1. Explaining the Volume-Cost Relationship for Cancer Surgery Vivian Ho PhD a Meei-Hsiang Ku-Goto MA a and Thomas Aloia MD b a Rice University and Baylor College of Medicine b MD Anderson Cancer Center 1 This research was supported by grant number 1R01 CA 138640-01 A2 from the National Cancer Institute.

2. Are there determinants of high quality, low cost cancer surgery? Procedure Volume – Hospital Volume – Surgeon Volume There may be other factors as well. – Process measures – Skill/training – Intensity of resource utilization 2

3. Background Volume-Cost Studies. Few studies and important weaknesses – Examine hospital volume, but not surgeon volume. – Measure hospital charges, not costs. – Data for 1 procedure, U.S. state, or the U.K. 3

4. Background Higher surgeon volume lowered hospital costs for 6 cancer operations. (Ho and Aloia, Medical Care 2008) – Higher hospital volume lowered costs only for colectomy. Do high volume hospitals spend more to improve outcomes? – Broader range of specialists? – Advanced ICUs and technology-based services? 4

5. This study What explains hospital and surgeon volume-cost relationships? – Adding surgeon costs. – Do higher volume providers earn higher profits? – Are factors associated with lower costs also correlated with lower mortality? 5

6. Data SEER-Medicare files – Patients diagnosed 2001-2005, Medicare claims through 2007. MedPAR files linked to Carrier claims. – Patients who received cancer surgery for 2005- 2009. 6

7. 7 Dependent VariablesRegressors Hospital characteristics Surgeon characteristics Patient characteristics Methods

8. Hospital characteristics: – Volume, Hospital wage index, nurse-to-patient ratios, Hospital has CT/MRI PET imaging. Surgeon characteristics: – Volume, General surgeon/surgical oncologist/thoracic/ other. 8

9. Methods Patient characteristics: – age, sex, race, state indicator variables. – Urgent/emergent admission, transfer patient, teaching hospital, insurance type. – Cancer stage (nodal involvement/organ metastasis). Disease specific indicator variables, e.g. upper/middle/lower esophogeal tumor site. – Elixhauser comorbidity indicators. 9

10. Methods Regressions include year and hospital fixed effects. – Coefficient on volume measures effects of within-hospital changes in volume. – → Can’t specify volume in categories. Standard errors adjusted for clustering of unobservables across patients within hospitals. 10

11. Methods Test for nonlinear volume effects using fractional polynomials. Powers restricted to the set – -2, -1, -0.5, 0, 0.5, 1, 2, 3 11

12. Methods We hypothesize a negative coefficient on surgeon volume, for reasons stated previously. Coefficient on hospital volume could be negative or positive. – Economies of scale/learning effects. – Costly investments in patient care at larger hospitals. 12

13. Methods The base regressions measure the magnitude of the volume-cost relationship. – Controlling for patient characteristics and the wage index. Next, add variables that may "explain" the volume-cost relationship. – Do the coefficients on hospital and surgeon volume change when "underlying causes" are added to the regressions? 13

14. AHRQ Hospital-level Patient Safety Indicators Complications of anesthesia (PSI 1) Death in low mortality DRGs (PSI 2) Decubitus ulcer (PSI 3) Failure to rescue (PSI 4) Foreign body left in during procedure (PSI 5) Iatrogenic pneumothorax (PSI 6) Selected infections due to medical care (PSI 7) Postoperative hip fracture (PSI 8) Postoperative hemorrhage or hematoma (PSI 9) Postoperative physiologic and metabolic derangements (PSI 10) Postoperative respiratory failure (PSI 11) Postoperative pulmonary embolism or deep vein thrombosis (PSI 12) Postoperative sepsis (PSI 13) Postoperative wound dehiscence in abdominopelvic surgical patients (PSI 14) Accidental puncture and laceration (PSI 15) Transfusion reaction (PSI 16) 14

15. Costly Hospital Services Nurse-to-patient ratios Hospital has CT Scanner Hospital has Electron beam computed tomography (EBCT) Hospital has Magnetic resonance imaging (MRI) Hospital has Multi-slice spiral computed tomography Hospital has Positron emission tomography

16. Processes of Care Arterial Line Transfusion packed red blood cells or auto-transfusion Critical Care Consultations Central Venous Catheter Daily Epidural Management Epidural Anesthesia Frozen Section Incidental Appendectomy Inpatient Consultations Pulmonary Artery Catheter Re-intubation Total Parenteral Nutrition Total claimed hours for anesthesia

17. 17 Figure 1: Hospital Costs by Hospital and Surgeon Volume (SEER)

18. 18 Figure 2: Physician Reimbursements by Hospital and Surgeon Volume (SEER)

19. 19 Determinants of ln(Hospital Costs + Physician Payments) Colon Resection (SEER Medicare data) All regressions include patient and hospital characteristics, mean nurse wages, and the nurse-to-patient ratio. t-statistics in parentheses *p<0.10, **p<0.05, ***p<.01 N=43,231

20. 20 Determinants of ln(Hospital Costs + Physician Payments) Pancreatic Resection (SEER Medicare data) All regressions include patient and hospital characteristics, mean nurse wages, and the nurse-to-patient ratio. t-statistics in parentheses *p<0.10, **p<0.05 N=1,618

22. Summary of SEER Results Only procedure w/ nonlinear volume-cost relationship is colectomy. Surgeon V-C relation <0 for all ops, and significant for 4/5. – But magnitude of the V-C effect is small. – If move from lowest to highest tertile of colectomy (2 to 10/yr), mean costs ($19,879) fall by only $42. 22

23. Summary of SEER Results Specifications w/ hospital costs as dep var similar to hospital+physician costs. Surgeon volume only lowers physician costs for colon & pancreatic resection. Hospital volume does not influence physician payments. 23

24. Summary of SEER Results Adding PSIs & surgeon specialty doesn’t substantially change the V-C estimates. Not all PSIs appear for each op, but they tend to drive up costs. – PSI 11, postop respiratory failure,significant for 4/5 ops. – 0.651 for colectomy and =1 for 1.6% of colectomy patients. Little evidence that surgeon specialty affects costs. 24

25. Caveats SEER-Medicare sample is small. – Will also try analysis with 100% MedPAR files. Need to add processes of care to the analysis. 25

26. Pancreatic Resection Volume, CMS HospitalSurgeon MinMedMaxMinMedMax 2005131491272 2006131191254 2007131381267 2008151271254 2009151381259

27. Pancreatic Resection Volume, SEER HospitalSurgeon MinMedMaxMinMedMax 200113131110 200214151213 200314141210 200416161314 200515191313

28. Top 5 Hospitals by Pancreatic Resection Volume, CMS 2005 Hospital NameVolumeCityStateSEER Johns Hopkins Hospital149BaltimoreMDNo Clarian Health Partners108IndianapolisINNo Memorial Sloan-Kettering Cancer Center 94New YorkNYYes Massachusetts General Hospital80BostonMANo Saint Mary’s Hospital77RochesterMNNo

29. Within Provider Change in Volume Pancreatic Resection, 2005-2009 HospitalSurgeon MinMedMaxMinMedMax -73-222-35027

30. Average Cost per Pancreatic Resection Patient

31. Pancreatic Resection Total Cost Regression, FE (1) No Controls (2) + Patient Variables (3) + Hospital Variables Hospital volume 0.000663 (0.97) -0.000182 (-0.31) -0.0000263 (-0.07) Surgeon volume = ln(surgeon volume/10) -0.0503*** (-6.13) -0.0407*** (-5.22) -0.0429*** (-5.88) Patient Variables XX Nurse-to-patient ratio 0.0267*** (3.96) Hospital Variables X N 135721237712348 *All regressions include year dummies.

32. Pancreatic Resection Total Cost Regression, FE (4) + Safety Indicators Hospital volume -0.000193 (-0.40) Postop hemorrhage or hematoma 0.444*** (9.14) Surgeon volume = ln(surgeon volume/10) -0.0357*** (-4.76) Postop physio metabol derangement 0.280 (1.35) Complications of anesthesia -0.0346 (-0.27) Postop respiratory failure 0.537*** (15.84) Decubitus ulcer 0.338*** (6.19) Postoperative pe or dvt 0.303*** (10.75) Death among surgical 0.275*** (5.19) Postoperative wound dehiscence 0.503*** (5.33) Foreign body left in during proc -0.408*** (-5.99) Accidental puncture/laceration 0.143*** (5.17) Iatrogenic pneumothorax 0.152 (1.64) N 12348 *Regression includes year dummies and patient and hospital characteristics.

33. Pancreatic Resection Total Cost Regression, FE (5) + Birkmeyer Processes of Care Hospital volume -0.000661 (-1.41) Daily Epidural Management -0.00869 (-0.65) Surgeon volume = ln(surgeon volume/10) -0.0193** (-3.07) Re-intubation 0.253*** (8.36) Incidental Appendectomy 0.0131 (0.27) Transfusion/auto-transfusion -0.0217* (-2.08) Arterial Line 0.0660*** (6.84) Critical Care Consultations 0.285*** (18.83) Central Venous Catheter 0.0150 (0.26) Total Parenteral Nutrition 0.148*** (6.94) Epidural Anesthesia -0.00500 (-0.39) Inpatient Consultations 0.216*** (17.66) Frozen Section -0.00557 (-0.52) Operating Room Time 0.0383*** (18.34) Pulmonary Artery Catheter 0.190*** (8.15) N 11877 *Regression includes year dummies, patient and hospital characteristics, and PSIs.

34. Lobectomy Volume, CMS HospitalSurgeon MinMedMaxMinMedMax 2005162551382 2006162301382 2007172191386 2008182231393 2009192361377

35. Lobectomy Volume, SEER HospitalSurgeon MinMedMaxMinMedMax 2001110631664 2002110701673 2003111701762 2004112631766 2005112611865

36. Top 5 Hospitals by Lobectomy Volume, CMS 2005 Hospital NameVolumeCityStateSEER Memorial Sloan-Kettering Cancer Center 255New YorkNYYes H Lee Moffitt Cancer Center151TampaFLNo Saint Mary’s Hospital151RochesterMNNo New York-Presbyterian Hospital129New YorkNYNo University of Texas MD Anderson Cancer Center 111HoustonTXNo

37. Within Provider Change in Volume Lobectomy, 2005-2009 HospitalSurgeon MinMedMaxMinMedMax -58036-37153

38. Average Cost per Lobectomy Patient

39. Lobectomy Total Cost Regression, FE (1) No Controls (2) + Patient Variables (3) + Hospital Variables Hospital volume =(hospital volume/100)^3 -0.0149** (-2.78) 0.00845 (0.63) 0.00760 (0.58) Surgeon volume =(surgeon volume/10)^.5 -0.0487*** (-4.16) -0.0403*** (-4.32) -0.0403*** (-4.31) Patient Variables XX Nurse-to-patient ratio 0.00938* (2.36) Hospital Variables X N 570205283552675 *All regressions include year dummies.

40. Lobectomy Total Cost Regression, FE (4) + Safety Indicators Hospital volume =(hospital volume/100)^3 0.00990 (0.67) Postoperative hip fracture 0.404** (2.72) Surgeon volume =(surgeon volume/10)^.5 -0.0391*** (-4.58) Postop hemorrhage or hematoma 0.360*** (5.29) Complications of anesthesia 0.0611 (0.82) Postop physio metabol derangement 0.385*** (5.65) Decubitus ulcer 0.494*** (10.74) Postop respiratory failure 0.770*** (37.43) Death among surgical 0.537*** (19.57) Postoperative pe or dvt 0.349*** (14.91) Foreign body left in during proc 0.200 (1.41) Accidental puncture/laceration 0.191*** (10.20) Iatrogenic pneumothorax 0.0336*** (3.32) N 52675 *Regression includes year dummies and patient and hospital characteristics.

41. Lobectomy Total Cost Regression, FE (5) + Birkmeyer Processes of Care Hospital volume =(hospital volume/100)^3 0.0116 (0.91) Daily Epidural Management 0.0158** (2.92) Surgeon volume =(surgeon volume/10)^.5 -0.0048 (-0.66) Re-intubation 0.412*** (31.60) Incidental Appendectomy 1.250*** (4.78) Transfusion/auto-transfusion 0.0954*** (16.61) Arterial Line 0.0180*** (4.01) Critical Care Consultations 0.282*** (30.11) Central Venous Catheter 0.122* (2.52) Total Parenteral Nutrition 0.313*** (11.20) Epidural Anesthesia -0.00768 (-1.62) Inpatient Consultations 0.186*** (34.42) Frozen Section 0.0426*** (10.63) Operating Room Time 0.0742*** (33.22) Pulmonary Artery Catheter 0.177*** (11.04) N 48689 *Regression includes year dummies, patient and hospital characteristics, and PSIs.

42. Colon Resection Volume, CMS HospitalSurgeon MinMedMaxMinMedMax 20051233681770 20061233721784 20071243451683 20081273421680 20091252531558

43. Colon Resection Volume, SEER HospitalSurgeon MinMedMaxMinMedMax 2005124961536 20061261271641 20071251041636 20081251061627 2009125981637

44. Top 5 Hospitals by Colon Resection Volume, CMS 2005 Hospital NameVolumeCityStateSEER Florida Hospital368OrlandoFLNo New York-Presbyterian Hospital291New YorkNYNo Christiana Care Health System264NewarkDENo Methodist Hospital262San AntonioTXNo Beaumont Hospital – Royal Oak252Royal OakMIYes

45. Within Provider Change in Volume Colon Resection, 2005-2009 HospitalSurgeon MinMedMaxMinMedMax -647147-22356

46. Average Cost per Colon Resection Patient

47. Colon Resection Total Cost Regression, FE (1) No Controls (2) + Patient Variables (3) + Hospital Variables Hospital volume 0.000149 (1.01) -0.0000399 (-0.31) -0.0000180 (-0.14) Surgeon volume -0.00532*** (-16.35) -0.00201*** (-9.07) -0.00202*** (-9.08) Patient Variables XX Nurse-to-patient ratio 0.0104*** (3.74) Hospital Variables X N 160712149803148925 *All regressions include year dummies.

48. Colon Resection Total Cost Regression, FE (4) + Safety Indicators Hospital volume 0.0000110 (0.09) Postop hemorrhage or hematoma 0.458*** (15.73) Surgeon volume -0.00187*** (-8.52) Postop physio metabol derangement 0.525*** (8.63) Complications of anesthesia -0.133* (-2.50) Postop respiratory failure 0.631*** (45.37) Decubitus ulcer 0.320*** (18.70) Postoperative pe or dvt 0.365*** (34.24) Death among surgical 0.274*** (15.55) Postoperative wound dehiscence 0.677*** (27.33) Foreign body left in during proc 0.216* (2.03) Accidental puncture/laceration 0.209*** (22.38) Iatrogenic pneumothorax 0.350*** (9.11) Transfusion reaction -0.0720*** (-10.43) Postoperative hip fracture 0.614*** (5.75) N 148925 *Regression includes year dummies and patient and hospital characteristics.

49. Colon Resection Total Cost Regression, FE (5) + Birkmeyer Processes of Care Hospital volume -0.000101 (-0.92) Daily Epidural Management 0.0259*** (5.05) Surgeon volume -0.000370 (-1.87) Re-intubation 0.260*** (27.95) Incidental Appendectomy 0.0303*** (4.57) Transfusion/auto-transfusion 0.0831*** (27.13) Arterial Line 0.157*** (36.19) Critical Care Consultations 0.331*** (66.48) Central Venous Catheter 0.00459 (0.15) Total Parenteral Nutrition 0.238*** (42.61) Epidural Anesthesia -0.00146 (-0.30) Inpatient Consultations 0.242*** (74.07) Frozen Section 0.0632*** (15.31) Operating Room Time 0.0893*** (36.53) Pulmonary Artery Catheter 0.189*** (13.15) N 138488 *Regression includes year dummies, patient and hospital characteristics, and PSIs.

50. Policy Implications Surgeon volume is more closely associated with average costs than hospital volume. – Given that higher surgeon volume lowers mortality, should states report surgeon volumes & mortality? Processes of care “explain” much of the surgeon volume-cost relationship. 50

51. Conclusions Some PSIs are important determinants of costs, even if they are not correlated with volume. Not viable to lower DRG rates to discourage low- volume providers. – 29% of colectomy and 54% of esophagectomy patients already treated at a loss to hospitals. 51

52. Caveats This analysis is highly preliminary and incomplete. Hospital fixed effects may not be the only approach. – If hospital/surgeon/other characteristics can explain the volume-cost relation in a random effects model, they may be targets for intervention. Haven’t fully explored large variability in costs across hospitals yet. 52