Consumerism in Surgery

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With the 10 most expensive inpatient surgical procedures ranging from $150,000 to well over $1M, it seems a bit surprising that consumerism in surgery hasn’t already become mainstream (at least not in the U.S.) despite all the predictions of consumerism in healthcare.

Understanding why consumerism is not prevalent in surgery requires a look into how we make decisions about our usage of surgical procedures. That may sound obvious to you, but this is actually a fairly complicated equation and one that’s rich in history.  Let’s look at how we pay for healthcare in the U.S. and our healthcare insurance market dynamics.

An excellent explanation of how  U.S. healthcare insurance history has shaped US healthcare consumption has been written by John C. Goodman here, and the following is a summary, emphasizing those parts of the article that deal with surgery purchase behavior:

Pre-WWII a competitive health insurance market developed in the U.S. with premiums reflecting risks, and insurers monitoring claims to keep costs down. Post WWII, hospitals and MD’s created the “Blues” which won competitive advantages from state governments and medical providers creating monopoly negotiating power on reimbursements.  This meant that commercial insurers, Medicare and Medicaid had to follow suit on decisions regarding reimbursement decisions.

Four factors related to these reimbursement decisions shaped the health insurance landscape even up to the present day: Hospitals were reimbursed on a cost-plus basis, health insurance was assumed to cover all medical costs, policies were priced on “community rating” giving everyone in a geographical area the same price for health insurance (i.e. higher-risk people were undercharged and lower-risk people were overcharged), and each year’s insurance premium paid for that year’s health care costs.  In short this created a medical marketplace that was anything but a truly competitive market, and in the hospital market this was very apparent to consumers.

Specifically for hospital-based surgical procedures, even today, most patients cannot find out in advance what a routine procedure will cost them. Thus, consumers of surgery cannot understand the price prior to making the purchase.  Compare this to the market for cosmetic surgery where patients pay with their own funds and patients are quoted a single package price in advance. During the past decade, the real price of cosmetic surgery actually fell, while prices of other medical services (including hospital-based surgical procedures) rose faster than the rate of inflation.

A real move toward consumerism in surgery would require accurate and easily accessible data for potential patients on cost, quality (and safety) of surgical procedures. Some tools are now entering the market that would allow for visibility to this information.  For their part, healthcare providers certainly need better visibility to their own costs in order to help drive the marketplace toward a more competitive market. As information becomes more readily available, some providers have found better ways to understand the cost of surgical procedures and move toward enhanced profitability using IT tools that allow them to analyze the true costs of procedures (in both hospitals and ASCs).

Undoubtedly, surgery advancements since the 1930s are a wonderful benefit to our society and our well-being; however, the way we choose to consume these benefits currently is sub-optimal and drives the price of healthcare higher without each of us truly considering the cost-benefit equation for each procedure.  Although we have a long way to go, I envision a day when we have a marketplace that drives real cost- and quality-based decisions about how we consume our surgical procedures


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