Robotic surgery may raise costs

By Markian Hawryluk The Bulletin
Published Feb 24, 2014 at 12:01AM / Updated Feb 25, 2014 at 02:07PM

The widespread adoption of robotic surgery has been controversial due to the high cost of the equipment and the lack of high-quality evidence supporting better patient outcomes.

But proponents have argued the higher costs make little difference because hospitals and physicians aren’t paid higher rates by public or private health plans for using a robot.

Payment rates from the Centers for Medicare & Medicaid Services, however, suggest that isn’t entirely true. Medicare reimbursements to hospitals for surgeries that are now commonly performed using a surgical robot have crept up significantly over the past decade, and in many cases, physicians receive a higher payment using the robot than they would with traditional surgical approaches.

Medicare pays hospitals a flat fee for each case, at rates set out in a list of more than 600 diagnosis-related groups, or DRGs. So when a patient needs a hip replacement, the hospital receives a fixed amount to cover the staffing, supplies, overhead and other costs associated with that patient’s surgery and hospital stay.

From Medicare’s perspective, the surgical robot simply represents the tool the surgeon has chosen to use in performing the surgery.

“So a hospital doesn’t get reimbursed more or less when they use a robot,” said Sherry Glied, an adjunct professor of health policy and management at Columbia University’s Mailman School of Public Health. The payment for a robotic hysterectomy is the same as for a laparoscopic hysterectomy. Both procedures are done through four small incisions through which a camera and surgical tools are inserted.

But as Glied explained in a 2010 perspective article in the New England Journal of Medicine, the higher spending associated with the robot could indirectly increase hospital payments for robotic surgery over time.

Here’s how: Medicare assigns a unique weight to each DRG, to reflect the average resources needed to provide patient care for that type of diagnosis or procedure. More costly conditions are assigned higher weights. So the DRG for heart transplant has a weight of 26.03, while a healthy newborn’s hospital stay has weight of only 0.17. (The mother’s labor and delivery are accounted for in a separate DRG). A DRG of 1 reflects the average for all inpatient hospital stays.

The weights are then multiplied by a certain dollar amount, adjusted each year to reflect medical inflation and geographical difference, to determine payment rates.

Each year, hospitals submit detailed cost reports to Medicare, which are then used to rebalance the DRG weights. As hospitals get more efficient at providing one type of service and their costs decline, that DRG weight drops. As new technology or other factors make other procedures more expensive, their DRG weights rise.

Glied and her co-author speculated that the adoption of the surgical robot would over time raise the costs incurred by hospitals, and thus indirectly increase the weights for surgeries typically done with the robot.

“We hadn’t looked at that, we were just speculating that when we wrote the paper,” Glied said. “But you might think that over time, because these procedures use more (operating room) time and they also have to reimburse for the cost of the capital, the charges for the underlying procedures might go up.”

And that is exactly what has happened. In 2004, before the robot was in widespread use, the DRG weight for prostate surgery was 1.0835. By 2014, up to 85 percent of prostatectomies were being done robotically, and the weight for that DRG has increased to 1.2928.

That means Medicare reimbursements to hospitals for robotic prostatectomies have increased 19 percent, above and beyond the increase in overall hospital payment rates.

Similarly, the DRG weights for benign hysterectomies have increased from 0.8099 in 2004 to 0.9903 in 2013, an increase of 22 percent. In 2007, only 0.5 percent of hysterectomies in the U.S. were performed robotically. That rate increased to 9.5 percent by 2010.

When the DRG weights are recalibrated, any increase for one DRG must be offset elsewhere, so the entire set of DRG weights breaks even. But those adjustments can also create incentives for hospitals to perform more of one procedure than another, and raise overall health care costs. Most hospitals now lose money on robotic surgeries, but the shortfall may be narrowing as DRG payments steadily increase.

A similar effect occurs on the physician payment side. Physicians are paid separately for their work, under a formula that takes into account their practice and liability insurance costs, as well as the work required to do various procedures.

Each service is ranked on the amount of work required by the physician and assigned a corresponding amount of relative value units, or RVUs. The more RVUs for a given procedure, the higher the physician’s fee from Medicare.

The RVUs for procedures using robotics have also increased over time. The units assigned for laparoscopic or robotic prostate surgery have increased from 30.69 units to 32.06 units from 2004 to 2013. That means physician payments for robotic prostatectomies have been increasing.

Moreover, as it stands right now, laparoscopic or robotic prostate surgery is assigned 32.06 units, while traditional open prostate surgery carries only 24.63 units.

That means surgeons get paid more to cut out a prostate with the robot than with a scalpel.

“It’s technologically more advanced, it takes more time, there’s more training involved, so the RVUs are higher,” said Dr. Benjamin Davies, an assistant professor of urology at the University of Pittsburgh Medical Center. “I’d be the first to admit it, there are incentives … to do robotics, because you get paid more.”

RVUs have traditionally been reviewed every five years by the Relative Value Scale Update Committee, a panel of physicians organized by the American Medical Association. However, Medicare officials recently began reviewing potentially misvalued codes on an annual basis in between the update committee’s reviews. The Centers for Medicare & Medicaid Services has already told physician groups it plans to review the work units assigned to laparoscopic and robotic prostate surgery.

“The RVUs for the laparoscopic procedure are higher than for the open procedure and, in general, a laparoscopic procedure would not require greater resources than the open procedure,” the agency said in a regulatory notice last year.

It’s unclear how much the higher payment rates have driven the rapid move toward robotic prostatectomy or whether changing the incentives would make any difference going forward.

“The newest generation of physicians basically only knows how to do it that way. How do we pull back from that?” Davies said. “In some sense, with robotics and prostatectomy … the die is cast.”

— Reporter: 541-617-7814,