Original Research

JOURNAL OF ENDOUROLOGY Volume XX, Number XX, XXXX 2014 ª Mary Ann Liebert, Inc. Pp. ---–--DOI: 10.1089/end.2014.0435

The Effect of Repair Costs on the Profitability of a Ureteroscopy Program Jeffrey J. Tosoian, MD, MPH,* Wesley Ludwig, MD,* Nikolai Sopko, MD, PhD, Jeffrey K. Mullins, MD, and Brian R. Matlaga, MD, MPH

Abstract

Background and Purpose: Ureteroscopy (URS) is a common treatment for patients with stone disease. One of the disadvantages of this approach is the great capital expense associated with the purchase and repair of endoscopic equipment. In some cases, these costs can outpace revenues and lead to an unprofitable and unsustainable enterprise. We sought to characterize the profitability of our URS program when accounting for endoscope maintenance and repair costs. Materials and Methods: We identified all URS cases performed at a single hospital during fiscal year 2013 (FY2013). Charges, collection rates, and fixed and variable costs including annual equipment repair costs were obtained. The net margin and break-even point of URS were derived on a per-case basis. Results: For 190 cases performed in FY2013, total endoscope repair costs totaled $115,000, resulting in an average repair cost of $605 per case. The vast majority of cases (94.2%) were conducted in the outpatient setting, which generated a net margin of $659 per case, while inpatient cases yielded a net loss of $455. URS was ultimately associated with a net positive margin approaching $600 per case. On break-even analysis, URS remained profitable until repair costs reached $1200 per case. Conclusions: Based on these findings, an established URS program can sustain profitability even with large equipment repair costs. Nonetheless, our findings serve to emphasize the importance of controlling costs, particularly in the current setting of decreasing reimbursement. A multifaceted approach, based on improving endoscope durability and exploring digital and disposable platforms, will be critical in maintaining the sustainability of URS. stone management.9–11 What is less certain and particularly important in the present healthcare environment of cost containment, however, is how effectively a URS program can achieve a positive financial margin in light of these high overhead costs. To better characterize the sustainability of URS moving forward, we assessed the profitability of our URS program while accounting for endoscope maintenance and repair costs. Furthermore, we considered the effect of inpatient stays and revenue collection rates on overall profitability.

Introduction

U

reteroscopy (URS) is considered a first-line therapy for patients with upper tract stone disease.1 One of the persistent concerns related to this intervention, however, particularly from an institutional perspective, is its capital-intensive nature; an effective URS program needs a multiplicity of endoscopes and disposable devices.2 In addition to the initial capital outlays associated with the purchase of the ureteroscope, the frequency of ureteroscope repair presents a significant cost to institutions.3 Despite advances in technology and the use of techniques to minimize damage, multiple studies have reported that ureteroscope repair will be needed within 5 to 28 endoscope uses; the cost of these repairs has been reported to be in excess of $50,000 annually.3–8 Nonetheless, as kidney stones affect approximately 10% of the population and claim an increasing prevalence, URS will likely continue to be an important component of surgical

Materials and Methods

For fiscal year 2013 (FY2013), we identified all URS cases performed at a single surgical suite (Johns Hopkins Bayview Medical Center). URS cases were identified through a query of the Centricity Perioperative Manager, the information system that manages the key functions of the surgical suite.

Department of Urology, The James Buchanan Brady Urological Institute, The Johns Hopkins University School of Medicine, Johns Hopkins Hospital, Baltimore, Maryland. *Co-first authors.

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Identified cases were reviewed to determine whether the patient needed inpatient admission after the surgical procedure, and records were marked accordingly. Fiberoptic endoscopes were used in all instances. The vast majority of cases were laser lithotripsy or stone manipulation (Current Procedural Terminology 52353, 52352) with a small minority of procedures being diagnostic in nature. Lasers needed for URS were purchased years before the present study and therefore the costs of these devices were not included in this analysis. Cost and collection data were obtained from the Johns Hopkins Bayview Medical Center billing department. The collection rate was the proportion of calculated gross revenue that was received as payment. Certified Professional Coder allowable income was tabulated for inpatient and outpatient admissions, and the net income was calculated according to the collection rate. Direct variable costs, indirect variable costs, direct fixed costs, and indirect fixed costs were tabulated. Direct costs are defined as costs associated with a procedure that can be directly attributed to the procedure, such as specific supplies used in the operating room. On the other hand, indirect costs are those associated with the global operating room effort that cannot be linked to a particular procedure. An example of indirect costs are the salaries of support personnel. Variable costs are those that change throughout the accounting period, such as device costs discounted with volume utilization that may or may not be attained throughout the fiscal year. Finally, fixed costs are those that do not change throughout the fiscal year. Net margin was calculated as the difference between net income and total cost. The variable net margin represents the incremental margin achieved with each additional case and indicates whether increasing volume is associated with increased profitability. Parameters were described on a per-case basis by dividing the total values by the number of cases performed. We did not include the ureteroscope acquisition cost, because those outlays had been incurred before the study period. This study was approved by the Institutional Review Board at the Johns Hopkins Medical Institutions. Results

During the study period, ureteroscopes were used for management of urolithiasis a total of 190 times. Indirect variable costs associated with URS totaled $183,575, of which $115,000 was attributable to 20 endoscope repairs needed during the study period. The total institutional costs associated with URS cases are listed in Table 1. On a per-case basis, the cost of endoscope repair equaled $605 per case. The average institutional cost of each URS case was $4852.

Table 1. Institutional Costs Associated with Ureteroscopy

Cases Direct fixed costs Indirect fixed costs Direct variable costs Indirect variable costs Total costs

Total

Per-case

190 $143,864 $214,794 $379,621 $183,575 $921,855

1.0 $757 $1130 $1998 $966 $4852

Table 2. Revenues Generated and Collected by Ureteroscopy

Cases Gross revenue Collection rate Net collection

Total

Per-case

190 $1,158,528 89% $1,034,804

1.0 $6098 89% $5446

Revenues associated with URS cases are listed in Table 2. The calculated gross revenue of all cases was $1,158,528. Revenues were collected at a rate of 89%, yielding a net collection of $1,034,804 and a per-case collection of $5446. Of the 190 patients who underwent URS, 11 needed inpatient (IP) hospitalization after the procedure while 179 were discharged as outpatients (OP) on the day of the procedure. As demonstrated in Table 3, IP cases were generally associated with greater costs and revenues than OP cases. The average values for IP and OP cases combined were similar to those observed in OP cases, because OP cases composed the vast majority (94.2%) of the study population. Ultimately, IP cases were associated with a net loss of $455 (-4%) per case, while OP cases generated a net profit of $659 (13%) per case. Independent of postoperative disposition, URS cases generated a profit of $594 (11%) on average. Notably, the variable net margin is positive for both IP and OP cases, indicating that increased case volume would prove profitable. Break-even analysis was performed to identify minimum and maximum cost and collection parameters at which the URS program would remain profitable. The maximum cost of ureteroscope repair allowing for profitability was found to be $1199 per case, while the minimum collection rate allowing for profitability was 79.6%. Discussion

Total healthcare expenditures are anticipated to double in the coming decade, reaching an estimated 4.8 trillion dollars by 2021.12 In the setting of recently initiated healthcare reform, medical expenditures have come under scrutiny, perhaps now more than ever.13 Substantial alterations have already been made to physician reimbursement plans, and

Table 3. Per Case Costs and Revenues by Postoperative Disposition

Direct fixed costs Indirect fixed costs Direct variable costs Indirect variable costs Total costs Gross revenue Collection rate Net collection Variable net margin (%) Net margin (%) -

IP (N = 11)

OP (N = 179)

IP and OP

$2504 $2743 $4589 $1481 $11,317 $13,448 81% $10,868 $4793 (44)

$650 $1031 $1839 $935 $4455 $5646 91% $5113 $2340 (46)

$757 $1130 $1998 $966 $4852 $6098 89% $5446 $2482 (46)

$455 (-4)

$659 (13)

$594 (11)

IP = inpatient; OP = outpatient.

EFFECT OF URETEROSCOPE REPAIR ON PROFITABILITY

widespread changes are certain to continue in this evolving economic climate.14 Physicians in procedure-based fields may be particularly susceptible to scrutiny, because the financial impact of surgical procedures is multiplied with each additional patient treated. The management of urolithiasis, in particular, is a resource-intensive surgical realm that will likely face increasing levels of scrutiny in the coming years. Although previous studies have characterized the frequency with which ureteroscopes need repair, there have been limited investigations into the net financial implications of URS repair and whether it threatens the regular practice of URS. Our findings demonstrate that despite substantial costs associated with repair, URS remains profitable, with a net margin of $594 per case. During this study period, the percase cost of endoscope repairs was calculated as $605, in comparison with our historic finding of $418 in 2009.3 One explanation for the observed increase in per-case repair costs may be the increased complexity of cases being managed with URS, as the stone burdens treated have increased with provider familiarity over time. These costs described at our institution are in line with the findings of others, who have similarly demonstrated high capital expense associated with URS.2,15 Importantly, however, we found the URS program would remain profitable even with repair costs increasing to nearly $1200 per case. While the costs allowable to remain profitable will certainly vary by case mix and among institutions, it is notable that URS remains a profitable venture at present, even in the face of such repair costs. It should be noted that we did not account for the acquisition costs of the ureteroscopes in our analysis, as those costs were borne before FY2013, the time period of our study. A returnon-investment calculation for initiating a URS program would necessarily have to include capital costs for endoscope acquisition, as well as video towers, lasers, and the like; those calculations are outside of the scope of the present study. In addition to calculating the costs associated with URS, we aimed to build on previous research by assessing the impact of factors such as postoperative disposition and overall collection rate on profitability. By analyzing IP and OP cases separately, we found there was a net financial loss associated with IP cases that was not present with OP cases. There are a number of factors that may contribute to this dichotomy, most notably the collection rates of 81% for IP and 91% for OP cases. Had the collection rate been 91% for all cases, IP cases would have generated an average profit of $920, which differs significantly from the observed loss of $455. A better understanding of this variation in collection rates may improve the profitability of cases necessitating inpatient stay. In addition, the increased costs associated with IP cases should be more thoroughly investigated. While an inpatient stay is by nature associated with higher costs, it is important to understand whether there exist case or patient-specific factors that unnecessarily increase costs in the inpatient setting. Previous studies have investigated methods of decreasing costs associated with URS. For example, training urology nursing staff to clean and sterilize ureteroscopes can significantly decrease repair costs.3 Karaolides and colleagues6 introduced a set of guidelines for ureteroscope use and a credentialing process for new surgeons that also led to a significant decrease in the frequency with which scopes needed repair. Similarly, Chapman and associates16 demonstrated a significant reduction in repair costs when disposable laser fibers

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were used for lithotripsy, as compared with reusable fibers. Other groups have demonstrated that endoscope durability improves and the frequency of repair decreases with the appropriate use of ureteroscopic accessories such as a ureteral access sheath and nitinol basket.8 Implementation of such practices and discovery of additional methods to decrease cost will be essential to ensuring the sustainability of URS programs.17 This study has limitations that deserve mention. First, we were unable to identify whether ureteroscope repairs occurred with greater frequency after IP procedures vs OP procedures. Although IP procedures may be more complex and encounter larger stone burdens, we could not identify the impact of this on endoscope durability. Furthermore, our data did not allow us to differentiate those IPs admitted for another diagnosis who underwent a potential OP procedure from those whose procedure ultimately merited IP stay, although we believe this to be a small proportion. Notably, all endoscopes used in this study were fiberoptic, so these data may not apply to programs using digital endoscopes, which are often more costly to repair. In addition, collection rates may vary based on institution and payer mix; thus our findings may not translate directly to external programs but instead represent a baseline from which other institutions will vary. In a similar manner the cost of scope servicing may vary based on institutional agreements. The decision to purchase or rent laser units, as well as the variation in cost of specific lasers, is a significant, institutiondependent factor that may certainly impact profitability. While the current study focused on endoscope-specific costs, these factors should also be considered in subsequent work. Finally, the manner in which disposable products were accounted varied among cases based on payer. Fortunately, these products contribute only minimally to the net margin and should not significantly affect our results. Certainly, however, individual practice patterns regarding the use of disposable products will impact overall costs and need to be considered when applying these findings externally. Nonetheless, our ability to establish a net profitability margin for URS is unique and provides a basis for comparison moving forward. Our comparison of the IP and OP settings further provides insight as to the profitability of procedure-based care in the contemporary setting and should prompt additional factor-based analysis in URS as well as other practices. Ultimately, this study helps to answer the fundamental question of whether URS is a sustainable therapy for urolithiasis despite being associated with high institutional costs. Indeed, URS does appear to be profitable, particularly in the OP setting. Additional research may aim to build on these findings and maximize the sustainability of this procedure. Conclusions

Despite the high costs associated with frequent ureteroscope repair, URS appears to be a financially sustainable modality for the treatment of patients with urolithiasis. Technologic advancements and the implementation of programs aimed at minimizing ureteroscope damage may further improve profitability. Regardless, URS appears to be a feasible treatment option in the setting of decreased healthcare spending. Disclosure Statement

No competing financial interests exist.

4 References

1. Preminger GM, Tiselius HG, Assimos DG, et al. 2007 guideline for the management of ureteral calculi. J Urol 2007;178;2418–2434. 2. Gurbuz C, Atis G, Arikan O, et al. The cost analysis of flexible ureteroscopic lithotripsy in 302 cases. Urolithiasis 2014;42:155–158. 3. Semins MJ, George S, Allaf ME, Matlaga BR. Ureteroscope cleaning and sterilization by the urology operating room team: The effect on repair costs. J Endourol 2009;23: 903–905. 4. Traxer O, Dubosq F, Jamali K, et al. New-generation flexible ureterorenoscopes are more durable than previous ones. Urology 2006;68:276–281. 5. Knudsen B, Miyaoka R, Shah K, et al. Durability of the next-generation flexible fiberoptic ureteroscopes: A randomized prospective multi-institutional clinical trial. Urology 2010;75:534–538. 6. Karaolides T, Bach C, Kachrilas S, et al. Improving the durability of digital flexible ureteroscopes. Urology 2013;81: 717–722. 7. Carey RI, Gomez CS, Maurici G, et al. Frequency of ureteroscope damage seen at a tertiary care center. J Urol 2006;176:607–610. 8. Pietrow PK, Auge BK, Delvecchio FC, et al. Techniques to maximize flexible ureteroscope longevity. Urology 2002;60: 784–788. 9. Stamatelou KK, Francis ME, Jones CA, et al. Time trends in reported prevalence of kidney stones in the United States: 1976–1994. Kidney Int 2003;63:1817–1823. 10. Cone EB, Eisner BH, Ursiny M, Pareek G. Cost-effectiveness comparison of renal calculi treated with ureteroscopic laser lithotripsy versus shockwave lithotripsy. J Endourol 2014;28:639–643. 11. Rombi T, Triantafyllidis A, Fotas A, et al. Socioeconomic evaluation of the treatment of ureteral lithiasis. Hippokratia 2011;15:252–257.

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12. Centers for Medicare and Medicaid Services: National Health Expenditure Projections 2011–2021. http://www .cms.gov/Research-Statistics-Data-and-Systems/Statistics -Trends-and-Reports/NationalHealthExpendData/Downloads/ Proj2011PDF.pdf 13. Emanuel E, Tanden N, Altman S, et al. A systemic approach to containing health care spending. N Engl J Med 2012;367:949–954. 14. Barney LM, Gokak SZ, Jackson JJ, et al. 2014 fee schedule and CPT code changes will affect surgical practice. Bull Am Coll Surg 2014;99:27–33. 15. Collins JW, Keeley FX Jr, Timoney A. Cost analysis of flexible ureterorenoscopy. BJU Int 2004;93:1023–1026. 16. Chapman RA, Somani BK, Robertson A, et al. Decreasing cost of flexible ureterorenoscopy: Single-use laser fiber cost analysis. Urology 2014;83:1003–1005. 17. Matlaga BR, Jansen JP, Meckley LM, et al. Economic outcomes of treatment for ureteral and renal stones: A systematic literature review. J Urol 2012;188:449–454.

Address correspondence to: Brian R. Matlaga, MD, MPH Brady Urological Institute 600 North Wolfe Street Park 2/Room 221 Baltimore, MD 21287 E-mail: [email protected]

Abbreviations Used FY2013 ¼ fiscal year 2013 IP ¼ inpatient OP ¼ outpatient URS ¼ ureteroscopy

The effect of repair costs on the profitability of a ureteroscopy program.

Ureteroscopy (URS) is a common treatment for patients with stone disease. One of the disadvantages of this approach is the great capital expense assoc...
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