June 05, 2012

Costs of Surgery... How Is This Calculated?

So I have blogged about this topic a few times in the past, but there still seems to be confusion regarding the costs of surgery.

As mentioned in the past, the cost of surgery is broken down into basically 3 separate charges:

• Surgeon's charge
• Anesthesia's charge
• Hospital's charge

So... after surgery, a patient typically will get 3 bills; one each from surgeon, anesthesia, and hospital.

At least in the United States, the three charges are completely separate from each other to the point that anesthesia will have no idea what the charges for the surgeon as well as hospital will be.

Same goes for the surgeon... the surgeon will know his charges, but will have no idea what the charges will be for anesthesia and the hospital.

Even if the surgeon demands to know what anesthesia and the hospital will charge for a surgical procedure (s)he will perform, a specific charge will not (can not) be provided in the United States typically.

Why is that?

If I am going to perform for example, a tonsillectomy, why can't anesthesia give even me the surgeon a specific dollar amount of what anesthesia will charge? Why can't the hospital administration provide me the hospital charges?

Here's why... or at least part of the reason why in the United States...

Surgeon's Charge

The surgeon's charge is set. For a given surgeon, his/her charge will remain the same regardless of time or difficulty of the surgery. It may be different between different surgeons... but for a given individual surgeon, it will always be the same for a given procedure.

For example, if the surgeon's tonsillectomy charge is $250. It will remain $250 whether it takes 15 minutes or 3 hours. It will remain $250 if the surgery was technically difficult or a piece of cake.

So, the surgeon's charge is easy. It is what it is.

The harder question to answer is what the anesthesia and hospital charges will be...

Anesthesia Charges

Anesthesia charges on a per time basis (in increments of 15 minutes) on top of a "base" charge that depends on the surgical procedure.

For example, let's say a given anesthesia group has a base charge of $500 for tonsillectomy.

Let's also assume this particular anesthesiology group charges $500 per 15 minutes of anesthesia.

SO... if the surgeon performs a tonsillectomy and it takes the surgeon 30 minutes to perform the procedure, the anesthesia charge will be $500 base charge PLUS $1000 for the time ($500 per 15 minutes) for a total anesthesia charge of $1500.

If it so happens that the surgery takes only 15 minutes... than the anesthesia charge will be $1000 ($500 base charge plus $500 for the 15 minutes surgical time).

In other words, for the SAME exact surgical procedure, the anesthesia charges may be different for different patients depending on how long the surgery takes.

Hospital Charges

Different hospitals calculate their charges differently... but in essence, the hospital will charge whatever it cost them to allow the surgery to happen in their facility plus a nebulous "profit" factor.

SO, a given hospital charge will include the:
  • Salary of all the personnel used in the surgery (surgical tech, registered nurse, circulating nurse, anesthesia tech, secretary, etc)
  • Equipment used during the surgery (IV lines, needles, anesthesia tubing, masks, endotracheal tube, surgical equipment, etc)
  • Medications used during the surgery (gases, IV drugs, etc)
  • Facility costs expended during the surgery (electricity, water, oxygen, medical waste disposal, etc)
To take the example of tonsillectomy, the hospital charges will include all the equipment, medications, personnel, and facility costs utilized during the tonsillectomy surgery.

In Summary, the Cost of Surgery is... It Depends

Given anesthesia charges vary based on the time duration of surgery regardless of WHAT the surgery is as well as hospital charges which may vary based on how much was "expended" during the surgery regardless of WHAT the surgery is, the anesthesia and hospital charges are moving targets which roughly correlate with how long the surgery takes.

The surgeon can certainly state what their charges will be up-front because this charge is fixed, but anesthesia and hospital charges are NOT fixed and depend on a certain time factor regardless of WHAT surgical procedure is being performed.

Because of this time dependence, that's why anesthesia and hospital charges can not typically be obtained prior to surgery in most places.

That's also why most places can't (won't) post the total cost of surgery up-front.

Of course, if a given surgeon is very consistent and always takes 15 minutes to perform surgery and always uses the same exact equipment, than anesthesia and the hospital may be able to provide an "averaged" charge up-front.

It is also not uncommon that additional "discounts" may be offered based on a patient's income.

Some places like the Surgery Center of Oklahoma somehow persuaded the anesthesiologist, surgeon, and facility administrators to sit around a table and force an agreement on a fixed TOTAL charge for different surgical procedures. Once an agreement is made on a fixed charge for each, an up-front cost can be publicized... but this can never happen as long as anesthesia and hospital refuses to agree to a fixed charge and rather stick with a time-based framework to determine their charges.
Fauquier blog
Fauquier ENT

Dr. Christopher Chang is a private practice otolaryngology, head & neck surgeon specializing in the treatment of problems related to the ear, nose, and throat. Located in Warrenton, VA about 45 minutes west of Washington DC, he also provides inhalant allergy testing/treatment, hearing tests, and dispenses hearing aids.


Dan Schwartz, Editor, The Hearing Blog said...

Actually, Surgery Center of Oklahoma has as managing partner an anesthesiologist.

Trey said...

While Dr. Fauquier's description of "anesthesia" charges is correct, his example is exaggerated. As an anesthesiologist, I have no idea what an ENT charges or is reimbursed for a tonsillectomy, somehow I doubt the charge is only $250 (maybe that is all some insurance companies pay). A more realistic scenario for an anesthesiologist is to charge $150 base (collects $75) and $75/unit (collects $35). This is for an insurance case. Medicare / Medicaid is more like 15% of charges and some Medicaid plans pay a flat rate (think $175) for every case: 15 minutes or 15 hours!
Dr. Fauquier should consider politics - throw in some facts with distortions to make your case.

Anonymous said...

A more realistic scenario was my actual bill for a 30 minute hernia repair under local with sedation--anesthesiologist's charge $800 (collected $400)and nurse anesthetist charge $800 (collected 280).
Double billing...hmmmm (I'm sure the presence of both were necessary for local w/ sedation- and if so, how many nurse anesthetists were simultaneously "supervised")--get real.

Anonymous said...

My tonsilectomy with mi ble cross shield ins cost 8 grand total surgeons take was 850 . Annestesia group costs 1200 hospital charges were the remainder mostly facility and a rediculous 2450 for recovery just sitty up in a bed in a small recovery outpatient ward where a nurse checked on me twice for 2 minutes what a ripoff. I was stuck with 1500 bucks after insurance paid. Go for ambulatory for minor sloutpatent surgery much cheaper same quality just doc thought it was clser to house for us . Yes by half hour big deal his charges like article said were the same no katter where or what.

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