- Researchers conducted an economic analysis of simple and complex cataract surgeries using a method called time-driven activity-based costing.
- They reported that although complex surgeries require more time, resources, and effort from the physician compared to simple surgeries, Medicare reimbursements fail to account for these differences.
- This discrepancy may affect doctors financially and could potentially reduce access to care for people needing complex surgeries, thus highlighting the need for more accurate reimbursement rates.
When a person’s vision is impaired as a result of cloudy or opaque areas on the lens of the eye, they may need surgery to remove the lens and replace it with a synthetic one.
This is known as simple cataract surgery.
In some cases, a person may have other eye conditions besides cataracts, which requires additional interventions to be performed during the surgical procedure.
This is called complex cataract surgery.
Complex cataract surgery requires more time, resources, and effort from the physician compared to simple cataract surgery. But it remains unclear whether Medicare reimbursement for complex cataract surgery offsets those increased costs.
In a new study, researchers hypothesized there are excess costs associated with complex cataract surgeries that are not adequately covered by Medicare reimbursements.
To prove this, they used a method they called “time-driven activity-based costing” to measure the difference in day-of-surgery costs and net earnings between simple and complex cataract surgery.
Their findings appear in the journal
Study co-author Dr. David Portney, a resident at Michigan Medicine’s Kellogg Eye Center, explained to Medical News Today that “there is an incredible lack of understanding of healthcare and medical costs.”
“From my experiences — it has never been easy to accurately point to a cost number for a medical procedure, hospital stay, or office visit. We often attribute the payer (insurance cost), but this does not accurately represent the cost to the provider, which is the true cost of delivery.”
– Dr. David Portney, study co-author
Calculating healthcare costs accurately can be challenging and traditional methods are not necessarily reliable for measuring the true cost of a process.
“The physician fee schedule was created in the 1980s as a means of standardizing the amount paid to a physician for a given service,” Dr. Christopher Childers, a surgical oncology fellow at MD Anderson Cancer Center in Texas, not involved in this study, told MNT.
“But the tools available to researchers back then were limited,” Dr. Childers explained. “Researchers simply had to ask physicians about roughly how much effort and time went toward taking care of patients. The fee schedule is incrementally updated all the time, but the methods have not kept pace. We are still relying primarily on survey data to inform these updates.”
More precise cost calculations can be achieved through a method called time-driven activity-based costing (TDABC). This approach measures the time used by key personnel and assigns a cost rate to it. This allows for a more accurate calculation of the actual cost involved.
Some researchers have used TDABC to examine
Others have sought to improve operational efficiency at ophthalmology institutions using TDABC.
Dr. Childers says that “these types of studies are incredibly important” and “could inform and make the [physician] fee schedule more accurate.”
In their study, Dr. Portney and his colleagues conducted an economic analysis of simple and complex cataract surgery cases that were performed at the University of Michigan Kellogg Eye Center from 2017 to 2021.
Their cost calculation, which focused only on the day of the surgery itself, took the following personnel and resources into account:
- preoperative and postoperative nursing and associated unit capacity
- operating room (including the associated scrub technician and circulating nurse)
- surgeon (ophthalmologist)
- costs of supplies and materials
The researchers obtained time estimates for the surgeries from an internal anesthesia record system. They also collected financial estimates from a combination of internal sources at Michigan Medicine and prior literature. The costs of supplies used during the surgeries were obtained from the electronic health record.
Dr. Robert Berenson, a senior fellow at the Urban Institute with expertise in healthcare policy, particularly Medicare, applauded the research for “collecting actual time data as the basis for setting fees.”
Dr. Berensen, who was not involved in the recent study, told MNT that the empirical measures of time, such as time stamps for procedures, should be used to determine relative costs for procedures.
The study included a total of 16,092 cataract surgeries, out of which 13,904 were simple surgeries and 2,188 were complex surgeries.
The researchers calculated that time-based costs on the day of surgery were $1,486 for simple cataract surgery and $2,205 for complex cataract surgery. This means that complex cataract surgery cost $719 more on average compared to simple surgery.
The cost of supplies and materials for complex surgery was $158 higher compared to simple surgery.
When considering all the costs on the day of surgery, the total cost difference between complex and simple cataract surgery was $877.
Still, the reimbursement for complex cataract surgery was $231 more compared to simple surgery. This means that complex cataract surgery resulted in a financial loss of $646 when compared to simple cataract surgery.
Medical News Today asked Dr. Portney to shed light on how the discrepancy between costs and reimbursement for complex cataract surgery may affect doctors and patients.
“For doctors, the first thing it can do is hurt physicians financially,” he said.
“Doctors are not driven primarily by financial motives, but it is certainly something that plays a role in the way offices and institutions function. I cannot directly speak to whether ophthalmologists change practice patterns because of this, but it is theoretically possible that a busy and profit-focused ophthalmologist — may defer or refer out patients who will require more complex care, potentially reducing access to care for such patients.”
– Dr. David Portney, study co-author
Dr. Childers shared similar thoughts.
“If reimbursement rates are too low, physicians may be deterred from taking on these cases,” he said.
“As described in this study, ophthalmologists may not be inclined to do complex cataract surgeries as the reimbursement is not on par with the complexity of care provided. Conversely, if reimbursement is too high it may create perverse incentives for physicians to perform that service too often,” Dr. Childers added.
Dr. Childers had two main concerns regarding this study.
“First, it’s only from a single institution,” he said. “The goal of a physician fee schedule is to be generalizable to a variety of different practices across the country. It is unclear if the findings in this study would be generalizable.”
“Second, one has to be a little cautious at interpreting their findings. They are reporting the difference in costs between simple and complex cases but are not reporting the absolute costs/revenues of the operations,” Dr. Childers explained.
“The way the data is presented makes it look like the institution is losing money on the complex cataract surgeries but this is not actually what is being presented. It is possible the institution may be making a lot on the simple cases and then relatively less (but still positive amounts) from complex cases.”
– Dr. Christopher Childers, surgical oncology fellow
In Berenson’s opinion, the study’s major limitation is that it “calculates absolute dollar costs for physician services… but the Medicare physician fee schedule estimates relative costs.”
He pointed out that comparing the two values is like comparing “apples to oranges” and noted that without this limitation being addressed, the study’s findings may be misleading.
Dr. Portney said he hopes that this study will be followed by “many more similar studies, and a thoughtful discussion about where reimbursement changes can feasibly be made.“
This, he said, “will hopefully lead to sustainable and more equitable reimbursement for physicians — not just ophthalmologists — to ensure that patients continue to have excellent and high quality care.”