Utilization and Outcome in the Medical Patient Referred to Surgery

Eric Muiioz, MD, MBA, stony Brook, NW York, Richard Soldano, BA, MPH, William Schroder, MD,

Howard Gross, MD, MS, Jonathan Goldstein, MPA, NW Hyde park, NOW York,

Leslie Wise, MD, Stony Brook, New York

The objective of this study was to test the hypothe- sis that hospitalized patients referred to a general surgical service from a medical service for a surgi- cal procedure would have higher hospital costs and longer lengths of stay per diagnosis-related group (DRG) than patients admitted directly to the gen- eral surgical service. Hospital costs by DRC, exclu- sive of physician’s fees, were analyzed for all adult general surgical admissions treated at our hospital from January 1, 1985 to March 31, 1986 (3,028 patients) to yield a population of patients in those DRGs with patients referred to general surgery from medicine ( 1,495 patients). Patients within each DRG were then disaggregated by either direct admission to general surgery ( 1,412 patients) or referral to the general surgical service from the medical service (83 patients). Mean cost per pa- tient was 146.5 percent higher for referral patients than for direct admission patients, as was the total length of stay. Mortality was higher for referral pa- tients than for direct admission patients. Factors analyzed which contributed to this greater resource utilization and higher mortality were ( 1) a greater severity of illness, (2) higher diagnostic costs, and (3) delays in diagnosis or treatment. The DRG payment for referral patients also produced a sub- stantial deficit for the hospital, whereas direct ad- mission patients produced a profit of $1,105,596. This data suggests that direct admission to the sur- gical service of patients likely to need surgery might lower their hospital costs and improve the quality of their care.

From the Department of Surgery, Long Island Jewish Medical Center, New Hyde Park, New York and the State University of New York, Stony Brook, New York.

Requests for reprints should be addressed to Eric Mufioz, MD. Research Division, Department of Surgery, Long Island Jewish Medi- cal Center, New Hyde Park, New York 11042.

N ew payment mechanisms, such as the diagnosis- related group (DRG) prospective payment system,

introduce economic risk into hospital reimbursement [1,2]. Hospitals are paid a set price for each of 468 DRGs; obviously, this type of reimbursement system pro- vides a strong economic incentive to decrease hospital costs [3]. As the federal government shifted hospital re- imbursement from the cost-plus systems of the past to the prospective payment systems of today, most hospitals have tried to devise methods to be more cost-effective while maintaining quality surgical care [4]. A previous study at our hospital had shown that for patients under- going craniotomy, those who were admitted to the medi- cal service (usually neurology) and referred to the neuro- surgical service had much higher hospital charges and longer hospital lengths of stay than those admitted direct- ly to the neurosurgical service [5].

The purpose of the present study was to examine whether this referral factor could be applied to general surgical patients. We wanted to test the hypothesis that hospitalized patients referred to the general surgical ser- vice from the medical service would have higher hospital costs and longer lengths of stay per DRG than patients admitted directly to the general surgical service. If this hypothesis was shown to be true, then we wished to study the reasons for these higher hospital costs. In addition, we wanted to compare survival between these two groups of patients.

MATERIAL AND METHODS The Long Island Jewish Medical Center is an 805&d

not-for-profit academic medical center in the suburbs of New York City. New York State came under DRG reimbursement on January 1, 1986. Our hospital is cate- gorized as an urban teaching hospital by the DRG pay- ment system. Standard New York State DRG reim- bursement methodology was used in this analysis. All 83 adult patients referred from the medical service to the general surgical service during the study period, January 1, 1985 to March 3 1,1986, were analyzed. These patients comprised 25 general surgical DRGs. All 1,412 patients who were admitted directly to the general surgical service in these 25 DRGs were also studied. DRG weight index, length of stay, and survival were studied for all patients in both groups.

Hospital costs per patient by DRG, exclusive of physi- cian’s fees, were analyzed for all patients. Patients within each DRG were disaggregated by either direct admission to the general surgical service or referral to the general surgical service from the medical service. Hospital costs per patient were aggregated by hospital service category to include: room and board, laboratory analysis (urinaly- sis, coagulation, biochemical, and biologic analysis),

THE AMERICAN JOURNAL OF SURGERY VOLUME 157 FEBRUARY 1989 237

TABLE I Patient Characteristics*

Direct

Referral Admission p Value

Age fyr) 64.2 f 16.9 56.8 f 20.9 Case-mix index 2.46 f 0.37 2.32 f 0.47 Severity of illnesst 4.54 f 4.11 2.68 f 2.21 <b.Oo 1 Length of stay (d) 29.6 f 30.1 14.3 f 15.4 <O.OOl Mortality (%) 20 5.2 <O.OOl

l Values expressed as mean f SE unless otherwise indicated.

+ tntemationat Classification of Diseases codes [ 61.

blood type and cross, red cells, and blood products, radiol- ogy, operating room and recovery room, central supply and pharmacy, pathologic examination, electrocardiog- raphy, respiratory therapy, and total. Diagnostic costs were also computed for both direct admission and referral patients and were defined for this analysis as the sum of laboratory costs and radiologic costs, expressed as mean diagnostic cost per patient. Severity of illness was mea- sured using a form of the staging methodology, the num- ber of diagnostic and procedural International Classifica- tion of Diseases codes [6] per patient for both referral and direct admission patients. The number and percentage of patients who use more than 1.94 SD above the mean cost or length of stay for that particular DRG was calculated for both the referral and direct admission groups. Stu- dent’s t test and the chi-square test were used to compute statistical significance between groups.

Objective criteria were developed to evaluate delays in diagnosis or treatment using medical and surgical peer review utilization guidelines [5]. Patients in both the re- ferral and direct admission groups were audited for de- lays in diagnosis or treatment, and a consensus determi- nation was made by three general surgical attending surgeons. In the referral group all 83 patients were audit- ed; in the direct admission group, 10 percent of the pa- tients were selected using a random computer model and were audited. Both the referral and direct admission pa- tients were examined for delays in diagnosis or treatment, and those patients with no delay were also examined. For both direct and referral patients, total length of stay per patient, the number of days delayed per patient, and survival were studied.

Both the referral patients and the 10 percent of the sample audit of direct admission patients were also grouped by the type of operative procedure into the fol- lowing six groups: (1) gastric and duodenal procedures, (2) cholecystectomy and common bile duct procedures, (3) small intestinal procedures, (4) colorectal procedures, (5) peripheral vascular procedures, and (6) all other pro- cedures (endocrine, pancreatic, etc.). Length of stay (to- tal, preoperative, and postoperative), the number of days delayed, and outcome were analyzed for each category.

In order to further analyze the reasons for the higher costs and poorer outcome of referral patients, linear re- gression techniques were used to evaluate a number of factors. We wished to study the relative contribution of factors such as severity of illness, diagnostic costs, and delays in diagnosis or treatment for the cost and outcome

MUNOZ ET AL

TABLE II Hospital Costs In Dollars (mean f SE)

Direct Referral Admission p Value

Room & board 15,936 f 7,797 7,563 f 9,911 <o.ooi Laboratory 4,219 f 5,001 1,335 f 2,236 <O.OOi Blood 1,666 f 3,537 293 f 765 <o.ooi Radiology 1,478 f 2,108 558 f 898 <O.OOl Operating room 1,776 f 1,245 1,380f890 .

& recovery room Central supply 1,473 f 1,764 613 f 879 <o.ooi

8 pharmacy Other 58 f 60 35 f 56 <O.OOl

Total 26.604 f 28,628 11,778 f 14.289 <O.OOOi Cost day per 899 f 963 823f901 . . .

findings for referral patients. The independent variables of hospital cost and survival were each analyzed versus the dependent variables of severity of illness, diagnostic costs, and delays in diagnosis or treatment.

RESULTS The 83 referral patients generated $2,208,132 in hos-

pital costs versus $1,256,786 in DRG reimbursement, yielding a financial loss of $951,346 to the hospital ($11,462 loss per patient). 73.3 percent of referral pa- tients generated a financial loss to the hospital. The 1,412 direct admission patients, on the other hand, generated $16,630,536 in hospital costs versus $17,736,132 in DRG reimbursement, yielding a profit of $1,105,596 to the hospital ($783 profit per patient). Only 12.2 percent of direct admission patients generated a financial loss to the hospital.

Age and case-mix index were not significantly differ- ent for the referral versus the direct admission group. Length of stay, however, was significantly longer, and mortality was significantly higher for the referral group (Table I). Referral patients were also more severely ill than direct admission patients. Hospital costs were signif- icantly higher for referral versus direct admission pa- tients in most hospital service categories (Table II). In addition, referral patients had a much greater proportion of outliers than direct admission patients, demonstrating their greater financial risk under DRG reimbursement (20 percent versus 6.4 percent, p <O.OOl).

Among the referral patients, 69.9 percent (58 pa- tients), demonstrated some delay in diagnosis or treat- ment; the average length of delay was 29.9 days. Among the direct admission patients, on the other hand, only 2.1 percent of patients (three patients) demonstrated delays in diagnosis or treatment; the average length of delay in the direct group was only 0.1 days. Resource consump- tion, the degree of delay, and survival varied according to the type of procedure performed (Table III). Total preop- erative and postoperative length of stay per patient was almost always significantly higher for referral versus di- rect admission patients.

Linear regression analysis demonstrated a number of factors that contributed to the higher total cost of referral patients. R values from simple regression were as follows: severity of illness, 0.47, diagnostic costs, 0.39, and delays

238 THE AMERICAN JOURNAL OF SURGERY VOLUME 157 FEBRUARY 1989

HOSPITALIZED MEDICAL PATIENTS REFERRED TO SURGERY

TABLE III

RWCurCe COnSumptlOn, Delays, and MOrkMy by Surgical Category for Referral and Direct Admlsslon Patients*

Category (n) Total Length of Stay (d) Delay (d) Mortality

Preop Postop n % (%)

Referral

Large bowel (22) Small bowel (17) Gastric and

duodenal (13)

Cholecystectomy or CBD (16)

Vascular (7) Other (8)

28.2 f 18.3 11.8 f 7.2 18.8 f 12 4.3 f 3.4 90.1 18.2+ 31.8 f 28.4 9.2 f 8.2 22.4 f 24.3’ 3.1 f 3.5 64.7 11.8 31.9 f 34.7 10.8 zk 13.4 21.2 f 29 1.3 f 2.4 46.2 23.1

15.8 f 7.6 6.9 f 5.3 8.9 f 3.3f 2.6 f 2.5 75 18.8

54.3 & 34.8 5.9 f 5.5 48.4 f 33.5 2.1 f 4.1 42.9 28.6 23.1 f 14.9 12.7 f 13.1 10.4 f 5.4+ 2.4 f 1.5 87.5 25

Direct Admission

Large bowel (23) 13.1 f 7.8 Small bowel (25) 18.8 f 15.4

Gastric and 10.5 f 3.8 duodenal (29)

Cholecystectomy 8.9 f 5.5 or CBD (24)

Vascular (I 7) 15.5 f 12.2

Other (23) 10.1 f 10.4

* p <O.Ol unless otherwise indicated.

+ Not slgnlficant. CBD = common bile duct.

2.1 f 1.2 11 f 8.10 0.1 f 0.3 5.71 5+ 1.6 f 1.8 17.2 f 16.1+ 0.2 f 0.4 5 0

1 f 0.4 9.5 f 3.8 Of0 0 0

1.6 f 0.9 7.3 f 0.3 0.1 f 0.3 5.3 0

1.5 f 0.7 14 f 12.2 Of0 0 13.7

1.1 f 0.9 9 f 9.6+ Of0 0 4.3

in diagnosis or treatment, 0.37. Thus, at least three fac- tors were in part responsible for the greater regression. Analysis demonstrated that survival was less well corre- lated with these three factors. The R values measuring these relationships were as follows: severity of illness 0.29, diagnostic costs 0.15, and delays in diagnosis or treatment 0.05.

COMMENTS The purpose of this study was to test the hypothesis

that patients referred to the general surgical service from the medical service would have higher hospital costs and longer lengths of stay than patients admitted directly to the general surgical service. Patients referred to the gen- eral surgical service from the medical service had signifi- cantly higher hospital costs ($26,604 versus $11,779) and significantly longer lengths of stay (29.6 days versus 14.3 days) than nonreferred patients. These patients also had significantly higher mortality than nonreferred patients (20 percent versus 5.2 percent). There appeared to be a number of reasons for this higher resource utilization for referral patients. Regression analysis demonstrated at least three factors contributing to the higher cost of the referral patients: higher diagnostic costs ($5,697 versus 1,893), a greater severity of illness (454 versus 2.68 Inter- national Classification of Diseases codes), and delays in diagnosis or treatment (70 percent of patients delayed versus 2.1 percent). These three factors were not as well correlated with the referral patients’ poorer outcome, however. Referral patients for the period studied resulted in a $951,346 loss to our hospital, whereas direct admis- sion patients produced a profit of $1,105,596.

accounting for some of their higher cost and greater mor- tality. This greater severity of illness may be an irrevers- ible component of the hospital care for the referral pa- tients. However, two other factors that contributed to these patients’ higher cost and poorer outcome-higher diagnostic costs and delays in diagnosis or treatment- may be potentially reversible. Higher diagnostic costs were partially responsible for the referral patients’ great- er expense (higher cost, R = 0.39; greater mortality, R = 0.15) as well as delays in diagnosis or treatment (higher cost, R = 0.37; greater mortality, R = 0.05). The higher diagnostic costs for referral patients suggests that nonsur- geons may be more indecisive when diagnosing and treat- ing surgical disorders and may possibly perform more studies with a relatively small marginal return for the patient. The large percentage of referred patients with delays (70 percent) is an important finding in analyzing methods to improve the quality of surgical care.

It appeared from our study that the reason for the cost and outcome differences between referral and direct ad- mission patients were multifactorial. Referral patients were more severely ill than direct admission patients,

The federal peer review mechanism is changing along with hospital payment systems [7]. Professional Stan- dards Review Organizations were established in 1972 by the Professional Standards Review Act to monitor utili- zation review and the quality of care for hospitalized Medicare patients. The Health Care Financing Adminis- tration has contracted with 54 Professional Review Orga- nizations to monitor hospital use and the quality of care for Medicare patients now under DRG reimbursement [ 71. The mission of the new Professional Review Organi- zations appears to be primarily monitoring the quality of care delivered to Medicare beneficiaries; DRG’s are ex- pected to provide incentives for hospitals to examine physician resource utilization. It thus appears that the Medicare review mechanism will increasingly focus on the quality of care provided to hospitalized patients.

Our study demonstrated a method for hospitals to promote cost-containment, and incidentally, the quality

THE AMERICAN JOUP :NAL OF SURGERY VOLUME 157 FEBRUARY 1989 239

of care. It appeared that 70 percent of the patients re- ferred from the medical service to the general surgical service had delays in diagnosis or treatment, whereas only 2.1 percent of direct admission patients had delays. It is interesting to hypothesize about the reasons for these large differences. Surgeons are naturally selected as rea- sonably efficient decision makers. Surgical decision mak- ing is comprised of three major steps: (1) analyze and integrate a large body of information, (2) make a deci- sion, and (3) accept the consequences of that decision. This study suggests that surgeons may be more efficient at this task than their nonsurgical counterparts, especially for surgical diseases.

Mechanisms could be established by using utilization review, the admitting office, and the emergency room to identify patients likely to need surgical procedures, such as those with gastrointestinal bleeding, bowel obstruction, or abdominal pain. Our study suggests that if these pa- tients could be admitted directly to the general surgical service, their hospital costs might be lowered without a decrease in the quality of their surgical care. In the past there have been few incentives to analyze the cost dynam- ics of the medical patient referred to surgery; however, this is changing with new federal payment and quality

assurance mechanisms. Our study has demonstrated a number of factors that may be important in reducing hospital costs and possibly improving the quality of care for the hospitalized surgical patient.

Acknowledgment: We thank Katherine Mulloy for her assistance in data computation and Christina Weiss for preparation of the manuscript.

REFERENCES 1. MuRoz E, Laughlin A, Regan DM, et al. The financial effects of emergency department-generated admission under prospective payment systems. JAMA 1985; 254: 1763-71. 2. Igelhart JK. Medicare begins prospective payment of hospitals. N Engl J Med 1983; 308: 1428-32. 3. Fetter RB. Diagnosis related groups: the product of the hospital. Clin Res 1984; 32: 336-40. 4. Mufioz E, Margolis IB, Wise L. Surgonomics and cost contain- ment. Surg Gynecol Obstet 1986; 162: 137-41. 5. MuAoz E, Byun H, Pate1 P, et al. Surgonomics: the cost dynam- ics of craniotomy. Neurosurgery 1986; 18: 321-6. 6. Commission on Professional and Hospital Activities. Interna- tional classification of diseases. 9th revision: clinical modification. Ann Arbor, MI: 1980. 7. Dans PE, Weiner JP, Otter SE. Peer review organizations, promises and potential pitfalls. N Engl J Med 1985; 313: 1131-7.

240 THE AMERICAN JOURNAL OF SURGERY VOLUME 157 FEBRUARY 1989