Variation in the Price of Head and Neck Surgical Oncology Procedures

Variations in Payer-Negotiated Prices for Head and Neck Reconstructive Surgery

OBJECTIVE

Little is known about pricing for reconstructive procedures of the head and neck. As of January 2021, the Centers for Medicare and Medicaid Services requires hospitals to disclose payer-negotiated prices for services, offering new insight into prices for privately insured patients.

STUDY DESIGN

Cross-sectional analysis.

SETTING

Turquoise database.

METHODS

Payer-negotiated facility fees for 41 reconstructive surgeries were grouped by procedure type: primary closure, skin grafts, tissue rearrangement, locoregional flaps, or free flaps. Prices were normalized to account for local labor costs, then calculated as percent markup in excess of Medicare reimbursement. The mean percent markup between procedure groups was compared by the Kruskal-Wallis test. Subset analyses were performed to compare mean percent markup using a Student's t test. We also assessed price variation by calculating the ratio of 90th/10th percentile mean prices both across and within hospitals.

RESULTS

In total, 1324 hospitals (85% urban, 81% nonprofit, 49% teaching) were included. Median payer-negotiated fees showed an increasing trend with more complex procedures, ranging from $379.54 (interquartile range [IQR], $230.87-$656.96) for Current Procedural Terminology (CPT) code 12001 ("simple repair of superficial wounds ≤2.5 cm") to $5422.60 ($3983.55-$8169.41) for CPT code 20969 ("free osteocutaneous flap with microvascular anastomosis"). Median percent markup was highest for primary closure procedures (576.17% [IQR, 326.28%-1089.34%]) and lowest for free flaps (99.56% [37.86%-194.02%]). Higher mean percent markups were observed for rural, for-profit, non-Northeast, nonteaching, and smaller hospitals.

CONCLUSION

Wide variation in private payer-negotiated facility fees exists for head/neck reconstruction surgeries. Further research is necessary to better understand how pricing variation may correlate with out-of-pocket costs and quality of care.

Hospital Markup in Head and Neck Cancer Surgery in the US

Importance

Marked variation in hospital costs and payments is a target for health care reform efforts. Limited data exist to explain variability in prices for head and neck surgical procedures.

Objective

To characterize variations in hospital price markup for head and neck cancer surgery, and examine associations with market concentration and hospital for-profit status.

Design, Setting, and Participants

In this cross-sectional study, the Nationwide Inpatient Sample was used to identify 150 275 patients who underwent head and neck cancer surgery for a malignant upper aerodigestive tract neoplasm from 2001 to 2011. The markup ratio (charges to costs) was modeled as a continuous and categorical variable. Hospital market concentration was evaluated using a variable-radius Herfindahl-Hirschman Index from the 2000, 2003, 2006, and 2009 Hospital Market Structure files. Data were analyzed from May 2019 to July 2019.

Main Outcomes and Measures

Multivariable regression was used to evaluate associations between hospital and patient variables and hospital markup.

Results

There were 150 275 patients (mean [SD] age, 61.8 [12.6] years; 104 974 [70.0%] male) from 2001 to 2011 for whom hospital market information was available. Hospital markup ratios ranged from 0.8 to 8.7, with a mean markup ratio of 2.8 (95% CI, 2.7-2.9). Hospitals in the lowest markup ratio quartile had a mean markup ratio of 1.8 (95% CI, 1.8-1.9), while hospitals in the top markup ratio quartile (extreme markup) had a mean markup ratio of 4.1 (95% CI, 4.0-4.2). Extreme markup hospitals were more often large (77.5% vs 66.6%), private for-profit hospitals (19.0% vs 1.3%), and were less likely to be high-volume hospitals (21.0% vs 9.4%) or in competitive markets (64.4% vs 82.0%). Postoperative complications occurred more often in extreme markup hospitals (22.7% vs 17.1%). On multivariate analysis, a significantly higher markup was associated with private, for-profit hospitals (47.9%; 95% CI, 33.3%-64.2%), hospitals in the West (25.5%; 95% CI, 12.6%-39.8%), Hispanic race (9.8%; 95% CI, 4.4%-15.5%), prior radiation therapy (5.3%; 95% CI, 1.3%-9.4%), comorbidity (3.5%; 95% CI, 1.7%-5.4%), and complications (2.8%; 95% CI, 0.3%-5.4%). Hospital market concentration modified the association between hospital for-profit status and markup, with higher markups in for-profit hospitals in moderately concentrated and concentrated (less competitive) markets.

Conclusions and Relevance

In this cross-sectional study, there was wide variation in hospital markup for head and neck cancer surgery, with a 4-fold increase in charges relative to costs in 25% of hospitals. Variations in surgical price were primarily associated with hospital profit status. These data suggest that greater transparency is needed to address disparities in hospital pricing.