key: cord-0916643-vkvvgot3
authors: Best, Matthew J.; McFarland, Edward G.; Anderson, Gerard F.; Srikumaran, Uma
title: The Likely Economic Impact of Fewer Elective Surgical Procedures on US Hospitals During the COVID-19 Pandemic
date: 2020-07-29
journal: Surgery
DOI: 10.1016/j.surg.2020.07.014
sha: f67bd3690c0a8ff5d2fcd35726e9f70af54dad81
doc_id: 916643
cord_uid: vkvvgot3

BACKGROUND: In order to help control the COVID-19 pandemic, elective procedures have been cancelled in most US hospitals by government order. The purpose of this study is to estimate national hospital reimbursement and net income losses due to elective surgical procedure cancellation during the COVID-19 pandemic. METHODS: The National Inpatient Sample (NIS) and the Nationwide Ambulatory Surgery Sample (NASS) were used to identify all elective surgical procedures performed in the inpatient setting and in hospital owned outpatient surgery departments throughout the United States. Total cost, reimbursement, and net income was determined for all elective surgical procedures. RESULTS: The estimated total annual cost of elective inpatient and outpatient surgical procedures in the United States was $147.2 billion and estimated total hospital reimbursement was $195.4 – $212.2 billion. This resulted in a net income of $48.0 – $64.8 billion per year to the US hospital system. Cancellation of all elective procedures would result in estimated losses of $16.3 – $17.7 billion per month in revenue and $4 – $5.4 billion per month in net income to US hospitals. CONCLUSIONS: Cancellation of elective procedures during the COVID-19 pandemic has a substantial economic impact on the US hospital system.

(NASS) were used to identify all elective surgical procedures performed in the inpatient setting 23 and in hospital owned outpatient surgery departments throughout the United States. Total cost, 24 reimbursement, and net income was determined for all elective surgical procedures. In order to estimate cost and reimbursement for inpatient elective surgical procedures, we 83 selected all elective encounters in the NIS using the HCUP elective variable designation. Cases 84 were then selected based on procedure class using the HCUP procedure classification system 85 which divides procedures into four categories: minor diagnostic or minor therapeutic (not 86 requiring operating room), and major diagnostic or major therapeutic (operating room 87 procedure). 12, 13 We analyzed elective operating room procedures as well as those procedures not 88 requiring an operating room. 89

The HCUP provides cost-to-charge ratio files that are calculated based on information 92 from hospital accounting reports collected from the Centers for Medicare & Medicaid Services 93 (CMS) and are specific to each encounter in the NIS. 14 These files provide a cost that reflects the 94 actual expenses from hospital services, such as wages, supplies, and utility costs for each case. 11 The CMS provides additional payments for each case to teaching hospitals referred to as 106 the indirect medical education (IME) adjustment. The IME adjustment is calculated based on the 107 number of residents and the number of beds in each hospital. 18 The IME adjustment values of 108 each teaching hospital are available in the CMS hospital cost report data. 19 In order to estimate 109 IME adjustments for cases in the NIS, we used the CMS hospital cost report data to calculate 110 mean IME adjustment values stratified based on hospital census region, urban hospital setting 111 and hospital bed size. We then matched these adjustments to cases performed at teaching 112 hospitals in the NIS based on the census region, urban hospital setting, and hospital bed size as 113 listed in the NIS (Electronic Supplement 1). The CMS also adjusts the payment for each case 114 based on whether the hospital treats patients with low income. This is referred to as the 115 disproportionate share hospital (DSH) adjustment and is available in the CMS hospital cost 116 report. 20 Using CMS data, we calculated mean DSH adjustments based on hospital census region 117 and urban or rural hospital setting and matched these values to cases in the NIS based on hospital 118 census region and hospital setting (Electronic Supplement 2). 119

Finally, the CMS provides an additional adjustment for exceptionally high cost cases, 120 referred to as an outlier payment. Cases are eligible for outlier payments if the costs are greater 121 than the sum of the adjusted payment plus a constant value set by CMS each year known as the 122 fixed-loss cost threshold. The outlier payment is equal to 80% of the difference between the cost 123 and the sum of the adjusted payment and the fixed-loss cost threshold. 21 We calculated cost for each outpatient case in the NASS using data from the hospital 138 outpatient prospective payment system (HOPPS) designed by the CMS. The CMS determines 139 mean cost values for each Current Procedural Terminology (CPT) code, which is listed in the 140 HOPPS Final Rule cost statistic tables. The CMS calculates these values to represent the average 141 total cost for that type of case for all hospitals along with bundled services. 29 When more than 142 one procedure is performed during a single surgery and more than one procedural code is listed, 143 then the code with the highest cost is used to determine the total cost for the case. In the 144

Medicare payment system, subsequent codes do not add to the total case cost. 145

Reimbursement was calculated for each outpatient case using the CMS payment system. 148

As with cost, the CMS determines total payment amounts and minimum copayment amounts for 149 each procedural code which is listed in the HOPPS Final Rule cost statistical and addenda tables 150

for each year. The CMS calculates these amounts based on ambulatory procedure classifications 151 and procedure codes are also classified under a status indicator. 30 When more than one procedure 152 is performed during a single surgery and more than one procedure code is listed, the status 153 indicator is used to determine the method of payment. For example, if the status indicator of any 154 code for the procedure is J1, then the case receives a bundled payment and additional procedure 155 codes to do not affect payment. Payments for over 92% of cases in the NASS were bundled 156 based on the CMS method. Non-bundled cases receive full payment for the primary procedural 157 code, followed by 50% payment for subsequent codes in accordance with CMS rates. The total cost and adjusted reimbursement variables for all surgical services in all 169 hospitals were calculated. Net income was calculated by subtracting total cost from adjusted 170 reimbursement for each case and an aggregate sum was calculated. The most commonly 171 performed inpatient and outpatient operating room surgical procedures were identified using the 172 HCUP clinical classification software. 12,13 There were 1.7% (175,119) of outpatient cases that 173 had missing cost or reimbursement data so these were excluded from the analysis. We adhered to 174 methodological standards for NIS use, including using discharge weights rather than hospital-175 level weights for analysis. 31,32 Data were analyzed using SPSS, version 23, software (IBM Corp. (Table 1) . When comparing elective procedures to non-elective procedures, elective procedures 190 had lower cost and higher net income than non-elective procures (Figure 1 information on hospital revenue so their statistical brief did not include revenue or profit in the 216 analysis. Furthermore, the report did not contain information on ambulatory services. 8 Therefore, 217 it is difficult to make financial predictions on the financial performance of hospitals from 218 elective procedure cancellation using this report. In this study, we estimate hospital 219 reimbursement specifically for elective inpatient and outpatient surgical procedures, which can 220 be used to aid in economic projections and decision-making. Although Congress has already allocated $175 billion in relief funding to the healthcare 237 system to help reduce net income losses, the exact impact that this funding has on hospitals is not 238 well elucidated since the funding has not been completely allocated. The findings of this study may be useful for federal and state agencies in further considerations to provide hospitals with 240 additional measures to help offset these financial losses. Also, not all of the allocated dollars 241 have been spent and it is possible to change which hospitals receive the funding. 242 Some centers have needed to furlough employees and faculty, reduce salaries, decrease 243 retirement funding and limit benefits for workers which may reduce financial losses. 37 244

Alternatively, hospitals may incur greater costs in the future (due to increased COVID testing, 245 greater use of PPE, and decreased operating room efficiency during tiered procedure resumption) 246 in order to return to normal business operations and may have decreased efficiency in the next 247 few years due to distancing measures and limited personal protective equipment. Other long 248 terms costs which may arise include enhanced testing measures to keep patients safe for elective 249 visits, improved cleaning and sterilization processes, and enhanced infection control standards. 250

There are several limitations of this study. Most important, the study does not examine 251 the impact on surgeons. Second, we do not know how many elective surgeries were actually 252 cancelled and how long the cancellations will continue. Third, the NASS only includes data for 253 outpatient surgery that takes place in hospital owned facilities (including those within the 254 hospital, attached to the hospital or in a different geographic location than the hospital) and 255 represents a true national estimate of this but does not include physician-owned facilities. 256 However, our objective was to study the economic impact on the US hospital system and not on 257 private practice, a separate study would be needed to examine privately owned outpatient surgery 258 centers. Additionally, some hospitals are exempt from the CMS IPPS but these tend to be 259 smaller, rural hospitals and our payer adjustment would take this into account. 38 Using the NIS 260 and NASS, we cannot determine losses incurred by hospitals due to employees and infrastructure 261 in the absence of surgery. Finally, this study estimates potential losses in the case that all elective 262 procedures were cancelled, but the true number is likely lower than this. 263

The cost and revenue calculations are based on estimates. Cost estimates are reflective of 264 the expenses for each case and represent hospital services such as wages, supplies, and utility 265 costs. However, these costs do not include professional fees. Due to variation across the US 266 based on physician-hospital contracts and other variables, we felt that estimates of professional 267 fees would be difficult to assess and did not include these in the analysis. Our study utilizes CMS 268 methodology for calculating reimbursement, but several estimations were necessary, including 269 IME and DSH estimates. Mean IME and DSH estimates were stratified according census region, 270 hospital bed size, urban versus rural setting, and teaching status because we cannot link data 271 from CMS to specific hospitals in the NIS. Larger teaching hospitals have the highest IME and 272 DSH adjustments so calculating stratified mean estimates will decrease the adjustments for these 273 larger and busier hospitals; however, we are calculating national estimates, not estimates for In this study we estimated the total annual cost, reimbursement and net income from elective inpatient and outpatient surgery in the United States. The importance of this report is that it may aid state and federal agencies in financial planning during and following the COVID-19 pandemic and officials should consider these results when deciding how to allocate funds and resources to sustain hospital operations.

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