UC Irvine

Background: Medicare reimbursement to hospitals for spinal fusion surgery is provided as a fixed payment for each admission based on Diagnosis Related Group (DRG). This system is predicated on the assumption that patients can be grouped into relatively homogenous units of resource use such that a single payment will adequately cover the costs of inpatient hospitalization for most patients within a given DRG. However, a previous study in total joint arthroplasty (TJA) showed that variation within DRGs can lead to differences between hospital costs and Medicare reimbursement, resulting in predictable financial losses to hospitals and hindering access to care for some patients. No study to our knowledge has investigated cost variation within current spinal fusion DRGs.

Aims: The aims of this thesis are to investigate cost variation within spinal fusion DRGs to determine whether variation within these groups meets an acceptable standard and to propose alternative spinal fusion DRGs, defined according to surgical invasiveness, that attempt to decrease the cost variation within current spinal fusion DRGs.

Methods: Direct hospital costs were obtained from the 2011 Nationwide Inpatient Sample (NIS) using cost-to-charge ratios. Our primary outcome was the coefficient of variation (CV), defined as the ratio of the standard deviation (SD) to the mean (CV=SD/mean x 100), for all hospital costs within a given DRG. CVs for spinal fusion DRGs (453-460) were compared to an established benchmark of TJA “DRG 209” (aggregate of DRGs [466-470]) to determine if cost variation within current spinal fusion DRGs is, in fact, “acceptable.” We then modified a previously validated measure of surgical invasiveness and used it to re-categorize patients into new spinal fusion DRGs. Finally, we calculated the CV for these new DRGs to determine if this re-categorization resulted in a decrease in cost variation relative to existing spinal fusion DRGs.

Results: CV for costs within spinal fusion DRGs ranged from 44.16 for DRG 460 (spinal fusion except cervical w/o CC/MCC) to 52.6 for DRG 456 (spinal fusion except cervical w spinal curvature/malignancy/infection or 9+ fusion levels with MCC). The benchmark group, DRG 209, was found to have a CV of 38.2. The CVs for costs within spinal fusion DRGs were all significantly higher than the benchmark group (p < 0.0001). Re-categorizing patients into new DRGs according to surgical invasiveness resulted in a decrease in CV for costs within most groups.

Discussion: Our findings demonstrate that cost variation within current spinal fusion DRGs is unacceptably high. As in TJA, this variation may be leading to differences between costs and reimbursement that places undue financial burden on some hospitals and potentially compromises access to care for some patients. Re-categorizing patients into new DRGs according to surgical invasiveness results in decreased cost variation and may offer an alternative strategy for defining spinal fusion payment groups that ensures more equitable hospital reimbursement and improved patient access to care.