1. © 2003 WebMD Inc. All rights reserved. ACS Surgery: Principles and Practice
ELEMENTS OF CONTEMPORARY PRACTICE 7 ELEMENTS OF COST-EFFECTIVE CARE — 1
7 ELEMENTS OF COST-EFFECTIVE
NONEMERGENCY SURGICAL CARE
Robert S. Rhodes, M.D., F.A.C.S., and Charles L. Rice, M.D., F.A.C.S.
The citizens of industrialized nations generally enjoy a high level Surgery is a particularly suitable subject for cost-effectiveness
of health, and the positive correlation between life expectancy and analysis because surgical illnesses are usually of relatively short
per capita income is one of the best-known relationships in inter- duration, surgical outcomes are readily quantified, and surgical
national development.1 Yet many of these nations also face major costs often involve global fees. In what follows, we explore some
challenges in controlling the cost and improving the quality of basic principles of cost-effective surgical care and address some of
health care.The United States has attempted to control these costs the complex issues involved in defining such care.We define cost-
through price controls (in the Nixon era), prospective payment (in effectiveness as cost divided by net benefit, with the numerator
the Reagan era), and managed care (in the Clinton era), but none (cost) expressed in dollars and the denominator (net benefit)
of these measures have had any long-term success [see Table 1].2,3 expressed as beneficial outcomes minus adverse outcomes. Since
A consequence of the ongoing growth in health care expendi- cost-effectiveness is integrally related to quality of care issues, we
tures is that health care then increasingly competes with other consider recent changes in the concepts of quality, address the
social goals (e.g., education) for some of the same funds. The complex issues associated with cost, and examine the relation of
anguish of having to choose one social goal over another can be quality to cost. Perhaps most important, we also focus on specific
rationalized when the expenditures on the chosen goal produce skills and attributes that can help surgeons become more cost-
demonstrable improvements. Thus, if increased health spending effective.
generates measurably better health, it seems worthwhile, but if it
does not, it seems wasteful. In the United States, unfortunately,
the latter scenario appears to prevail. Even though the United Demise of “Appropriateness” as Indicator of Quality
States spends a larger fraction of its gross domestic product
DRAWBACKS OF TRADITIONAL VIEW OF QUALITY
(GDP) on health care than other industrialized nations do [see
Table 2], U.S. citizens seem less healthy—often by wide margins— To achieve cost-effective care, it is necessary first to develop a suit-
than citizens in other nations [see Table 3].4 Of further concern are able definition of quality—a task that is considerably more problem-
the data indicating that the greater U.S. spending is attributable atic than it seems.6,7 The traditional definition of quality focused on
largely to higher prices for health care goods and services.5 the appropriateness of the care provided, and the authority (in terms
Controlling health care costs and improving health care out- of knowledge) for such appropriateness was viewed as exclusively the
comes have multiple interwoven perspectives that range from the province of physicians. By the end of the 20th century, however, sev-
macrostructure of the health care system to the wide variety of eral factors had begun to erode appropriateness (and physician au-
individual patient-provider interactions. The relevance of these thority) as the traditional indicator of quality.
interactions is underscored by the fact that physician decision- One such factor was the realization that per capita health care
making accounts for 75% of overall health care costs. The pro- expenditure was not necessarily positively correlated with life
nounced impact of physicians’ choices on health care costs also expectancy. Another factor—one that directly challenged the
explains why those who pay the bills naturally seek to identify the authority of the physician as the arbiter of quality of care—was the
most cost-effective physicians. finding that some procedures have a relatively high incidence of
Table 1 U.S. Health Care Expenditures: Selected Years, 1960–20002,184
Expenditure Expenditure as
Year for Health Services U.S. Population Expenditure Percentage of
GDP ($ billion)
and Supplies (million) per Capita ($) GDP (%)
($ billion)
1960 25.2 190 141 527 5.1
1970 67.9 215 341 1,036 7.1
1980 245.8 230 1,067 2,796 8.8
1990 696.0 254 2,738 5,803 12.0
1995 990.1 268 3,697 7,401 13.4
2000 1,310.0 280 4,672 9,825 13.3
GDP—gross domestic product

2. © 2003 WebMD Inc. All rights reserved. ACS Surgery: Principles and Practice
ELEMENTS OF CONTEMPORARY PRACTICE 7 ELEMENTS OF COST-EFFECTIVE CARE — 2
Table 2 Percentage of GDP Spent on Health Care in Selected Countries: 1960–2000185
Expenditure as Percentage of GDP
Year Canada France Germany Japan United Kingdom United States OECD Median
1960 5.4 — — 3.0 3.9 5.0 4.1
1970 7.0 — 6.2 4.5 4.5 6.9 5.1
1980 7.1 — 8.7 6.4 5.6 8.7 6.8
1990 9.0 8.6 8.5 5.9 6.0 11.9 7.5
2000 9.2 9.3 10.6 7.6 7.3 13.1 8.0
GDP—gross domestic product OECD—Organisation for Economic Co-operation and Development
inappropriate indications. For instance, a Rand Corporation the intensity of local diagnostic testing and the number of invasive
study found that 32% of carotid endarterectomies, 17% of coro- cardiac procedures subsequently performed.18 Indeed, some
nary arteriograms, and 17% of upper GI endoscopies lacked communities seem to have distinct “practice signatures”—a find-
appropriate indications.8 In another study, one in six hysterec- ing that supports the idea that many medical decisions are based
tomies were deemed inappropriate.9 Caesarean section is also fre- on opinion rather than on evidence.19 It may be tempting to
quently performed for unclear indications. attribute such variations to the inherent potential conflict of inter-
A third factor was the differences in judgments of appropriate- est in a fee-for-service system, but in fact, economic incentives
ness often noted when decisions were made for groups rather than appear to have relatively little influence on physicians in this
for individuals.10 In addition, retrospective assessments often regard. Comparable variations in utilization rates exist among
judged appropriateness on the basis of outcome alone, without Veterans Health Administration medical facilities,20 as well as in
considering processes of care.11 countries that do not have fee-for-service reimbursement.
Yet another factor was the recognition of the great disparities in Whether the high utilization rates observed are too high or the
the frequency of surgical procedures among small geographic low utilization rates are too low is still a matter of debate.The pos-
areas.12-14 These frequency variations are procedure specific, and sibility that low frequency of use may reflect restricted access to
their degree is often related to the degree of consensus regarding care is a particular concern, given the association between varia-
indications.15 Procedures with highly specific indications (e.g., tion and the ratio of hospital beds to population.21 To date, stud-
repair of fractured hips, inguinal herniorrhaphy, and appendecto- ies that have attempted to find evidence supporting other possible
my) often exhibit little frequency variation, whereas procedures explanations of these variations (e.g., differences in disease inci-
with less definite indications (e.g., carotid endarterectomy, hys- dence and differences in the appropriateness of use) have not
terectomy, and coronary angiography) often exhibit a great deal of found such evidence.22 The current belief that the high utilization
variation.16 rates are too high is supported by findings of comparable health
The lack of consensus about the appropriateness of surgical status among patients from widely disparate areas of usage, which
interventions is often related to a lack of evidence. Indeed, a study have led to the conclusion that “marked variability in surgical
from the 1970s estimated that only about 15% of common med- practices and presumably in surgical judgment and philosophy
ical practices had documented foundations in any sort of medical must be considered to reflect absent or inadequate data by which
research.17 This conclusion does not necessarily mean that only to evaluate surgical treatment....”23
15% of care is effective, but it does raise concerns about the lack In addition to these concerns about selection and utilization of
of hard evidence for most care. surgical interventions, specific concerns have been raised about
Variations in procedure frequency also appear to be related to quality of care. For instance, studies suggested that as many as one
provider capacity (usually expressed as the number of hospital fourth of hospital deaths might be preventable,24 that one third of
beds per 1,000 persons): one study noted a close relation between hospital procedures might be exposing patients to unnecessary
Table 3 Health Status and Outcomes in Selected Countries: 1999
United United
Canada France Germany Japan Kingdom States OECD Median
Percentage of population 65 yr of age or
older (%) 12.5 15.8 16.1 16.7 15.7 12.3 14.7
Life expectancy at birth (years)
Female 81.7 82.5 80.7 84.6 79.8 79.4 80.7
Male 76.3 75.0 74.7 77.6 75.0 73.9 74.7
Infant mortality (per 1,000 live births) 5.3 4.3 4.5 3.2 5.8 7.1 5.0
OECD—Organisation for Economic Co-operation and Development

3. © 2003 WebMD Inc. All rights reserved. ACS Surgery: Principles and Practice
ELEMENTS OF CONTEMPORARY PRACTICE 7 ELEMENTS OF COST-EFFECTIVE CARE — 3
CRITICAL LITERATURE ANALYSIS
risk, that one third of drugs might not be indicated, and that one
third of abnormal laboratory test results were not followed up.25 The ability to evaluate the literature critically is essential for cost-
Large reviews of medical records also revealed alarming error rates effective care because it enables one both to identify the evidence
and showed that approximately half of the adverse events were relevant to the decision being made and to judge the quality of that
associated with errors in surgical care.26,27 The report on medical evidence.Today, the Internet is indispensable in this process.Three
error issued by the Institute of Medicine (IOM) brought these Web sites that are particularly valuable in retrieving and assessing
issues directly into the public spotlight.28 There were also concerns evidence are MEDLINE (http://www.ncbi.nlm.nih.gov/PubMed/
that physicians might be ignoring therapies of proven value (e.g., medline.html), together with other National Library of Medicine
beta blockade after a myocardial infarction). databases; the Cochrane Collaboration31 (http://www.cochrane.org),
An important consequence of the difficulty of measuring qual- an international network of clinicians and epidemiologists that sys-
ity in traditional terms was that the lack of clear data on quality led tematically reviews the best available medical evidence; and the
to a buyer’s market. Health care purchasers began to use the Oxford Centre for Evidence-Based Medicine (http://www.cebm.net).
apparent similarity in quality, despite variations in frequency and Each of these sites has its advantages and disadvantages. For exam-
cost, to justify contracting for less expensive care. As a result, the ple, the Cochrane Collaboration includes sources not always acces-
medical profession, whose authority was once strong enough to sible through MEDLINE, but the former requires a subscription,
forestall system change, now bears the burden of proof. In some whereas the latter is freely accessible. Recent reviews from the
cases, the pendulum may have even swung too far in one direction: Cochrane Collaboration are also abstracted monthly in the Journal
purchasers assume that even in an atmosphere of decreasing of the American College of Surgeons.
income and increasing professional constraints, health care Randomized, controlled trials (RCTs) are considered the gold
providers will not knowingly or willingly sacrifice quality. Indeed, standard of evidence-based medicine, and the number of surgery-
some believe that competition may spark in physicians a drive to related RCTs has grown rapidly. Meta-analysis of individual RCTs
exceed their patients’ expectations. further improves their utility. Unfortunately, RCTs do have poten-
tial drawbacks. One is that the reporting methods still are not stan-
EMERGENCE OF NEW CONCEPT OF QUALITY dardized.32 Another is that the stringent inclusion criteria of RCTs
Perhaps the final blow to appropriateness as the indicator of may limit the applicability of their results to very specific subsets of
quality was the emergence of a new concept of quality that over- patients.That is, the results may not apply well or at all outside the
conditions specified by the RCT. Even when the study findings are
came many of the shortcomings of the traditional concept.29 This
seemingly applicable to a particular patient, it may be difficult to
new concept characterized quality in terms of (1) structure (fac-
reproduce the expected results in a setting that differs from the care-
ulties, equipment, and services), (2) process (content of care), and
fully controlled conditions imposed by the original RCT. Thus, a
(3) outcomes. Moreover, it made use of the quality-control tech-
test or treatment that is efficacious under ideal circumstances may
niques pioneered by W. Edwards Deming in industry, which
not be effective under less than ideal circumstances. Study types
involved minimizing quality variations by examining production
other than RCTs are associated with lower evidence levels; the hier-
systems. In health care, the production systems are the systems of
archy of evidence levels was well summarized in a 2003 review.33
care, with the structure and process of such systems being inde-
Carotid endarterectomy is a good example of a procedure that
pendent variables and the outcomes being a dependent variable. demonstrates the crucial distinction between efficacy and effec-
Good systems predispose to good outcomes (e.g., high quality), tiveness. RCTs have shown this procedure to be efficacious when
and vice versa. performed by surgeons with low rates of perioperative stroke and
This new concept of quality is also compatible with IOM’s view death.34,35 The effectiveness of carotid endarterectomy, however,
of quality in terms of overuse, underuse, and misuse.30 Although depends on whether the incidence of complications can be kept
the new concept is gaining a strong foothold, the traditional con- low: as the incidence of stroke and other complications rises, the
cept continues to hold sway in some quarters, and this persistence, procedure becomes less effective or even ineffective.36-38 Because
in our view, is at least partly responsible for the fears commonly effectiveness may vary over a relatively narrow range of outcomes,
expressed by patients and health care professionals that managed there are strong ethical reasons why surgeons ought to be familiar
care will adversely affect quality. Nonetheless, the concepts of total with their own results. If patients are to give truly informed con-
quality management and continuous quality improvement are sent, they should have access to information about their surgeon’s
increasingly being applied to health care. outcomes in similar patients.
The generalizability of results is a concern for all types of studies,
Application of New Concept of Quality
not just for RCTs. For instance, in a prospective study of computed
tomography in the diagnosis of appendicitis, the clinical likelihood of
Of the three main components of the new concept of quality, appendicitis in 100 patients was estimated by the referring surgeon
outcome assessments have received the most attention. It is impor- and assigned to one of four categories: (1) definitely appendicitis
tant to remember, however, that outcomes are very dependent on (80% to 100% likelihood), (2) probably appendicitis (60% to 79%),
the structure and the processes of care. Moreover, improvement of (3) equivocally appendicitis (40% to 59%), and (4) possibly appen-
both the structure and the processes of care requires a commit- dicitis (20% to 39%).39 These estimates were then compared with
ment to evidence-based medical practice. This commitment, in the estimated probability of appendicitis determined by CT, and the
turn, depends on a capability for critical analysis of the medical lit- pathologic condition (or absence thereof) was then confirmed by op-
erature. Such analysis then becomes the basis of skills that are eration or recovery.The actual incidences of appendicitis in the four
applied to quality improvement: technology assessment (struc- categories were 78%, 56%, 33%, and 44%, respectively.The CT in-
ture), efficient use of diagnostic testing (process), and clinical deci- terpretations had a sensitivity of 98%, a specificity of 98%, a positive
sion analysis (process).These skills often are not emphasized dur- predictive value of 98%, a negative predictive value of 98%, and an
ing formal medical education and thus warrant review here. accuracy of 98% for either diagnosing or ruling out appendicitis.The

4. © 2003 WebMD Inc. All rights reserved. ACS Surgery: Principles and Practice
ELEMENTS OF CONTEMPORARY PRACTICE 7 ELEMENTS OF COST-EFFECTIVE CARE — 4
difference between the true incidences and the initial clinical esti- Accordingly, it is incumbent on surgeons to know how decisions
mates indicates the potential for inaccuracy in surgeons’ estimation about technology acquisition contribute to excess capacity and cost
of outcomes. within the health care system. The process begins with providers
The results of this study seem relatively clear-cut, but they may be who, out of a compulsion to be the first to have a new technology, ac-
considerably less so when applied to other institutions. For instance, quire it before its value is fully known. Other providers, fearing to be
the authors calculated a savings of $447 per patient. However, costs left behind, then follow suit. If the new technology is successful, the
(and any savings therein) are likely to vary from one institution to an- capacity within a community can exceed the needs; if it is unsuccess-
other in conjunction with a number of factors, including surgeons’ ful, health care cost increases without any increase in benefit to the
differing estimates of the clinical likelihood of appendicitis, the avail- community. Competition among providers is advocated as a way of
ability of less expensive alternatives to in-hospital observation, and restraining health care costs, but when competition is driven by the
the use of the emergency department for triage. In this report, 53% technological imperative, it can contribute to inflationary increases in
of the patients studied had appendicitis, but in other studies, as few these same costs.
as 30% of patients with an admitting diagnosis of appendicitis even- Special challenges result from practice innovations that do not
tually underwent appendectomy.40 involve the introduction of new technology but, rather, involve the
Proper assessment of the literature also requires an awareness of application of existing technology in new ways.65 In this setting,
the distinction between relative and absolute risk reduction. For methodologic problems may prevent surgeons from appreciating
instance, a treatment that reduces the incidence of an undesired potential harm before the innovation has become widely dissemi-
outcome from 5% to 4% and a treatment that reduces it from nated. Laparoscopic cholecystectomy is a particularly good exam-
50% to 40% can both be said to achieve a 20% relative reduction ple of an innovation that diffused rapidly into surgical practice
in risk. Reporting effectiveness in terms of relative improvement before its safety had been fully assesssed. Although laparoscopic
can be misleading if the baseline outcome is ignored.41 Patients’ cholecystectomy is now relatively safe, the learning curve was asso-
participation in adjuvant cancer therapy (and their willingness to ciated with an increased number of bile duct injuries—an out-
tolerate side effects) may be affected more by absolute reductions come that might have been avoided had the procedure been intro-
in risk than by relative reductions. duced in a more systematic fashion.The following four questions,
Another potential pitfall in assessing evidence can arise when an formulated by the American College of Surgeons,66 should be
advance in diagnostic technology allows earlier symptomatic diag- asked whenever a new technology or an innovation in surgical care
nosis or a new or improved screening test allows diagnosis at an is being considered for introduction into widespread use:
asymptomatic stage of a disease. As a result of such developments, 1. Has the new technology been considered adequately tested for
studies intended to compare different treatments of the same dis- safety and efficacy?
ease may actually be comparing treatments of different stages of 2. Is the new technology at least as safe and effective as existing,
the disease process. Earlier diagnosis may appear to improve long- proven techniques?
term survival while in fact only serving to identify the condition for 3. Is the individual proposing to perform the new procedure fully
a longer time.The apparent extended survival with earlier diagno- qualified to do so?
sis is referred to as lead-time bias, and such bias can lead to over- 4. Is the new technology cost-effective?
estimation of disease prevalence.42
Further information on critical analysis of the medical literature EFFICIENT USE OF DIAGNOSTIC TESTING
is available elsewhere,19 particularly in the excellent series pro- Laboratory tests and imaging studies are responsible for a large
duced by the Evidence-Based Medicine Working Group.43-60 share of health care costs and account for much of the reported cost
A final argument for the value of critical literature analysis is variations. Traditionally, the value of a test rested on its sensitivity
physicians’ need to keep pace with patients’ growing access to (i.e., its ability to identify patients with a disease) and specificity (i.e.,
medical information. There are now more than 15,000 health- its ability to identify patients without a disease).67 However, the cost-
related Web sites,61 and it is estimated that tens of millions of effectiveness of a test also depends on disease prevalence. For instance,
adults find health information online. In addition, patients may get if a test with a 98% sensitivity and a 98% specificity is applied to a
information from completely unmonitored sources, such as dis- group of patients with a disease prevalence of 50% (i.e., a group in
ease-specific bulletin-boards. Given that at least some of this infor- which half the patients have the disease being tested for), 245 of
mation is inaccurate, misleading, or unconventional,62 it is vital every 500 patients tested (500 × 0.98 × 0.5) will have true positive
that surgeons be aware of what their patients may know or believe. results and five (500 × 0.02 × 0.5) will have false positive results. If,
Survey results published in 2003 suggest that patient use of the however, this same test is applied to 500 members of a population
Internet may be somewhat less than previous estimates suggested with a disease prevalence of 10%, 49 patients (500 × 0.98 × 0.1) will
and that further patient use may be dependent on subsequent have true positive results and nine (500 × 0.02 × 0.9) will have false
interactions with the physician.63 Issues of reimbursement for positive results.Thus, for any given sensitivity, the ratio of true pos-
Internet-based health care services also need to be resolved.64 itives to false positives increases with increasing prevalence of disease
in a given patient population. In the above example, the incidence of
TECHNOLOGY ASSESSMENT
false positives was 2.0% (5/245) in the first group and 18.4% (9/49)
The prevailing societal attitude that equates the latest with the in the second. Given that most tests are not 98% sensitive and 98%
best—the so-called technological imperative—creates consider- specific, the incidence of false positives in the real world is likely to
able pressure to acquire the newest equipment and techniques, be that much greater.This relation between disease prevalence and
even before their value is completely evident. With the explosive the incidence of false positives serves to establish a test’s value or
growth of technology in recent years, this behavior has been a utility and explains why a test may have relatively little value as a
major contributor to the rapid growth of health care costs. screening test in general practice (where the disease prevalence may
It is undeniable that many technological advances have improved be low) but may have relatively high value in a specialist’s practice
surgical care; however, not every new technology proves successful. (where referrals may increase the relative prevalence of the disease).

5. © 2003 WebMD Inc. All rights reserved. ACS Surgery: Principles and Practice
ELEMENTS OF CONTEMPORARY PRACTICE 7 ELEMENTS OF COST-EFFECTIVE CARE — 5
allows an appreciation of the impact of specific factors on that out-
come. Some factors may then receive greater consideration, and
others may be discounted.73 This process is exemplified by analy-
ses of the management of penetrating colon trauma74 and asymp-
tomatic carotid artery stenosis.75 Reductions in uncertainty are
Quality of Care
reflected in increased cost-effectiveness.76-78
Some may find the mathematics of such analyses intimidating;
others may perceive it as a cookbook approach to health care.
Nonetheless, it is clear that formal clinical decision analysis yields
estimates of the importance of specific facets of health care that
might be difficult to obtain otherwise.79
1 2 3 4 Understanding Systems of Care
The analytical skills described (see above) are important for
improving cost-effectiveness, but they may not be sufficient by
themselves. An additional critical element that must be in place is
Cost of Care
a solid understanding of the systems of care within which one
Figure 1 Illustrated is the new concept of quality and cost.72 A practices.These systems reflect the processes of care, and the mea-
positive relation between quality and cost still exists in zones 1 sures of these processes (i.e., what is done to a patient) may be a
and 2, but the slope of the curve flattens in zone 3 and actually more sensitive indicator of quality of care than measures of out-
becomes negative in zone 4. Here, further cost increases are
come (i.e., what happens to a patient). After all, poor outcomes do
associated with decreasing quality because increased use of
not occur every time an incorrect decision is made.80 Systems of
sophisticated (albeit riskier) technology in earlier (or even just
suspected) stages of disease may result in a flat slope (zone 3) or care are reflected in critical pathways, coordination of care, and
even a negative one (zone 4). disease management.
CRITICAL PATHWAYS
An example of the role of test utility in clinical decision making Critical pathways, also referred to as practice guidelines, are
is found in the functional assessment of incidental adrenal mass- increasingly used to standardize treatments and are particularly
es.68 Physicians encountering such masses often feel compelled to helpful for high-volume diagnoses. Although criticized by some as
engage in an elaborate workup; however, in the absence of con- embodying a “cookie cutter” approach, they minimize variation by
crete signs and symptoms, measurement of specific hormone lev- displaying optimal goals for both patients and providers. Critical
els may be of little value. Close inspection of many other routine pathways have been developed by a number of groups and orga-
preoperative tests reveals that they, too, may have little value.69,70 nizations and are available commercially, through surgical soci-
As noted [see Demise of “Appropriateness” as Indicator of eties,81 and in focused publications.82 The Agency for Healthcare
Quality, above], increases in diagnostic testing tend to parallel Research and Quality (AHRQ) has also established practice
increases in clinically relevant downstream procedures.71 An guidelines, which are available online (http://www.ahrq.gov or
example is the known association between the intensity of diag- http://www.guideline.gov) or through evidence-based practice
nostic testing and the frequency of subsequent invasive cardiac centers. The guideline.gov site is part of the National Guideline
procedures.18 A consequence of this association is that increases in Clearinghouse and is a comprehensive repository for clinical prac-
the number of patients who undergo cardiac catheterization as a tice guidelines and related materials.
result of false positive screening tests also lead to increases in the Critical pathways, though valuable as explicit expressions of the
number of patients with negative findings who may have compli- processes of care, do have limitations. One is that the focus on qual-
cations of catheterization, because complications of catheteriza- ity and efficiency of care is often adopted after the decision has
tion occur just as frequently in patients with false positive indica- already been made to admit the patient or perform a procedure. A
tions as in those with true positives.The net effect is to flatten the second is that standardization does not automatically result in qual-
cost-benefit curve and steepen the cost-harm curve.29 Thus, the ity improvement. Accordingly, critical pathways must be consid-
relative frequency of false positives affects both the numerator and ered flexible and subject to modification on the basis of experience.
the denominator of cost-effectiveness. Indeed, critical pathways are perhaps best understood not as rigid
The possibility of a relative reduction in benefit coupled with a rel- rules but as ways of codifying experience that can help others avoid
ative increase in harm is the basis of the new relation between quali- mistakes. A third limitation is that some guidelines do not adhere
ty and cost. In the context of the appropriateness concept, the rela- to established methodologic standards.83-86 A great deal of addi-
tion between health care cost and quality was seen exclusively as tional information on pathway development, implementation, and
positive: increasing expenditure was considered to improve quality, troubleshooting is readily available in published sources.87,88
and vice versa. In the light of our current understanding, however,
COORDINATION OF CARE
differential effects on the cost-benefit and the cost-harm curves can
be seen to alter the relation of quality to cost [see Figure 1].72 By preventing duplication of tests and unnecessary delays, coor-
dination of care both improves patient satisfaction and saves
CLINICAL DECISION ANALYSIS
money. The most frequent causes of delay are scheduling of tests
Analysis of clinical decision making involves quantifying the (31%), followed by unavailability of postdischarge facilities (18%),
effect or impact of each option involved in a medical decision.The physician decision making (13%), discharge planning (12%), and
outcome of each decision thereby acquires a probability, and each scheduling of surgery (12%).89 The growing complexity of health
component of the decision tree carries an explicit assumption that care makes teamwork increasingly essential.

6. © 2003 WebMD Inc. All rights reserved. ACS Surgery: Principles and Practice
ELEMENTS OF CONTEMPORARY PRACTICE 7 ELEMENTS OF COST-EFFECTIVE CARE — 6
DISEASE MANAGEMENT
meaningfulness of a given functional status. For instance, patient
Comprehensive management of disease goes beyond coordina- A may not be able to walk as far as patient B, but whether patient
tion of care and emphasizes preventive measures. Disease man- A actually has a poorer quality of life depends on the context in
agement is most applicable to a relatively large group of patients which that poorer functional status is placed.96
with a given health problem within a given health system or prac- Calculation of QALYs is confounded by several factors.80,97 For
tice. Such management uses an explicit, systematic population- instance, estimates of the future value of an outcome measure may
based approach to identify patients at risk, intervene with specific vary with the circumstances prevailing at the time of assessment
programs of care, and measure clinical and other outcomes.90 (e.g., acute pain) or with the patient’s age (e.g., the elderly often
place great value on the ability to live independently).Thus, quality
of life may be more important than longevity.98 Calculation of
Analysis of Cost-Effectiveness QALYs may also be affected by gender, ethnicity, socioeconomic sta-
In simple terms, cost-effectiveness reflects the cost of a health tus, religious beliefs, and other factors that affect attitudes about
care intervention (usually expressed in dollars) in relation to out- health care.Adjusting outcome measures to account for health status
come. It is distinct both from the cost-benefit ratio, which mea- and severity of illness before treatment can also be difficult.99
sures return on investment (with both the numerator and the Still another factor confounding determination of QALYs is
denominator expressed in dollars), and from efficiency, which that patients, providers, and health care purchasers may have dif-
measures productivity (with outputs divided by inputs). Analysis ferent perspectives on the experiential, physiologic, and resource-
of cost-effectiveness, by definition, compares two approaches to a related dimensions of QALYs. These differences may be reflected
given problem, with the numerator reflecting any difference in cost in different views about which measure is best for judging the out-
come of a given intervention. Thus, the hospital administration is
and the denominator reflecting any difference in quality.The com-
likely to emphasize length of stay and cost, whereas the surgeon
parison can be between two interventions, between an interven-
and the patient are more likely to emphasize morbidity, mortality,
tion and no intervention, or between early and delayed treat-
and subsequent quality of life. When these various perspectives
ment.91 Beneficial changes in one component of the cost-effec-
disagree about the outcome of a decision (as when an outcome
tiveness ratio can be outweighed by adverse changes in the other,
deemed successful by a provider does not satisfy the patient), the
and vice versa. For example, a study of appendicitis noted that for disagreement further complicates the assessment of quality.
each 10% increase in diagnostic accuracy, there was a 14%
increase in the perforation rate.92 In this case, the cost (i.e., DETERMINATION OF COST
increased morbidity from perforation) might be the price paid for Definition and attribution of cost are also complex issues.
the benefit derived (i.e., greater diagnostic accuracy). Any savings Practice costs are relatively easy to identify. Hospital costs, howev-
achieved up front might be lost in the long run because of more er, are much more intricate; as has been well said, “cost is a noun
advanced or complicated illness. that never really stands alone.”100
MEASUREMENT OF QUALITY
A first step in unraveling the complexity of cost is to understand
the distinction between costs and charges. Charges reflect price
To calculate cost-effectiveness, it is necessary to understand the structure but are a poor reflection of actual costs. Costs can be calcu-
principles underlying the measurement of both quality and cost. lated as an aggregate fraction of charges, and this aggregate ratio is
Under the new concept of quality, the preferred outcome measure often relatively constant among institutions. Nevertheless, substantial
is health care–related quality of life, typically expressed in terms of variations exist among institutions regarding the relation between
quality-adjusted life years (QALYs),93,94 which reflect the length of charges and costs for specific goods and services. Such variations re-
time for which a patient experiences a given health status. There sult partly from differences in accounting systems and partly from
are several methods of quantifying QALYs.95 Some of these meth- contractual differences with payors. However, they also arise as a
ods include objective measures (e.g., functional status), whereas consequence of substantial differences in cost attribution, and these
others are based entirely on subjective estimates of well-being.The differences are evident even with the relatively standardized account-
objective measures emphasize patient-desired outcomes and the ing standards required by the Centers for Medicare and Medicaid
Table 4 Categories and Types of Hospital Costs
Category Type Example or Definition
Direct Salaries, supplies, rents, and utilities
Traceability to the object being costed
Indirect Depreciation and employee benefits
Variable Supply
Behavior of cost in relation to output Fixed Depreciation
or activity Semivariable Utilities
Semifixed Number of full-time equivalents per step in output
Management responsibility for control — Often limited to direct, variable costs
Avoidable costs Costs affected by a decision under consideration
Sunk costs Costs not affected by a decision under consideration
Future versus historical Incremental costs Changes in total costs resulting from alternative courses of action
Opportunity costs Value forgone by using a resource in a particular way instead of
in its next best alternative way

7. © 2003 WebMD Inc. All rights reserved. ACS Surgery: Principles and Practice
ELEMENTS OF CONTEMPORARY PRACTICE 7 ELEMENTS OF COST-EFFECTIVE CARE — 7
Services (CMS) (formerly the Health Care Financing Administra- cedure being offset by an increase in procedure volume and an
tion [HCFA]). For instance, data from 1996 indicated that best actual increase in aggregate costs. Given such results, it is under-
practice for expense per 100 minutes of OR time was $511, but the standable that patients, providers, purchasers, and investigators
national median was $938—a 46% variance.101 It is difficult to de- might all reach differing opinions about the value of new technol-
termine how much of this variation is due to differences in account- ogy. Similarly, the added costs of a complication in a single patient
ing and how much to differences in efficiency. can be considered with respect to the frequency of that complica-
To better understand cost behavior, it is useful to recognize that tion in the entire population undergoing a given treatment.109
health-related costs commonly fall into one of four general cate- Priorities for quality improvement efforts to prevent complications
gories [see Table 4]. For surgeons, the first two—the behavior of cost should consider both the incidence of the complication and its
in relation to output or activity and the traceability of costs—are per- independent contribution to resource use.
haps the most important.Within these general categories, there are Perspectives on cost-saving can vary among the different com-
several types of costs that are worth considering in further detail. ponents of the health care system. A 1996 consensus statement
Variable costs, such as supplies, change in a constant proportion- recommended adoption of better standards to improve the com-
al manner with changes in output; fixed costs do not change in re- parability of cost and quality.94,110,111 The panel advocated that cal-
sponse to changes in volume. Semivariable costs (e.g., utilities) in- culations be based on the perspective of society as a whole rather
clude elements of both fixed and variable costs; there is a fixed basic than on that of patients, providers, or purchasers. Otherwise, the
cost per unit of time and a direct, proportional relation between vol- panel concluded, costs incurred by patients or others, such as out-
ume and cost. Semifixed costs (also known as step costs) may patient medication or home care after hospital discharge, might be
change with changes in output, but the changes occur in discrete deemed irrelevant from the purchaser’s perspective.
steps rather than in a constant proportional manner. An example of A unilateral perspective may also disregard some outcomes. For
a semifixed cost is the number of full-time equivalents (FTEs) re- example, how soon patients return to work after an illness may mat-
quired for a particular output. If one FTE can produce 2,000 wid- ter little to a health maintenance organization (HMO) or a govern-
gets, every 2,000-unit change in widget output will be associated ment program but may matter a great deal to the patients them-
with a change in labor cost: for every 2,000-unit increment in out- selves, their employers, or the government agency responsible for
put, one more FTE is needed (with a concomitant increase in disability payments—and probably to most surgeons.
costs), and for every 2,000-unit decrement, one fewer FTE is need-
QUANTIFICATION OF COST-EFFECTIVENESS
ed (with a concomitant decrease in costs). Unless the step threshold
is attained, costs do not change. Thus, a semifixed cost might be Because it is a ratio, cost-effectiveness may be affected by
considered either a variable cost or a fixed cost, depending on the changes in either the numerator (cost) or the denominator (qual-
size of the steps relative to the range of output. Unfortunately, stan- ity) [see Table 5]. Thus, changes in cost-effectiveness can occur
dard protocols for reporting this information often are not avail- through either a relative reduction in cost or a relative improve-
able,102 and the lack of such protocols makes it more difficult to ment in quality. Moreover, quality improvements will be a func-
compare cost analyses of clinical interventions. tion of both the extent and the duration of the improvement.
Cost traceability is classified as direct or indirect. Examples of The various confounding factors notwithstanding, good data
direct costs are salaries, supplies, rents, and utilities; examples of are available on the relative cost-effectiveness of some common
indirect costs are depreciation and administrative costs associated medical interventions [see Table 6].112 The median medical inter-
with regulatory compliance. However, not all costs classified as vention cost is $19,000/year of life. The figure of $50,000/year of
indirect are necessarily indirect in all circumstances. In some situ- life saved has often been put forward as a threshold for cost-effec-
ations, they could be defined as direct costs, with the specific clas- tiveness; however, any such thresholds remain both arbitrary and
sification depending on the given cost objective. relative and are not necessarily indicative of an intervention’s soci-
One technique that can help clarify costs is the creation of a etal value. For instance, the Oregon state health plan prioritized
matrix in which cost type is plotted against cost traceability.Thus, benefits on the basis of broad input from stakeholders rather than
variable costs can be direct or indirect, and direct costs can be a stratified list of $/QALYs.113 Physician leadership is particularly
variable, semivariable, semifixed, or fixed. More often than not, crucial in this context because the majority of health care costs are
costs are categorized according to a decision maker’s specific related to the decision to provide care, not to the question of
needs. The subcategory to which a given cost is assigned, howev- which options for care should be selected.
er, often depends on whose point of view is assumed—the pur-
chaser, the provider, or the patient.103,104 A key point is that physi-
cians primarily affect costs via their impact on variable costs (e.g., Implications of Outcome Variations
fully variable or semifixed costs), yet these costs typically consti- Although it is human nature for each surgeon to believe that he
tute no more than 15% to 35% of hospital costs.104,105 or she is among the best, the data clearly show considerable vari-
The interval between the intervention and the point of mea- ation in resource use and outcomes among surgeons and among
surement can also affect estimates of cost-effectiveness.106,107 hospitals.114 These variations are often relatively large, sometimes
Whereas patients are likely to view outcomes over the long term, exceeding 200% or even 300%. Some of the discrepancies report-
providers and purchasers tend to focus on the short term (e.g., the ed can be accounted for by the natural variability of biologic
term of a health care contract). This difference in perspective processes, and some by differences in disease severity; however,
affects the calculation of QALYs, which, in turn, affects the deter- the majority of the variations are unexplained.
mination of cost-effectiveness. Health care purchasers are well aware of these variations and
It is also useful to distinguish between per-procedure costs at use claims data to create performance profiles of hospital and
the hospital level and aggregate procedure costs at the insurer physician costs and outcomes and to establish benchmarks toward
level. This distinction was clearly an issue with the advent of which providers are expected to strive.The potential problem with
laparoscopic cholecystectomy,108 which saw lower costs per pro- such benchmarks is that they tend to reflect an ideal or excep-

8. © 2003 WebMD Inc. All rights reserved. ACS Surgery: Principles and Practice
ELEMENTS OF CONTEMPORARY PRACTICE 7 ELEMENTS OF COST-EFFECTIVE CARE — 8
Table 5 Cost-Effectiveness Studies of Selected Surgical Procedures
Procedure $/QALY ∆ QALY Comment
The initial cost of endarterectomy is offset by the high cost of care after a major
Carotid endarterectomy in asymptomatic stroke; the relative cost of surgical treatment increases substantially with
patients74 8,000 +0.25 increasing age, increasing perioperative stroke rate, and decreasing stroke
rate during medical management
Routine radiation therapy after conservative The ratio is heavily influenced by the cost of radiation therapy and the quality-
28,000 +0.35
surgery for early breast cancer186 of-life benefit that results from a decreased risk of local recurrence
Total hip arthroplasty for osteoarthritis of the 117,000 in The cost savings result from the high cost of custodial care associated with
+6.9
hip: 60-year-old woman187 cost savings dependency
Total hip arthroplasty for osteoarthritis of the
4,600 +2 —
hip: 85-year-old man187
Endoscopic versus open carpal tunnel Cost-effectiveness is very sensitive to a major complication such as median
195 +0.235
release188 nerve injury
Cost-effectiveness results from the moderate costs of lumbar diskectomy and
Lumbar diskectomy189 29,200 +0.43
its substantial effect on quality of life
tional patient population.115 Thus, efforts to meet the mandated some states publicly disclosed provider-specific data on outcomes
performance levels might actually increase the risk of adverse out- of cardiac surgery. Their intent was to educate the public regard-
comes in complicated patients who need more extensive care. ing the choice of health care providers. Although these efforts used
A significant limitation of practice profile comparisons is that more criteria than were available through DRGs alone,125,126 the
they cannot fully account for disease-severity factors that affect profiles remained highly controversial because they still did not
outcome. Adjustments for disease severity are difficult to make on adequately account for all the differences in case severity. Because
the basis of claims data because in many cases, the requisite data current severity adjustments may not reflect differences attribut-
either is not collected or is miscoded.116 Medical-record review is able to patient selection, surgeons operating on truly high-risk
much better at accounting for severity, but it is also significantly patients will, all other factors being equal, have poorer outcomes
more cumbersome and costly. Even with medical-record review, than surgeons operating on lower-risk patients. However, all other
the effects of comorbid conditions on cost and outcome can be factors may not be equal. If the latter group of surgeons operated
difficult to sort out; as a result, much of the cost variation will still on the former group’s patients, the outcomes might even be worse,
be unaccounted for.117 Moreover, some differences in cost and and if the former group operated on the latter group’s patients, the
length of stay are related to factors that are not under surgeons’ outcomes might even be better. Such patient selection among
direct control, such as patient age, patient gender, and various cul- practices is a well-recognized phenomenon.127
tural, ethnic, or socioeconomic factors extrinsic to the medical Public release of provider outcome data may also have unin-
care system.118-120 Selection bias may affect outcome reporting as tended consequences. For instance, it has been suggested that
well.121 High rates of functional health illiteracy can also have an publicizing provider outcomes creates incentives to reduce risk-
adverse effect on compliance (and hence on outcomes).122 adjusted mortality by avoiding high-risk patients.128,129 In a 1996
Current methods, therefore, can result in very different estimates study, although consumer guides containing provider-specific out-
of cost-effectiveness for the same intervention. Despite the short- come data appeared to improve quality of care, they also appeared
comings of these methods, it is likely that health care purchasers will to have limited credibility among cardiovascular specialists.129
continue to use claims data and medical record review to assess cost- Surveys also indicated that the data were of limited value to the
effectiveness.The issue, then, is not whether such assessments will be target audience (i.e., patients undergoing cardiac surgery).
made but rather to what extent they will be used and for what pur- The success of provider report cards in prompting quality
poses.The Leapfrog Group (http://www.leapfroggroup.org) has tak- improvement depends on several factors.130 The added value of
en the lead in this area.This organization increasingly focuses on the such reports is likely to result in an increase in their availability to
differences in cost and outcome evidence and uses these data to rec- the public.131 As examples, one Web site (http://www.healthgrades.
ommend referral patterns. A 1995 national survey found that 39% com) contains hospital specialty data on cardiac, orthopedic, neu-
of managed care organizations were moderately or largely influenced rologic, pulmonary, and vascular surgery; transplantation out-
in initial physician selection by the physician’s previous patterns of comes are available from the United Network for Organ Sharing
costs or utilization, and nearly 70% profiled their member physi- (http://www.unos.org). There are numerous other Web sites that
cians.123 At least one HMO recognized that practices with high focus on health care quality [see Table 7].
scores on service and quality indicators attracted significantly more In contrast to the equivocal results of payor-based efforts, physi-
new enrollees than practices with lower scores did.124 cian-based quality-improvement efforts have had unquestioned
A somewhat controversial step has been the distribution of success. Perhaps the most notable of these latter efforts is that ini-
provider outcomes directly to the public in the form of report tiated by the Northern New England Cardiovascular Disease
cards. In an early effort, HCFA (now CMS) calculated mortality Study Group, which has developed a multi-institutional regional
data for individual hospitals using a risk-adjustment model based model for the continuous improvement of surgical care.132 The
on DRGs. After many years, however, HCFA acknowledged the success of this group’s approach rests on several key characteris-
flaws in the associated mortality model and stopped releasing tics: there is no ambiguity of purpose, the data are not owned by
these data. Subsequently, both HCFA (using Medicare data) and any member or subgroup of members, members have an estab-

9. © 2003 WebMD Inc. All rights reserved. ACS Surgery: Principles and Practice
ELEMENTS OF CONTEMPORARY PRACTICE 7 ELEMENTS OF COST-EFFECTIVE CARE — 9
lished safe place to work, a forum is set up for discussion, and reg- effective change strategies include reminders, patient-mediated
ular feedback is provided. Using a systems approach, the group interventions, outreach visits, input from opinion leaders, and mul-
effected a 24% reduction in hospital mortality for cardiac surgery tifaceted activities. Specific factors reported to increase the proba-
and reduced variation in outcomes among group members. The bility of a practice change are peer interaction, commitment to
decrease in mortality was considerably greater than that reported change, and assessment of the results of change.133 Additional evi-
by HCFA and by state report cards for similar procedures. Despite dence suggests that improvement in care is more likely to occur
concerns that releasing such findings would lead to unfavorable with CME activity that is directly linked to processes of care.134-138
publicity, no such reaction occurred. It is noteworthy that the Indeed, many of these features of practice change were employed
process the group developed did not involve personal criticism or both in the model developed by the Northern New England
attempt to identify the proverbial bad apples.Three important con- Cardiovascular Disease Study Group and in the subsequent
clusions can be drawn from the results reported: (1) physician-ini- national study by the Society of Thoracic Surgeons, which used
tiated interventions are likely to be more effective than external process measures to improve outcomes from coronary artery
review in improving quality, (2) a systems approach to quality bypass graft (CABG) surgery.139
improvement is better than the bad-apple approach, and (3) it is The current interest in assessing surgeons’ performance is not
possible to conduct quality-improvement programs involving prac- new, nor is the plea for that assessment from surgeons. In the early
tice groups that might otherwise be viewed as competitors. years of the 20th century, Ernest A. Codman, a Boston surgeon,
Although self-assessment of quality and cost-effectiveness may crusaded for hospitals and surgeons to publicize their results; his
seem daunting, the most difficult step may be the willingness to efforts typically met with varying degrees of disinterest or even
initiate the process. Studies of practice change in relation to con- defensiveness.140 Today, in the early years of the 21st century, it is
tinuing medical education (CME) consistently emphasize that clear that efforts to profile surgeons, despite their methodologic
shortcomings, are unlikely to go away. Surgeons who respond to
such efforts dismissively or defensively (e.g., by attempting to
explain away any outcome variations simply by stating, “My
Table 6 Cost-Effectiveness of Common
patients are sicker”) will be forgoing the opportunity to reestablish
Surgical Interventions92 the authority of the medical profession on the issue of quality.
Surgeons who preemptively familiarize themselves with their own
Cost-Effectiveness outcome data, on the other hand, will be better positioned to
Intervention ($/QALY)
respond appropriately to external review.
Mammography and breast exam (versus exam One must accept from the outset that self-assessment is an
95,000
alone) annually for women 40–49 yr of age ongoing process akin to peeling an onion: initial steps inevitably
lead to deeper analyses. Even simple data charts may reveal
Mammography and breast exam (versus exam
alone) annually for women 40–64 yr of age
17,000 changes or patterns in a surgeon’s outcomes or resource con-
sumption that might not otherwise be obvious.141 Sometimes,
Postsurgical chemotherapy for premenopausal
18,000
merely standardizing a process is enough to improve outcomes sig-
women with breast cancer nificantly. With time, strategies for optimal practice emerge.142,143
An important concept in looking at outcome measures and
Bone marrow transplant and high (versus standard)
130,000 processes of care is that for any given outcome measure to be a
chemotherapy for breast cancer
valid index of improved quality, it should also be intimately relat-
Cervical cancer screening every 3 yr for women ed to the processes of care.30
≤ 0*
older than 65 yr
Cervical cancer screening annually (versus every
3 yr) for women older than 65 yr
49,000 Relation of Volume to Outcome
An emerging aspect of cost-effective surgery is the finding,
Cervical cancer screening annually for women reported in numerous studies, that outcome appears to be posi-
82,000
beginning at age 20
tively correlated with volume: surgeons and hospitals that do an
One stool guaiac colon cancer screening for operation more frequently tend to do it better.144-149 This finding
660
persons older than 40 yr led the National Cancer Policy Board of the Institute of Medicine
and the National Research Council to conclude that patients
Colonoscopy for colorectal cancer screening for
90,000 requiring complicated cancer operations or chemotherapy should
persons older than 40 yr
be treated at high-volume facilities. There also appears to be an
Left main coronary artery bypass graft surgery
2,300 inverse relation between volume and cost.150,151 Thus, high volume
(versus medical management)
may have a positive effect on both the numerator and the denom-
Coronary artery bypass surgery for octogenarians190 10,424 inator of the cost-effectiveness ratio. Similar arguments have been
made with regard to the issue of surgical subspecialty training.152
Exercise stress test for asymptomatic men 60 yr
40
These findings form the basis of the Leapfrog Group’s recom-
of age mendations regarding the minimum numbers of CABG proce-
Compression stockings to prevent venous
dures, esophagectomies, carotid endarterectomies, and aortic
≤ 0* aneurysmectomies required for acceptable outcomes.
thromboembolism
It must be kept in mind, however, that the data in these studies
Preoperative chest x-ray to detect abnormalities represent associations and probabilities, not cause-and-effect rela-
360,000
in children
tionships.153 Thus, one cannot conclude that low volume is always as-
*Saves more resources than it consumes. sociated with poorer outcomes and high volume with better out-
QALY—quality-adjusted life year comes. Because some measures can be convincingly assessed only in

10. © 2003 WebMD Inc. All rights reserved. ACS Surgery: Principles and Practice
ELEMENTS OF CONTEMPORARY PRACTICE 7 ELEMENTS OF COST-EFFECTIVE CARE — 10
Table 7 Selected Web Sites Focusing on Health Care Quality
Organization (Web Address) Comment
The NCQA accredits managed health care plans and develops and refines the Healthplan Employ-
National Committee for Quality Assurance (NCQA)
er Data and Information Set (HEDIS). Many of the measures involve screening (e.g., mammogra-
(www.ncqa.com)
phy) and/or prevention (e.g., smoking cessation).
FACCT is a national organization dedicated to improving health care by advocating for an account-
Foundation for Accountability (FACCT) (www.facct.org)
able and accessible system.
National Forum for Health Care Quality Measurement NQF is a private, not-for-profit membership organization created to develop and implement a na-
and Reporting (ww.nqf.org) tional strategy for health care quality measurement and reporting.
Leapfrog is composed of more than 140 public and private organizations that provide health bene-
The Leapfrog Group (www.leapfroggroup.org) fits. The group works with medical experts to identify problems and to propose solutions that it
believes will improve hospital safety. It represents more than 34 million health care consumers in
all 50 states.
Joint Commission on Accreditation of Healthcare
The JCAHO develops standards and accredits health care organizations throughout the United States.
Organizations (JCAHO) (www.jcaho.org)
The institute offers resources and services to help health care organizations make dramatic and
Institute for Healthcare Improvement (www.ihi.org)
long-lasting improvements that enhance outcomes and reduce costs.
Institute for Health Policy (www.mgh.harvard.edu/
The institute is dedicated to conducting world-class research on central health care issues.
healthpolicy)
This organization was created to build consumer demand by providing information on quality rat-
QualityCounts (www.qualitycounts.org) ings for medical groups and hospitals in its network; tips for choosing doctors or hospitals; and in-
formation on dealing with medical errors.
The Commonwealth Fund supports and publishes studies in the broad area of health care quality.
The Commonwealth Fund (www.cmwf.org)
The study results are available on its Web site.
The NPSF identifies and creates a core body of knowledge; identifies pathways to apply that
National Patient Safety Foundation (www.npsf.org) knowledge; develops and enhances the culture of receptivity to patient safety; and raises
public awareness and fosters communications about patient safety.
Agency for Healthcare Research and Quality AHRQ is a branch of the Department of Health and Human Services that focuses on funding and
(www.ahrq.org) reporting health services research. Its Web site is an excellent resource of knowledge.
A nonprofit advocacy organization active in both state (primarily New York) and national efforts to
Center for Medical Consumers (www.medicalconsumers.org) improve the quality of health care. Its Web site is regularly updated with articles on issues of
health care quality, including a report on volume-outcomes in carotid endarterectomy.
large patient populations, outcome comparisons can be highly prob- physician-initiated) alternatives do not emerge, then other, less
lematic when one is dealing with unusual or infrequent cases. More- desirable options are likely to be imposed.
over, the relative importance of hospital volume and surgeon volume
may vary with specific procedures: complex, team-dependent proce-
dures (e.g., CABG surgery) may be more dependent on hospital vol- Practical Issues in Improving Cost-Effectiveness
ume, whereas less complicated procedures may be more dependent The OR is a frequent target for improved efficiency, and specif-
on surgeon volume. In the Veterans Administration National Surgi- ic guidelines for achieving this end are available.158-160 Perceived
cal Quality Improvement Project’s large study of eight common sur- delays in room turnover are a common complaint, for which the
gical procedures, which used medical-record data rather than claims responsibility is variously assigned to nurses, anesthesiologists, and
data, no correlation could be established between institutional oper- surgeons themselves. Maintaining large inventories to satisfy indi-
ative volume and postoperative mortality.154 It remains unclear, vidual surgeon preferences also contributes to higher costs, and
therefore, whether practice makes perfect or perfect makes practice. the growth of minimally invasive surgery has added new dimen-
The announced thresholds for given procedures are also fraught sions to this challenge[see 1:1 Prevention of Postoperative Infection].161
with methodologic problems.155 Key issues in this setting include reusable versus disposable equip-
The empirical relation between surgical volume and outcome ment, the varying costs of different types of equipment used to
has led to proposals for regionalization of care.156 Regionalization accomplish the same task, and just-in-time inventory. Major pieces
has proved effective in trauma care, but the basis of the improved of equipment are often duplicated to allow similar cases to be per-
quality in this setting may be better systems of care, not higher vol- formed simultaneously in different rooms, but this duplication
ume per se.This view is consistent with the findings that not every often means that the equipment may be idle for relatively long
high-volume provider has better outcomes and not every low-vol- periods. More efficient use of such equipment reduces costs, but
ume provider has poor outcomes. Regionalization of care without it requires levels of cooperation and coordination among surgical
a solid understanding of the basis of the volume-outcome rela- staff members that can be hard to achieve.
tionship has the potential to create unintended or even adverse To improve efficiency, the surgical team must think of the OR
consequences for other types of care. Consequently, many believe less as a workshop and more as a factory. Surgeons, having been
that it is too soon to use these volume-outcome data as surrogates steeped in the view that they are the “captain of the ship,” often
for quality or as criteria for establishing policy.157 Nonetheless, the have a hard time embracing the view that all members of the sur-
pressure to reduce cost remains strong; if suitable (preferably gical team have interdependent goals for quality maintenance and

11. © 2003 WebMD Inc. All rights reserved. ACS Surgery: Principles and Practice
ELEMENTS OF CONTEMPORARY PRACTICE 7 ELEMENTS OF COST-EFFECTIVE CARE — 11
cost reduction. However, these two perspectives are not mutually how effectively they can address the issues of quality and cost. In
exclusive. Successful team efforts have led to cost reductions in particular, it is essential that they address both variations in interven-
trauma care162,163 and to the use of protocols to guide ventilator tion rates and variations in outcomes. Medical decision making
weaning.164,165 Moreover, the relative contributions of individual must increasingly be evidence based. Financial constraints will place
and institutional cost-effectiveness are such that improving the growing pressure on payors to reimburse surgeons and hospitals
former may have little impact if the latter is not improved as well. only for those procedures with clear indications, suitably low mor-
Ambulatory surgical units are often heralded as a cost-saving bidity and mortality, or both.This has already occurred with lung re-
measure. However, the aggregate savings are likely to depend on duction surgery for end-stage chronic obstructive pulmonary disease
existing OR capacity and on specific payor issues.166 (COPD). Although this procedure was being performed more and
It is worthwhile for surgeons to familiarize themselves with the more frequently, there was little hard evidence indicative of long-
broader organizational efforts aimed at improving quality in term efficacy. As a result, HCFA announced that it would pay for
health care [see Table 7].167-169 Such efforts may indeed help the procedure only if it was performed as part of a clinical trial aimed
improve care significantly; however, the most meaningful at confirming such efficacy; other payors quickly followed suit.173
improvements in care are likely to arise from efforts initiated at the Only in the past few years did the results of an RCT clarify the role
grassroots level. of lung reduction surgery for COPD.174
Academic medical centers are no more immune to the current
changes in health care than nonacademic centers are. In fact, they
Ethical and Legal Concerns face special challenges.175 Teaching hospitals are under growing
Efforts to improve cost-effectiveness are often seen as forcing pressure to subsidize education and research from their clinical
health professionals to face conflicts between the ethic of patient incomes, even while reimbursement is being increasingly restrict-
advocacy, on one hand, and pressures to make clinical decisions for ed.176 A 1997 study examining the relation between National
societal purposes and on behalf of third parties, on the other. Institutes of Health awards and managed care penetration in aca-
Although resolving these tensions may seem difficult,170 the med- demic medical centers found the two to be inversely related.177
ical profession is no stranger to such potential conflicts. The vast Other studies indicated that increased competitiveness within
majority of physicians successfully avoid the temptations inherent health care markets seemed to hinder the capacity of academic
in fee-for-service care, and at least as many appear to avoid incen- health centers to conduct clinical research and foster the careers
tives to undertreat. Although some believe that evidence-based of young faculty members.178,179 Nevertheless, despite higher
practices derived from large populations may not be readily applic- costs, teaching hospitals continue to demonstrate better out-
able to individual patients, the rationale for this belief is not clear. comes, even for rather low-technology interventions.180,181
One area that frequently generates controversy is the high costs A concern for the future is that academic medical centers may
of the terminal stages of life, particularly among patients who lose the capacity for producing the evidence on which cost-effec-
require intensive care. To mitigate the dilemma faced by physi- tive practice must be based—circumstances that would be tanta-
cians involved in making life-ending decisions, increasing empha- mount to eating the proverbial seed corn.182
sis is being placed on patient self-determination. However, even It is curious that despite the frequently expressed concerns
when physicians and institutions make efforts to comply with the about quality, competition over price still appears to be a much
choices of patients or their families in the setting of terminal ill- more urgent issue than competition over quality is.183 It seems log-
ness, costs are not always reduced, nor are outcomes always ical, however, that at some point, concerns about how much is
improved.171 The actual savings may be small.172 being paid out will give way to questions about why something is
being paid for. Physicians are the only participants in the health
care system who have the knowledge and skills needed to address
The Future the challenges of identifying cost-effective care. If they can
Physicians undoubtedly have a role to play in the ongoing discus- respond constructively to these challenges, rather than simply
sion and debate on the future of the health care system in the United ignore or dismiss them, they stand a good chance of recapturing
States.The extent of their input in this debate is likely to depend on much of their lost status and autonomy.
References
1. Bloom DE, Channing D:The health and wealth of 6. Phelps CE:The methodologic foundations of stud- 11. Caplan RA, Posner KL, Cheney FW: Effect of out-
nations. Science 287:1207, 2000 ies of the appropriateness of medical care. N Engl come on physician judgments of appropriateness
J Med 329:1241, 1993 of care. JAMA 265:1957, 1991
2. Iglehart JK: The American health care system:
expenditures. N Engl J Med 340:70, 1999 7. Kassirer JP: The quality of care and the quality of 12. Wennberg J, Gittelsohn A: Variations in medical
measuring it. N Engl J Med 329:1263, 1993 care among small areas. Sci Am 246(4):120, 1982
3. Altman DE, Levitt L: The sad history of health
care cost containment as told in one chart. Health 8. Chassin MR, Kosecoff J, Park RE, et al: Does inap- 13. Chaissin MR, Brook RH, Park RE, et al:Variations
propriate use explain geographic variations in the in the use of medical and surgical services by the
Aff (Millwood) Supp Web Exclusives:W83, 2002
use of health services? A study of three procedures. Medicare population. N Engl J Med 314:285,
4. Anderson GF, Poullier J-P: Health spending, JAMA 253:2533, 1987 1986
access, and outcomes: trends in industrialized 9. Bernstein SJ, McGlynn EA, Siu AL, et al: The
countries. Health Aff (Millwood) 18:178, 1999 14. The Dartmouth Atlas of Health Care. American
appropriateness of hysterectomy: a comparison of
Hospital Publishing, Chicago, 1998
5. Anderson GF, Reinhardt UE, Hussey PS, et al: It’s care in seven health plans. JAMA 269:2398, 1993
the price, stupid: why the United States is so dif- 15. Eddy DM:Variations in physician practice: the role
10. Redelmeir DA, Tversky A: Discrepancy between
ferent from other countries. Health Aff (Millwood) medical decisions for individual patients and for of uncertainty. Health Aff (Millwood) 3:74, 1984
22:89, 2003 groups. N Engl J Med 322:1162, 1990 16. Birkmeyer JD, Sharp SM, Finlayson SR, et al: