regionalization can increase consumer surplus, but the benefits may be substantially less than implied by examining only the outcome side of the equation. Second, modest changes in outcomes due to regionalization may lead to decreases in consumer surplus. Third, before any regionalization policy is implemented, a deep and precise understanding of the nature of both outcome/volume and price/competition relationships is needed. Regionalization Versus Competition in Complex Cancer Surgery 3 ABSTRACTThe empirical association between high hospital procedure volume and lower mortality rates has led to recommendations for the regionalization of complex surgical procedures. While regionalization may improve outcomes, it also reduces market competition, which has been found to lower prices and improve health care quality. This study estimates the potential net benefits of regionalizing the Whipple surgery for pancreatic cancer patients. We confirm that increased hospital volume and surgeon volume are associated with lower inpatient mortality rates. We then predict the price and outcome consequences of concentrating Whipple surgery at hospitals that perform at least 2, 4 and 6 procedures respectively per year. Our consumer surplus calculations suggest that regionalization can increase consumer surplus, but potential price increases extract over half of the value of reduced deaths from regionalization. We reach three conclusions. First, regionalization can increase consumer surplus, but the benefits may be substantially less than implied by examining only the outcome side of the equation. Second, modest changes in outcomes due to regionalization may lead to decreases in consumer surplus. Third, before any regionalization policy is implemented, a deep and precise understanding of the nature of both outcome/volume and price/competition relationships is needed.

Decreasing Regional Neurosurgical Workforce—A Blueprint for Disaster

“…[12][13][14][15][16] The declining enthusiasm of surgeons to participate in emergency call has even led to a suggestion to regionalize previously widespread areas of care, such as emergency general surgery. 17 How to balance the advantages of concentrating expertise and experience in specialized medical areas against the need for patients to be expeditiously evaluated and treated is a difficult task, particularly for rural communities in which transport to tertiary referral centers may involve long distances.…”

Hospital Volume, Surgeon Volume, and Patient Costs for Cancer Surgery

“…However, past studies that have accounted for the endogenous relation between hospital volume and mortality or between hospital competition (based on hospital volume) and mortality conclude that the direction of causation is primarily from volume to outcome. 30,31 The analysis does not adjust for differences in patient length of stay, because lower costs may be attributable to shorter hospital stays that are attained after greater surgeon learning. Previous studies suggest that higher surgeon volume is associated with lower mortality measured 30 days postsurgery for several complex cancer operations.…”

What Underlies the Observed Hospital Volume-Outcome Relationship?

“…One limitation of centralized care is that it decreases competition between care providers, and it has been clearly shown that competition between providers in a fixed-price market improves the quality of care, since providers compete in regard to aspects other than price, such as the quality or hospital's amenities (Gaynor & Town, 2012). A study that took into account the changes in the market structure that would occur with centralized care found that regionalization of care for complex cancer surgeries would increase consumer surplus, while controlling for the negative impact of a reduction in competition between providers that it would incur (Ho, Town, & Heslin, 2007a). The second major limitation of centralized care is that it could increase inequalities in access to quality care by increasing in the distance between patients and the site where they receive treatment.…”

“…Furthermore, failing to properly control for differences in case-mix according to hospital volume activities also makes hospital volume endogenous if they are correlated to patient outcomes. To overcome these econometric issues, several studies have instrumented hospital volume activities by the number of potential patients and other hospitals in a defined area (Gaynor et al, 2005;Gowrisankaran, Ho, & Town, 2006;Hentschker & Mennicken, 2017;Ho, Town, & Heslin, 2007b;Kahn, Ten Have, & Iwashyna, 2009).…”