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.