Hospital Costs by Cost Center of Inpatient Hospitalization for Medicare Patients Undergoing Major Abdominal Surgery

Published In: Journal of the American College of Surgeons, v. 220, no. 2, Feb. 2015, p. 207-217.e11

Posted on on January 19, 2015

by Anne M. Stey, Robert H. Brook, Jack Needleman, Bruce L. Hall, David Zingmond, Elise H. Lawson, Clifford Y. Ko

Read More

Access further information on this document at Elsevier Inc

This article was published outside of RAND. The full text of the article can be found at the link above.

BACKGROUND: This study aims to describe the magnitude of hospital costs among patients undergoing elective colectomy, cholecystectomy, and pancreatectomy, determine whether these costs relate as expected to duration of care, patient case-mix severity and comorbidities, and whether risk-adjusted costs vary significantly by hospital. Correctly estimating the cost of production of surgical care may help decision makers design mechanisms to improve the efficiency of surgical care. STUDY DESIGN: Patient data from 202 hospitals in the ACS-NSQIP were linked to Medicare inpatient claims. Patient charges were mapped to cost center cost-to-charge ratios in the Medicare cost reports to estimate costs. The association of patient case-mix severity and comorbidities with cost was analyzed using mixed effects multivariate regression. Cost variation among hospitals was quantified by estimating risk-adjusted hospital cost ratios and 95% confidence intervals from the mixed effects multivariate regression. RESULTS: There were 21,923 patients from 202 hospitals who underwent an elective colectomy (n = 13,945), cholecystectomy (n = 5,569), or pancreatectomy (n = 2,409). Median cost was lowest for cholecystectomy ($15,651) and highest for pancreatectomy ($37,745). Room and board costs accounted for the largest proportion (49%) of costs and were correlated with length of stay, R = 0.89, p < 0.001. The patient case-mix severity and comorbidity variables most associated with cost were American Society of Anesthesiologists (ASA) class IV (estimate 1.72, 95% CI 1.57 to 1.87) and fully dependent functional status (estimate 1.63, 95% CI 1.53 to 1.74). After risk-adjustment, 66 hospitals had significantly lower costs than the average hospital and 57 hospitals had significantly higher costs. CONCLUSIONS: The hospital costs estimates appear to be consistent with clinical expectations of hospital resource use and differ significantly among 202 hospitals after risk-adjustment for preoperative patient characteristics and procedure type.

This report is part of the RAND Corporation External publication series. Many RAND studies are published in peer-reviewed scholarly journals, as chapters in commercial books, or as documents published by other organizations.

Our mission to help improve policy and decisionmaking through research and analysis is enabled through our core values of quality and objectivity and our unwavering commitment to the highest level of integrity and ethical behavior. To help ensure our research and analysis are rigorous, objective, and nonpartisan, we subject our research publications to a robust and exacting quality-assurance process; avoid both the appearance and reality of financial and other conflicts of interest through staff training, project screening, and a policy of mandatory disclosure; and pursue transparency in our research engagements through our commitment to the open publication of our research findings and recommendations, disclosure of the source of funding of published research, and policies to ensure intellectual independence. For more information, visit

The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.