A cost evaluation methodology for surgical technologies

Abstract

Objective

To create and validate a micro-costing methodology that surgeons and hospital administrators can use to evaluate the cost of implementing innovative surgical technologies.

Methods

Our analysis is broken down into several elements of fixed and variable costs which are used to effectively and easily calculate the cost of surgical operations. As an example of application, we use data from 86 robot assisted gastric bypass operations made in our hospital. To validate our methodology, we discuss the cost reporting approaches used in 16 surgical publications with respect to 7 predefined criteria.

Results

Four formulas are created which allow users to import data from their health system or particular situation and derive the total cost. We have established that the robotic surgical system represents 97.53 % of our operating room’s medical device costs which amounts to $4320.11. With a mean surgery time of 303 min, personnel cost per operation amounts to $1244.73, whereas reusable instruments and disposable costs are, respectively, $1539.69 and $3629.55 per case. The literature survey demonstrates that the cost of surgery is rarely reported or emphasized, and authors who do cover this concept do so with variable methodologies which make their findings difficult to interpret.

Conclusion

Using a micro-costing methodology, it is possible to identify the cost of any new surgical procedure/technology using formulas that can be adapted to a variety of operations and healthcare systems. We hope that this paper will provide guidance for decision makers and a means for surgeons to harmonise cost reporting in the literature.

Appendix

Demonstration: medical devices

Objective:

• TC_i = Cost per operation of medical device i’s purchase and maintenance costs.

Let

• P _i  = purchase price

• M _i  = maintenance fee per year

• E _i  = life expectancy expressed in years

• N _i  = mean number of operations per year for which medical device has been used

• r = discount rate

$${\text{Purchase}}\;{\text{cost}}\;{\text{per}}\;{\text{operation}}\,{ = }\,\frac{{P_{i} }}{{E_{i} \times N_{i} }}$$

$${\text{Yearn's}}\;{\text{maintenance}}\;{\text{discounted}}\;{\text{present}}\;{\text{value}}\, = \,M_{i} \times \frac{ 1}{{\left( { 1+ r} \right)^{n} }}$$

$$\begin{aligned} {\text{Maintenance}}\;{\text{cost}}\;{\text{per}}\;{\text{operation}}\, & = \,\frac{ 1}{{\left( {E_{i} \times N_{i} } \right)}} \times \left( {M_{i} + M_{i} \times \frac{ 1}{{\left( { 1+ r} \right)}} + \cdots + M_{i} \times \frac{ 1}{{\left( { 1+ r} \right)^{{E_{i} }} }}} \right) \\ & = \,\frac{ 1}{{E_{i} \times N_{i} }} \times M_{i} \times \left( { 1+ \frac{ 1}{ 1+ r} + \cdots + \frac{ 1}{{\left( { 1+ r} \right)^{{E_{i} }} }}} \right) \\ & = \,\frac{ 1}{{E_{i} \times N_{i} }} \times M_{i} \times \frac{{ 1- \left(\frac{1} { 1+ r} \right)^{{ E_{i} + 1}} }}{{ 1- \frac{1} { 1+ r} }} \\ & = \,\frac{ 1}{{E_{i} \times N_{i} }} \times M_{i} \times \frac{{ 1- \left( { 1+ r} \right)^{{ - E_{i} - 1}} }}{{ 1- \left( { 1+ r} \right)^{ - 1} }} \\ \end{aligned}$$

By summing the Purchase cost and Maintenance cost per operation:

$${{\text{TC}}_{i} = \frac{ 1}{{E_{i} \times N_{i} }}\left( {P_{i} + M_{i} \times \frac{{ 1- \left( { 1+ r} \right)^{{ - E_{i} - 1}} }}{{ 1- \left( { 1+ r} \right)^{ - 1} }}} \right)}.$$

Demonstration: medical devices

Objective:

• PC_i = Personnel i’s cost per operation

Let

• W _i  = Annual loaded salary

• L _i  = Weekly paid working hours

• t _i  = Mean time spent in operations, expressed in minutes

  $${\text{Monthly}}\;{\text{loaded}}\;{\text{salary}}\,{ = }\,{\frac{{W_{i} }}{ 1 2}}$$
  $${\text{Weekly}}\;{\text{paid}}\;{\text{working}}\;{\text{minutes}}\, = \,{L_{i} \times 6 0}$$
  $${\text{Effective}}\;{\text{working}}\;{\text{days}}\;{\text{per}}\;{\text{month}}\, = \,{\frac{{{\text{Effective}}\;{\text{working}}\;{\text{days}}\;{\text{per}}\;{\text{year}}}}{ 1 2} = \frac{{\left( {{\text{working}}\;{\text{days}}\;{\text{per}}\;{\text{year}} - {\text{Paid}}\;{\text{leave}}} \right)}}{ 1 2}}$$
  $${\text{Effective working weeks per month }} = \,{\frac{{{\text{Effective}}\;{\text{working}}\;{\text{days}}\;{\text{per}}\;{\text{month}}}}{ 5} = \frac{{\left( {{\text{Working}}\;{\text{days}}\;{\text{per}}\;{\text{year}} - {\text{Paid}}\;{\text{leave}}} \right)}}{{\left( { 1 2\times 5} \right)}}}$$
  $$\begin{aligned} {\text{Effective}}\;{\text{working}}\;{\text{minutes}}\;{\text{per}}\;{\text{month}} \\ & \quad {\text{ = Weekly}}\;{\text{paid}}\;{\text{working}}\;{\text{minutes}} \times {\text{effective}}\;{\text{working}}\;{\text{weeks}}\;{\text{per}}\;{\text{month}} \\ & \quad = \left( {L_{i} \times 6 0} \right) \times \frac{{\left( {{\text{working}}\;{\text{days}}\;{\text{per}}\;{\text{year}} - {\text{Paid}}\;{\text{leave}}} \right)}}{ 6 0} \\ & \quad = L_{i} \times \left( {{\text{Effective}}\;{\text{working}}\;{\text{days}}\;{\text{per}}\;{\text{year}}} \right) \\ \end{aligned}$$

Cost per minute of personnel i × Minutes personnel i spent in operation j:

$$\begin{aligned} {\text{PC}}_{i} & = \frac{{W_{i} /12}}{{L_{i} \times \left( {{\text{Effective}}\;{\text{working}}\;{\text{days}}\;{\text{per}}\;{\text{year}}} \right)}} \times t_{i} \\ & = \frac{1}{{12}} \times \frac{{W_{i} \times t_{i} }}{{L_{i} \times E{\text{wd}}_{i} }} \\ \end{aligned}.$$