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Estimating the Financial Contribution of a Benign Foregut Practice: What General Thoracic Surgeons Need to Know Regarding its Relative Value Compared to Pulmonary Procedures
Arman Ashrafi, *Brooks Udelsman, *Graeme Rosenberg, *Sean Wightman, Takashi Harano, *Anthony Kim, Scott Atay
Keck School of Medicine of the University of Southern California, Los Angeles, California, United States
Objective: Estimate payor-specific reimbursement using a generalizable financial model and relative contribution of benign foregut procedures compared to pulmonary resections for general thoracic surgery services. Methods: Medical records of patients undergoing foregut surgery – identified by diagnosis-related group (DRG) codes 326 (with major complication or comorbidity, MCC), 327 (with complication or comorbidity, CC), and 328 (without CC) – by thoracic surgeons from 1/2018 – 12/2019 were reviewed. Patients were stratified by case complexity according to DRG code. Esophagectomies and those with primary neoplasms were excluded. Volume of surgeries, pre- and postoperative studies and clinic visits were measured. Cost-to-charge ratio, current procedural terminology code, DRG Medicare data, and Private:Medicare/Medicaid:Medicare payment ratios were used to estimate payor reimbursements. Relative contribution was calculated by comparing national reimbursements for foregut surgery and equivalent complexity pulmonary procedures, identified by DRG codes 163 (MCC), 164 (CC), and 165 (without CC), respectively. Results: 72 patients met inclusion criteria and underwent 73 operations: 62 (85%) hiatal hernia and 11 (15%) esophageal diverticulectomy or myotomy. Of the 73, 11 (15%) were DRG 326, 24 (33%) DRG 327, and 38 (52%) DRG 328. Patients underwent 531 studies (333 pre- and 198 postoperative) and had 283 billable clinic visits (152 pre- and 131 postoperative). For a California-based hospital, this volume equated to $12.7M in total charges and $2.0M in Medicare reimbursement. When adjusted for a 59% Private, 32% Medicare, and 9% Medicaid payor mix, total reimbursement was $3.7M, of which $3.4M (94%) is driven by inpatient services. Average reimbursement per surgery was $60k for Private, $35k for Medicare, and $28k for Medicaid. Total costs and operating income were $3.2M and $502k (i.e., 14% operating margin), respectively. Highest complexity foregut cases [DRG 326] were associated with longer average length of stay than lower complexity cases [DRG 327 and 328] (6.4 vs 2.8 and 2.2 days, respectively; p < 0.0001). Compared to equivalent complexity lung procedures foregut surgeries nationally average higher reimbursement for the highest complexity MCC cohort (p < 0.0001) but less reimbursement for lower complexity cases (p ? 0.005) (Figure 1). Conclusion: Using this financial model, the overall and payor-specific reimbursements, costs, and operating margins of a general thoracic surgery service can be calculated – for both foregut and pulmonary volume. While only a portion of foregut procedures yield higher reimbursement than lung surgeries, foregut surgery can still generate positive returns – assuming a balance in private and public payor mix and case complexity – while providing supplemental surgical output. A focus on reduced perioperative cost and increased care efficiency can improve operating margins for low complexity cases.
Figure 1: A) Summary estimations of key financial parameters for a California-based hospital's thoracic surgery benign foregut volume stratified per year and per surgery, averaged across all payors. B) Foregut vs Lung reimbursement differences. According to average national Medicare payments, foregut procedures are reimbursed greater than equivalent complexity lung surgeries only for the highest complexity DRG codes [MCC: 326 foregut vs 163 lung]; otherwise, lung surgeries are reimbursed at higher levels for lower complexity cases [CC: 327 foregut vs 164 lung and Without CC: 328 foregut vs 165 lung]. MCC: with major comorbidity or complication; CC: with complication or comorbidity.
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