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A Comparison of Costs: How California Teaching Hospitals Achieved Slower Growth Than Nonteaching Hospitals in Operating Room Costs From 2005 to 2014

Childers, Christopher P. MD, PhD; Maggard-Gibbons, Melinda MD, MSHS; Nuckols, Teryl MD, MSHS

doi: 10.1097/ACM.0000000000002844
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Purpose Historically, teaching hospitals have had higher costs than nonteaching hospitals, introducing potential financial risk in value-based payment models. This study compared risk-adjusted operating room (OR) costs between California teaching and nonteaching hospitals.

Method Using 2,992 financial statements from fiscal years (FYs) 2005–2014, the authors extracted data for OR total costs, components of direct costs, and indirect costs. Cross-sectional and longitudinal models estimated OR costs per minute of surgery by teaching status, ownership, case mix index, and geographic area.

Results Risk-adjusted cost was $9.44 per minute less in teaching than nonteaching hospitals in FY 2014 (95% CI, 3.03–15.85, P = .004). Between FY 2005 and FY 2014, OR costs grew more slowly at teaching hospitals because of slower wage growth and indirect costs per minute (−$0.13 and −$0.77 per minute per year, respectively, P = .005 and P < .001). Hourly pay rose more at teaching hospitals ($0.26 per hour per year, P = .008) but was offset by slower full-time equivalents growth (−0.002 per 10,000 OR minutes per year, P = .001). Between FY 2005 and FY 2014, operative volume increased at teaching hospitals and decreased at nonteaching hospitals.

Conclusions By 2014, California teaching hospitals had lower OR costs per minute than nonteaching hospitals because of relative labor productivity gains and slower indirect cost growth. The latter likely resulted from a volume shift from nonteaching to teaching facilities. These trends will help teaching hospitals compete under value-based models. Implications for patients and nonteaching hospitals warrant evaluation.

C.P. Childers is resident physician, Department of Surgery, David Geffen School of Medicine at University of California, Los Angeles (UCLA), and postdoctoral fellow, Department of Health Policy and Management, Fielding School of Public Health at UCLA, Los Angeles, California; ORCID: https://orcid.org/0000-0002-6489-8222.

M. Maggard-Gibbons is professor, Department of Surgery, David Geffen School of Medicine at UCLA, Los Angeles, California.

T. Nuckols is associate professor and director, Division of General Internal Medicine, Cedars-Sinai Medical Center, and vice chair for clinical research, Department of Medicine, Cedars-Sinai Medical Center, Los Angeles, California.

Supplemental digital content for this article is available at http://links.lww.com/ACADMED/A702.

Funding/Support: C.P. Childers is funded by the Agency for Healthcare Research and Quality (AHRQ; no. F32HS025079). The AHRQ had no role in the design or conduct of the study; collection, management, analysis, and interpretation of the data; preparation, review, and approval of the manuscript; or decision to submit for publication.

Other disclosures: None reported.

Ethical approval: The University of California, Los Angeles Institutional Review Board determined that the study was not human subjects research.

Previous presentations: This work was presented at the American College of Surgeons 104th Annual Clinical Congress, Scientific Forum, Boston, Massachusetts, October 22, 2018.

Correspondence should be addressed to Christopher P. Childers, Department of Surgery, David Geffen School of Medicine at UCLA, 10833 Le Conte Ave., CHS 72-247, Los Angeles, CA 90095; email: cchilders@mednet.ucla.edu; Twitter: @cchildersmd.

Copyright © 2019 by the Association of American Medical Colleges