Jonathan Lhost's Entry For The 2004 Moffatt Prize in Economics

Introduction:

Surgery is among the most risky of medical procedures. Due to the high risks of surgery, it is important to search for ways to make surgery safer-after all, the purpose of surgery is often to save lives. One reform that is gaining widespread support is the referral of surgery patients from low volume hospitals (LVHs) to high volume hospitals (HVHs).

Many studies have found an inverse relationship between hospital volume and mortality rates for all sorts of different surgery procedures, from heart surgery and transplants to the removal of various forms of cancer. The bottom line is that for many procedures, mortality rates are lower in hospitals that perform more of that procedure relative to hospitals that perform relatively fewer of that procedure. Due to the risks associated with surgery, any steps that can be taken to reduce mortality rates after surgery should be warmly welcomed. However, it is also important to consider the economic implications of surgical reforms. It is important to reform the way our health care system provides surgical procedures in the most efficient way possible.

Volume and Mortality:

Over the past thirty years, many studies have found a relationship between the mortality rate for a certain surgery at a given hospital and the number of times that surgery is performed each year at that hospital, called volume.

The higher the volume, the lower the mortality rate, as well as the lower the incidence of complications and the shorter the length of hospital stay. It is important to note that what qualifies as a high volume hospital is different for different procedures and is subject to constant change. This issue, however, is beyond the scope of this paper and will not be discussed further.
These studies are only a few of the many studies finding better surgical outcome at high volume hospitals. Due to these results, certain groups such as the Leapfrog Group (see www.leapfroggroup.org), a group that represents many large employers and public healthcare purchasers, uses its bargaining power to obtain the referral of surgery patients from LVHs to HVHs. Such a policy would most likely save lives due to decreased mortality rates at HVHs, such as is found in the studies summarized above. However, it is important to consider the economic implications of such a referral policy, for it is possible that there is a more cost-beneficial method of improving surgical outcomes. The economic implications of a volume-based referral strategy will be the focus of the rest of the paper.

Be Sure to Continue to Page 2 of "The Quality and Economic Implications of Volume-Based Surgery Referral".