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    This blog is intended to encourage open dialogue and learning amongst members and interested parties of the perioperative and periprocedural communities for the purpose of envisioning and encouraging higher performing systems.

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You are here: Twin Peaks Group > Perioperative Systems-related

The true cost of robotic hysterectomy

Posted at 2:18 pm on Aug 08, 2014 by


Along with all the hype about robotic surgery, we finally get some credible data and a useful proposal.

The data

In the February 2013 issue of the Journal of the American Medical Association, Jason Wright and his colleagues from Columbia University compared the outcomes of performing robotically assisted benign hysterectomies with other methods.[1] The most meaningful comparison is with laparoscopic surgery performed without the assistance of a robot. They found that there was no significant advantage to performing the procedure with the assistance of a robot, but that the method carried an additional (incremental) cost of about $2,000. Despite this apparent disadvantage, the authors report that the adoption of robotically-assisted surgery for benign hysterectomies is rising more rapidly than “standard” laparoscopic surgery.

The editorial

The article was accompanied by an editorial,[2] drawing attention to the impact of direct-to-consumer marketing of robotic surgery and its likely role in driving demand, thus fueling “unnecessary utilization.” The authors of the editorial, Joel Weissman and Michael Zinner from Brigham and Women’s Hospital in Boston, went further: They pointed out that, since reimbursement for laparoscopic benign hysterectomy is the same whether robotically assisted or not, patients and hospitals do not have an incentive to use the less expensive option. To stimulate the right behavior – in this particular case, where the outcomes are effectively the same – Weissman and Zinner suggest that, when the patient requests robotically assisted surgery, a copayment equal to the additional cost be imposed. If physicians and hospitals are driving the demand, they suggest that they be asked to justify their recommendation. (In the interest of brevity, I’ve simplified things a bit; for the details, please consult the editorial).

The opportunity cost

Although it was not mentioned in the article by Wright and his colleagues, robotically assisted benign hysterectomy consumes more OR time than the “standard” laparoscopic method. Thus, when estimating the copayment, a premium should be added to account for the opportunity cost associated with reimbursement that would have been received by fitting a greater number of standard laparoscopic procedures into the available OR time.

The estimate of the opportunity cost

How large should this premium be? In our paper, “Calculating the true cost of robotic hysterectomy,” which appears in the August issue of Healthcare Financial Management, Vikram Tiwari, Warren Sandberg and I provide the answer. We employ a simulation model to estimate the number of robotically assisted and standard laparoscopic procedures that can be performed in one month in a dedicated OR, and then calculate the resulting difference in a hospital’s cash flow. For a range of reasonable values of the important parameters, we find that, when the premium is taken into account, the appropriate copayment could be at least three times as large as proposed by Weissman and Zinner. As we point out in our article, the total copayment represents 7 to 9 percent of the median income of a family of four in the United States. Translation: It’s a big deal!

If transparency were introduced, with prospective patients regularly presented with outcome data for the two non-invasive methods along with what they would have to pay for the privilege of the robotically assisted method, it is likely that a majority of patients would forgo the robot.

The lesson

So, what’s the really big lesson here? We need more transparency; more researchers like Jason Wright and his colleagues to collect and carefully analyze masses of data; and more highly regarded influencers like Joel Weissman and Michael Zinner to call ‘em as they sees ’em.


[1] Wright, J.D., Ananth C.V., Lewin, S.N., et al., “Robotically Assisted Vs. Laparoscopic Hysterectomy Among Women with Benign Gynecologic Disease,” Journal of the American Medical Association, February 2013.

[2] Weissman, J.S., and Zinner M., “Comparative Effectiveness Research on Robotic Surgery,” Journal of the American Medical Association,February 2013.

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The president of the American Hospital Association weighs in on a study of surgical complications

Posted at 10:49 am on May 02, 2013 by

In October 2102, Warren Sandberg, Bill Weeks and I published an article in Health Affairs demonstrating that when hospitals, whose inpatient surgical volumes are not growing, reduce surgical complications they suffer negative cash flow.  In April 2013, Dr. Sunil Eappen and his colleagues, relying on more extensive data, came the same conclusion in an article in JAMA (Relationship Between Occurrence of Surgical Complications and Hospital Finances).  The New York Times considered their finding significant enough to warrant a front-page story on April 16, announcing “Hospitals Profit From Surgical Mistakes, Study Finds.”

The JAMA article was accompanied by an editorial by Prof. Uwe Reinhardt of Princeton University who called the conclusion “troublesome but not surprising.” After making several important observations regarding the consequences of different reimbursement policies illustrated in the study (private, Medicare and Medicaid), Prof. Reinhardt took Eappen et al. to task for their arbitrary allocation of fixed costs to patients with and without complications.  The arbitrary allocations led to the misleading conclusion that the total margin for patients without complications is a negative 6.4 thousand dollars, suggesting – incorrectly – that the hospitals lose money on patients with complications.

Undeterred by Prof. Reinhardt’s criticism of the arbitrary allocation of fixed costs, Rich Umbdenstock, the president of the American Hospital Association jumped into the fray to draw attention to the financial plight of the hospitals on which the study was based: “[T]he hospitals studied are reimbursed less than the overall cost of caring for patients with surgical complications by 6.4 percent.” (Letter to the Editor of the New York Times, dated April 18 and published on April 25).  I don’t know where in the article by Eappen and his colleagues Mr. Umbdenstock found the 6.4 percent figure, but he appears to ignore Prof. Reinhardt’s valid critique.  Moreover, he seems to imply that hospitals should not lose money on complications.  Mr. Umbdenstock, then chastises the study for failing “to recognize that hospitals physicians, nurses and other caregivers work every day to do the right thing for their patients and provide the best care possible.”

I side with the Dr. Eappen and his colleagues, one of whom, Atul Gawande, is the champion of the surgical safety checklist.  First, they cite an article reporting the slow pace of adoption of the surgical checklist.  The slow pace suggests that the commitment to improving care is not as high as implied by Mr. Umbdenbstock.  Second, I am disappointed at the low participation of hospitals in the American Surgical Association’s National Surgical Quality Improvement Program (NSQIP): Only about ten percent of this country’s hospitals participate.  Yet NSQIP provides a rigorous, unbiased assessment of a hospital’s surgical outcomes.  The limited participation suggests that most hospitals are not willing to invest in a program that allows them to compare their surgical performance to their peers and to take advantage of one of the benefits of NSQIP membership – learning from the top participating performers.

Talk about the power of financial incentives!

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How to make the perioperative system more productive

Posted at 11:14 am on Jan 30, 2013 by

Many years ago, when I was first given responsibility for a major project spanning multiple organizations, I quickly realized that I knew little about project management.  Easy, I thought, I’ll just arrange a two-day course for our department and we’ll be all set.  As the end of our training session approached, I sadly realized that the course offered no help on the biggest problem I faced: The people, assigned to my project by other departments, just weren’t devoting the time to my project that had been promised by their managers.  Not surprisingly, my project started missing its milestones, I grew progressively more frustrated, a lot of finger-pointing ensued, and progress slowed.  My projects succeeded if they were sufficiently small so that I controlled all the resources, but problems inevitably surfaced in projects staffed by people from more than one organization.

In the late 90s Figure for portfolio blogwhile working at Integral, a consulting firm, I learned that many of our clients experienced the same problem: late projects and frustrated staff.  In fact, as I learned, it was the result of project overload.  Project gluttony we called it.  We found many firms that had taken on more than twice as many projects than they could properly handle and these projects were inevitably late.

Fortunately, we had been brought in to solve the problem by applying a solution devised by Integral’s founders, two well-known professors at the Harvard Business School.  The remedy boiled down to“less is more.”  By reducing the number of projects to a manageable level, our clients’ output began to rise.  What’s more, it was the “right” kind of output because they were now prioritizing their projects according to their strategy.

How did we accomplish this transformation?  We first worked with our clients’ executives to help them express their strategy in some readily understandable form.  Although this was not easy, it was the next step that was really painful – getting managers to agree on the projects to be dropped.  However, I was always amazed that, once the managers got the hang of it, the process moved rapidly.  Then, to stay on the diet, the clients’ management teams tracked projects and assignments to avoid overload.  Projects could not be initiated until resources were available.

Hospitals – and perioperative systems in particular – also suffer from project gluttony.  And it turns out that applying this solution is more challenging there than in engineering, packaged consumer goods and banking organizations where the solution was initially applied.  Why?  There is less experience with project management, and most clinicians have day jobs.  They are thus forced to work on improvement projects when they can fit them in.  By contrast, most other industries have the flexibility to make improvement projects a temporary “day job.”  Paradoxically, another barrier in hospitals is the current pressure to perform many Lean projects.  I don’t dispute the need for clinicians to learn how to do Lean; I believe, however, that improvement projects, regardless of methodology, should be undertaken only if they fit into the hospital’s portfolio.

Despite these challenges, I am confident, that the method can be readily adapted to hospitals.  In fact, along with Kathy Brooks, Vice President of Jackson Surgical Assistants, I have written an article on how to apply it in the perioperative system.  The article, entitled “Performance Improvement in the Perioperative System,” appeared in the December issue of Healthcare Financial Management. In it, we introduce a strategy map for the perioperative system and use it as the starting point for portfolio building.  We then show how to build a portfolio, illustrating it with a variety of projects.  We include both clinical projects such as reducing complications and operational projects such as reducing costs.  In each case, we provide suggestions on how to staff the project and how long it should take.  Finally, we describe a simple spreadsheet tool that can be used to avoid project overload.

Please contact us if you would like a copy.

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Incentives for hospitals to reduce surgical complications

Posted at 1:52 pm on Oct 19, 2012 by

In my post on May 5, I discussed the apparently dismal economics of reducing hospital-acquired infections. I showed why hospitals may not have a financial incentive to reduce hospital-acquired infections.  However, because hospitals have a moral and ethical incentive to saves lives and to prevent suffering, they face a dilemma: by doing the right thing they suffer financially.  Sadly, many leaders in health care are not aware that they face this choice.

How to deal with the dilemma is described in an article entitled “The Impact On Hospitals Of Reducing Surgical Complications Suggests Many Will Need Shared Savings Program With Payers,” published by Health Affairs on October 17, 2012 as Web First, and to appear in the November print issue.  My co-authors are Warren Sandberg of the Vanderbilt School of Medicine in Nashville and Bill Weeks of the Geisel School of Medicine at Dartmouth College.  We demonstrate that, when you perform the hospital’s business case for reducing complications, you need to distinguish between situations in which the hospital’s inpatient caseload is growing and in which it’s not growing.

Let’s start with the “no growth” scenario, which is the one I described in my earlier post although I did not draw attention to the no-growth assumption.  You’ll recall that the hospital may suffer a negative cash flow because its small savings, mostly attributable to supplies and materials, may be swamped by the loss of reimbursement revenue  for the excess care associated with complications.  In this case, the payers clearly benefit from the hospital’s initiative in doing the right thing, while the hospital suffers a negative cash flow.

What happens in the “growth” scenario?  To arrive at the answer, first consider what happens in the surgical unit as the complication rate drops: Empty beds begin to appear as patients with complications are “converted” into patients without complications.  This capacity creation has been known and talked about, of course.  Our contribution is to show just how much extra capacity is created – it can be much more that you might think – and to put a dollar value on that capacity if the hospital is able to fill all those emptying beds.  It turns out that the financial payoff can be very attractive.  Using typical numbers for a hospital that performs 10,000 inpatient cases annually, the annual cash flow increase comes to over $1 million for each 1 percent drop in the complication rate.  For the numbers, assumptions and additional details, I encourage you to read the article, including its online appendix.

For hospitals whose inpatient volume is growing rapidly enough there’s no dilemma: Keep reducing complications and grow your revenue.  But most hospitals’ inpatient case load is unlikely to be growing.  They do indeed face a dilemma.  What should they do?  We recommend they negotiate an agreement with their payers to share in the gains.  Although our article doesn’t describe how to conduct the negotiations, it does describe how to arrive at the numbers that should serve as the basis for the talks.


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Getting to Know Your (Time-Driven) ABCs

Posted at 9:10 am on Nov 09, 2011 by

In my previous posting I praised Robert Kaplan and Michael Porter for applying Time-Driven Activity-Based Costing (TDABC) to uncover differences in the costs for total-knee procedures in U.S. hospitals and two hospitals in Germany and Sweden.

Their sample was admittedly very small, but the findings suggest that the leading culprit is lower productivity in the U.S.

However, the major point of their article in the September issues of the Harvard Business Review was to advance the benefits of TDABC to health care.

Activity-Based Costing

So, does their prescription to use TDABC make sense? Read more about this article »

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CABG quality: the latest results from Consumer Reports

Posted at 8:16 am on Aug 26, 2011 by

The September 2011 issue of Consumer Reports carries report cards on the quality of CABG procedures performed by 324 groups/hospitals.

Ratings of one, two or three stars,  corresponding to performance below, at and above average, are based on performance in 11 categories (e.g. risk-adjusted mortality after CABG, antiplatelet medication at discharge and percentage of procedures performed using an internal thoracic artery).  A 2010 article in the New England Journal of Medicine (NEJM) describes the program (http://www.nejm.org/doi/full/10.1056/NEJMp1009423).

The rating system was developed by the Society of Thoracic Surgeons (STS) whose web site includes more details on individual ratings (http://www.sts.org/quality-research-patient-safety/sts-public-reporting-online).  The methodology, endorsed by the National Quality Forum, is based on a registry of about 90% of approximately 1100 U.S. cardiac surgery programs.

When Consumer Reports published the first set of ratings in October 2010, the NEJM article, cited above, called the public disclosure “a watershed event in health care accountability.”

I believe that this year’s report, based on data running from July 1, 2009 to July 30, 2010, is particularly significant because the number of groups/hospitals that have chosen to go public has increased by more than 100, and because five groups/hospitals with below-average performance had the courage to disclose their report cards.

My disappointment lies in the absence of reports from many famous institutions – Massachusetts excepted – and the lack of analogous report cards for other specialties, such as orthopedics and vascular surgery.  I had hoped that their respective societies would have followed the lead of the STS.

As a consultancy devoted to helping our clients create high-performing perioperative systems, Twin Peaks Group applauds the initiative of the STS and the two-year trend in public disclosure.  We believe that hospitals should measure and publish risk-adjusted outcomes.

With that in mind, how gratifying would it be if next year’s announcement in Consumer Reports listed report cards for 500 groups/hospitals, and revealed that this year’s one-star performers had added one or more stars?

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The Cost of an OR Minute: Use and Abuse

Posted at 3:11 pm on Jul 07, 2011 by

During a recent discussion on operational improvements I was asked for “my” number for the cost of an OR minute.  “What’s your point?” I asked.  “It tells us how much we can save by reducing time in the OR,” he responded.  Unfortunately, this is a fallacy.  It’s even more unfortunate that there are many others who share this misunderstanding.

Before explaining the source of this fallacy, let’s consider why the number is important, how it’s calculated and who should be interested in the number.

The number is essential to assessing a hospital’s profitability by comparing the hospital’s costs to the reimbursements it receives.  In addition to the cost of materials and supplies used in a case, the hospital also needs to calculate the cost of everything else that should be allocated to, say, a lap chole procedure. Read more about this article »

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Inside a High-Performing Perioperative System (2)

Posted at 10:02 am on May 03, 2011 by

Several months ago, I described what it’s like inside one hospital’s high-performing perioperative system.  Since then, I’ve been privileged to learn more.

The hospital is successfully applying analytic capabilities rarely found in healthcare settings, and continues on its quest to reduce post-surgical complications, sharing its results more openly than any institution that I know of.Stethoscope and healthcare data (transparency)

The hospital is now supported by an Operations Research Group that originated in a strategic planning exercise launched by the hospital several years ago.  The group has used a variety of mathematical methods to assist in the design of a new building that houses an ambulatory surgery center, a family clinic and imaging facilities, and has built models that optimize the weekly schedules of individual surgeons who divide their responsibilities among multiple facilities. Read more about this article »

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Anesthesiologists’ Answer to the American College of Surgeon’s National Surgical Quality Improvement Program (NSQIP)?

Posted at 6:22 pm on Mar 21, 2011 by

At the recent meeting of the American Association of Clinical Directors (AACD), I learned that the American Association of Anesthesiologists (ASA) had set up the Anesthesia Quality Institute (AQI) (www.aqihq.org).  The Institute’s vision is to become “the primary source for quality improvement in the clinical practice of anesthesiology,” while its mission is to establish and maintain the National Anesthesia Clinical Outcomes Registry. (I could put in all the acronyms but it would make your eyes glaze over).

If this sounds to you like a cousin of the National Surgical Quality Program (NSQIP), you’d be almost right: Having observed NSQIP, Rick Dutton, MD, AQI’s Executive Director, has taken a different approach to membership and to the collection and analysis of data.

Because storage capacity is infinite and because bandwidth will continue to increase, he decided that the system should collect all reasonably useful data on all cases of participating institutions; moreover, that membership should be almost free.  (It’s subsidized by the ASA).

After you sign up, “pipes” are set up to channel your data – de-identified – into a massive data base.  The choices made by Rick allow for flexible, but potentially complex, analyses.  By contrast – and probably for good reasons – NSQIP collects carefully defined data on selected cases (only), and requires that data be checked by a full-time assessor, who is trained and periodically re-qualified by NSQIP.

It’s gratifying that the ASA has set up the Anesthesia Quality Institute.

When it comes to surgery, anesthesiologists feel particularly responsible for post operative nausea/vomiting, and for pain.  In recognition of this, the data collected and adjusted by the Institute will permit benchmarking on those two quality dimensions.

Now, all that we need is a joint program – one that combines NSQIP and a subset of the data from the Anesthesia Quality Institute.

After all, anesthesiologists’ complications are indistinguishable from those of surgeons from the perspective that matters most: the patient’s.

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Let’s Start Investing in Measuring Value for Patients

Posted at 5:04 pm on Dec 15, 2010 by

As consultants, we rely on metrics to assess the impact of our work.  Thus, when our clients don’t already measure what we might improve, we face an uphill battle.  And the battle becomes particularly frustrating when institutions don’t measure what we consider to be most important: value to the patient.   But what do we mean by “value”?  Very recently, Michael Porter defined it as health outcomes achieved per dollar spent.

We applaud his definition because it’s consistent with our position that perioperative systems should be judged by a double bottom line: quality of outcomes and financials.

Porter is very careful to stress that outcomes must be measured in terms of results achieved for the patient; process measures are not outcomes.  Moreover, he points out that the principal reason for collecting the outcome measures is to enable “innovations in care.” Read more about this article »

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