Variation in Medicare Payments for Colorectal Cancer Surgery

Abstract

Purpose: Colorectal cancer (CRC) is the second most expensive cancer in the United States. Episode-based bundled payments may be a strategy to decrease costs. However, it is unknown how payments are distributed across hospitals and different perioperative services. Methods:We extracted actual Medicare payments for patients in the fee-for-service Medicare population who underwent CRC surgery between January 2004 and Decembe 2006 (N ϭ 105,016 patients). Payments included all service types from the date of hospitalization up to 1 year later. Hospitals were ranked from least to most expensive and grouped into quintiles. Results were case-mix adjusted and price standardized using empirical Bayes methods. We assessed the contributions of index hospitalization, physician services, readmissions, and postacute care to the overall variation in payment.Results: There is wide variation in total payments for CRC care within the first year after CRC surgery. Actual Medicare payments were $51,345 per patient in the highest quintile and $26,441 per patient in the lowest quintile, representing a difference of ⌬ ϭ $24,902. Differences were persistent after price standardization (⌬ ϭ $17,184 per patient) and case-mix adjustment (⌬ ϭ $4,790 per patient). Payments for the index surgical hospitalization accounted for the largest share (65%) of payments but only minimally varied (11.6%) across quintiles. However, readmissions and postacute care services accounted for substantial variations in total payments. Conclusion:Medicare spending in the first year after CRC surgery varies across hospitals even after case-mix adjustment and price standardization. Variation is largely driven by postacute care and not the index surgical hospitalization. This has significant implications for policy decisions on how to bundle payments and define episodes of surgical CRC care.

Hospital Ownership of a Postacute Care Facility Influences Discharge Destinations After Emergent Surgery

“…6 These payments account for nearly 50% of the regional variation in Medicare payments, 5 and represent a target for controlling Medicare spending through the broader implementation of episode-based bundled payments. 6,18 We specifically focus on urgent and emergent colectomy, as these patients are more likely to require some form of postacute care. 12 Because these operations are performed for life-threatening conditions, patients are more likely to undergo surgery at the nearest hospital and closer to home.…”

Variation in the cost-of-rescue among medicare patients with complications following hepatopancreatic surgery

“…Substantial variation in Medicare payments for surgical episodes across hospitals nationwide has been previously reported. 3,21,22 For example, Miller et al reported that Medicare episode payments for colectomy and back surgery varied by 49-130 percent across hospitals in the US. 23 In a separate study, Pradarelli et al analyzed variations in Medicare payments for rescuing patients from surgical complications (cost-of-rescue) after four common procedures.…”

“…Nevertheless, previous studies have described payments as a good metric of assessing overall healthcare utilization and associated health care expenditures. 17,22,25 Moreover, the analyses were restricted to the payments for index hospitalization and readmissions, not including the post-acute care setting, which may not fully represent the longer term care received after hepatopancreatic surgical procedures.…”

Effect of Index Hospitalization Costs on Readmission Among Patients Undergoing Major Abdominal Surgery

“…8 Although the cost of readmission has a significant financial effect on the use of health care resources, the costs incurred during the index hospitalization are responsible for most health care spending. [9][10][11] Efforts to reduce health care…”