For Common Surgeries, Children's Hospitals Cost More but Offer No Outcome Benefit

By Linda Carroll

June 29, 2022

NEW YORK (Reuters Health) - When it comes to common surgical procedures, children's hospitals offer no outcome benefits over other hospitals, yet cost more, a new study suggests.

An analysis of data from nearly 400,000 pediatric patients who underwent a common surgical procedure revealed that outcomes at children's hospitals were no better than at non-children's hospitals, but the price tag was almost 40% higher, according to the report published in JAMA Network Open.

"As we focus on trying to improve value in healthcare, we need to not only focus on improving quality and clinical outcomes but also pay closer attention to the costs of healthcare delivery," said the study's lead author, Dr. Mehul Raval, a professor of surgery and pediatrics at the Northwestern University Feinberg School of Medicine and a pediatric general and thoracic surgeon at the Ann and Robert H. Lurie Children's Hospital of Chicago.

One possible explanation for the higher prices at children's hospitals may be that these hospitals are doing some creative accounting.

"Perhaps the biggest driver is that children's hospitals care for a larger number of patients who are publicly insured or are uninsured," Dr. Raval said. "The costs of caring for these patients is tremendous and it is well known that the payments made by Medicaid are significantly lower than the costs of conducting day to day business. Thus, there is a well described practice known as 'cost shifting' where the losses incurred from caring for Medicaid populations are made up with higher negotiated payments from private insurers."

"Children's hospitals also provide very complex care including heroic surgical care," Dr. Raval said. "The expenses for these types of activities can exceed tens of thousands of dollars a day. There are hospitalizations that can exceed $1 million. No one can possibly pay for these types of bills. Thus, children's hospitals will often write off or use philanthropic resources to help try to cover these expenses. Part of the higher payments incurred for routine surgical procedures evaluated in our study may also represent the shifting of these costs."

Children's hospitals also often provide added services that aren't available at non-children's hospitals, such as "'child life specialists,' who spend time engaging with families before and after surgery to help alleviate stress and anxiety," Dr. Raval said, adding that such services "go beyond what was measured in our study and represent potentially higher quality care that many patients and families may be willing to pay a premium to have."

To take a closer look at outcomes and costs for common surgical procedures at both children's hospitals and non-children's hospitals, Dr. Raval and his colleagues conducted a cohort study using version 1 of the Health Care Cost Institute data set, which provides deidentified administrative cost and utilization data for more than 10 million beneficiaries in the U.S. who are covered by private insurance.

The researchers analyzed claims data from January 2010 to September 2015 and included patients aged 18 and younger who underwent one of the following: anterior cruciate ligament reconstruction, antireflux surgery, appendectomy, humerus fracture repair, tympanostomy tube replacement, tonsillectomy and adenoidectomy, strabismus surgery, posterior spinal fusion, cholecystectomy, umbilical hernia repair, inguinal hernia repair, orchiopexy and circumcision.

Of the 368,220 patients who underwent one of the index procedures, 118,977 (32.3%) received care at freestanding children's hospitals, 75,256 (20.4%) at children's hospital attached to an adult hospital, and 173,987 (47.3%) at non-children's hospitals.

On average, the cost at a children's hospital was nearly $1,500 higher than at a non-children's hospital. The mean payment for all procedures at a children's hospital was $6,533.56, as compared to $5,847.50 at a children's hospital attached to an adult hospital and $5,034.25 at a non-children's hospital.

The mean overall complication rate was 0.004 at children's hospitals, as compared to 0.01 at children's hospitals attached to adult hospitals and 0.003 at non-children's hospitals. Readmission rates at 30, 60, and 90 days were similar across all hospital types.

After adjusting for zip code, year, surgery, surgery setting, and observable patient, hospital, and county characteristics, the researchers estimated that payments for inpatient common procedures were 39% higher at children's hospitals than at non-children's hospitals. Similarly, payments for common outpatient procedures were 34% higher at children's hospitals than at non-children's hospitals.

"Exploiting their monopolistic positions - there are rarely two children's hospitals in the same market - children's hospitals can squeeze a high price from private insurers," said Ge Bai, a professor of health policy and management at the Johns Hopkins Bloomberg School of Public Health. "But privately insured patients actually don't get their money's worth from children's hospitals for common procedures such as circumcision, tonsil removal, and hernia repair."

This may mean that parents whose insurance has a high deductible or high copay may want to take their kids to a non-children's hospital in many cases, Bai said in an email.

"For common procedures, private insured patients with limited means and high cost-exposure should steer clear of children's hospitals if they can," Bai said. "Self-insured employers and insurance companies interested in lowering their premiums should also use their benefit design to steer patients away from children's hospitals."

SOURCE: https://bit.ly/3y3EjoG JAMA Network Open, online June 24, 2022.

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