Winter Is Coming.
“To put it bluntly, there is an almost complete lack of understanding of how much it costs to deliver patient care.”
Those were some harsh words from Michael Porter and Bob Kaplan in the Harvard Business Review (2011!)
I’m not sure the story is different in 2025.
Payers may understand their costs… but Porter and Kaplan were talking about something else entirely.
They were referring to COGS: the Cost of Goods Sold… the “total direct cost of producing or acquiring goods that are sold during a specific period”. Raw materials, labor, manufacturing overhead, etc.
In other words… what is the precise cost a health system incurs when executing an elective cervical spine fusion?
I’m not just talking about implant costs.
I’m not just talking about OR costs.
I’m not talking about RVUs.
Would the surgery have happened if the surgical scheduler hadn’t done her part? What’s the cost of those (wo)man-hours?
Would the surgery have happened if the pre-cert team hadn’t gotten insurance approval? What’s the cost of those man-hours?
Would the surgery have happened if the clinical team hadn’t done preop visits and counseling? What’s the cost of that?
Would the surgery have happened without post-op nursing, inpatient physical therapy evaluations, or rounding by the surgical team? What’s the cost of that?
Assuming that surgical costs are just about implants… is like assuming that Nvidia’s GPU costs stem only from silicon. It takes a village.
This is important because bundled payments will soon be mandatory (CMS TEAM) for many hospitals. If you don’t know your COGS for the entire episode of a spinal fusion, how will you make this work?
More importantly, we will soon see bundled payments for specific conditions… not just specific procedures.
In that scenario, an anterior-posterior cervical fusion is going to look a lot worse than an anterior-only procedure.
You better be certain the more expensive option was really worth it.
It’s a scary thought… what if surgeons were financial incentivized by episode costs, and not just RVUs or collections?
🗞️ HOT OFF THE PRESS:
We need the ability to evaluate all the possible surgical options for a given condition, with respect to total episode costs. Not just implants… everything.
This publication is our step in that direction.
If we don’t know our own numbers… folks in suits will take us for a ride and leave us out in the cold.
Winter Is Coming. We need to “bundle up”.
