Abstract
Introduction
Complicated ventral hernias are often referred to tertiary care centers. Hospital costs associated with these repairs include direct costs (mesh materials, supplies, and nonsurgeon labor costs) and indirect costs (facility fees, equipment depreciation, and unallocated labor). Operative supplies represent a significant component of direct costs, especially in an era of proprietary synthetic meshes and biologic grafts. We aim to evaluate the cost-effectiveness of complex abdominal wall hernia repair at a tertiary care referral facility.
Methods
Cost data on all consecutive open ventral hernia repairs (CPT codes 49560, 49561, 49565, and 49566) performed between 1 July 2008 and 31 May 2011 were analyzed. Cases were analyzed based upon hospital status (inpatient vs. outpatient) and whether the hernia repair was a primary or secondary procedure. We examined median net revenue, direct costs, contribution margin, indirect costs, and net profit/loss. Among primary hernia repairs, cost data were further analyzed based upon mesh utilization (no mesh, synthetic, or biologic).
Results
Four-hundred and fifteen patients underwent ventral hernia repair (353 inpatients and 62 outpatients); 173 inpatients underwent ventral hernia repair as the primary procedure; 180 inpatients underwent hernia repair as a secondary procedure. Median net revenue ($17,310 vs. 10,360, p < 0.001) and net losses (3,430 vs. 1,700, p < 0.025) were significantly greater for those who underwent hernia repair as a secondary procedure. Among inpatients undergoing ventral hernia repair as the primary procedure, 46 were repaired without mesh; 79 were repaired with synthetic mesh and 48 with biologic mesh. Median direct costs for cases performed without mesh were $5,432; median direct costs for those using synthetic and biologic mesh were $7,590 and 16,970, respectively (p < .01). Median net losses for repairs without mesh were $500. Median net profit of $60 was observed for synthetic mesh-based repairs. The median contribution margin for cases utilizing biologic mesh was −$4,560, and the median net financial loss was $8,370. Outpatient ventral hernia repairs, with and without synthetic mesh, resulted in median net losses of $1,560 and 230, respectively.
Conclusions
Ventral hernia repair is associated with overall financial losses. Inpatient synthetic mesh repairs are essentially budget neutral. Outpatient and inpatient repairs without mesh result in net financial losses. Inpatient biologic mesh repairs result in a negative contribution margin and striking net financial losses. Cost-effective strategies for managing ventral hernias in a tertiary care environment need to be developed in light of the financial implications of this patient population.
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Dr. Daniel J. Deziel (Chicago,IL): Dr. Reynolds and colleagues have painted a discouraging financial profile for ventral hernia repair which would become even more grim if the cost of readmissions was added. Related readmissions yield, at best, only commodity level returns and are not in the financial core. Two primary drivers of direct cost were use of mesh, particularly biologic mesh, and length of stay. Perhaps you could clarify whether the mesh cost figures were actual institutional costs or patient charges. Since there is no consensus on the specific value of various biologics, have you done anything to standardize use of these expensive products? With the exception of biologic mesh, all hernia repair categories would have been money makers before indirect costs. Indirect costs are allocated differently at different medical centers and within medical centers. Your indirect costs ranged up to 58 % of direct cost and up to nearly 800 % of OR supply cost (from tables in manuscript). Is an excess of overhead being misallocated to these patients?
Thank you for the privilege of discussion.
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Dr. Drew Reynolds: Thank you, Dr. Deziel, for your comments and thoughtful critique of our manuscript. To begin with, I wholeheartedly agree with your assessment of the bleak financial picture. I believe it is appropriate to assume that if the cost of readmissions were included, the financial picture would be even more dismal. Analysis of cost data related to readmissions is an area of further investigation for our group. Biologic mesh materials were a significant driver of cost in this analysis. To answer your question, we used actual hospital costs and did not evaluate hospital charges, as these numbers are often inflated and individual insurance contracts result in different negotiated rates. Additionally, in an era of DRG-based hospital reimbursement, actual hospital charges are frequently irrelevant as reimbursements are based upon contractual agreements for the vast majority of patients. With respect to standardization of mesh use, as of 2009, a contractual agreement was made with one company (BARD). And most of the meshes used at our facility are their products. And we only use biologic grafts for ventral hernia when we feel that a synthetic is contraindicated. Indirect costs include overhead depreciation, enterprise transfers, goods and services, and personnel, and are based on direct costs. We agree that contribution margin is a more relevant number in looking at these finances, but hospitals still need to cover indirect costs to remain fiscally solvent. With the help of our finance staff, we have investigated the methodology associated with assigning these indirect costs to each patient and feel that in fact the calculations are appropriate.
Based upon selection, this manuscript was presented as an oral presentation at Digestive Disease Week 2012 in San Diego, California
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Reynolds, D., Davenport, D.L., Korosec, R.L. et al. Financial Implications of Ventral Hernia Repair: A Hospital Cost Analysis. J Gastrointest Surg 17, 159–167 (2013). https://doi.org/10.1007/s11605-012-1999-y
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DOI: https://doi.org/10.1007/s11605-012-1999-y