Identifying Drivers of Episode Cost Variation With Radical Prostatectomy

OBJECTIVE To describe total and component radical prostatectomy (RP) episode costs across a diverse set of hospitals in Michigan, and examine drivers of variation in such payments. METHODS We identified Medicare and private payer patients undergoing RP from 2012 to 2014 from the claims-based registry maintained by the Michigan Value Collaborative, a statewide consortium that provides hospitals with price-standardized and risk-adjusted 90-day episode costs for common medical and surgical procedures. We divided hospitals into quartiles based on mean total episode cost for RP. Total episode costs were further classified into 4 payment categories: index hospitalization, professional services, readmissions, and postacute care. Component payments were then compared across high-cost and low-cost hospitals. RESULTS We identified 3077 patients undergoing RP in 42 hospitals. Mean 90-day total episode cost was $14,614, ranging from $13,043 to $16,749 across quartiles (28.4% difference, P < .001). Overall variation in total episode cost was divided nearly equally among readmissions (29%), postacute care (29%), and professional payments (26%). We noted significantly higher readmission ($1442 vs $288, P = .03) and postacute care payments at high-cost hospitals ($1686 vs $522, P = .002). CONCLUSION Significant variation exists in 90-day total episode costs for RP, suggesting a potential target for bundled payments and other care improvement efforts. Focused efforts on reducing variation in readmissions and postacute care could improve cost-efficiency. (C) 2016 Elsevier Inc.