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July 22, 2010

Does robotic surgery save hospitals money?

Daily Briefing

By reducing length of stay (LOS) and complications, robotic surgery can help hospitals reduce overall treatment costs and produce a net savings of $1,200 per surgery, an expert contends in the New York Times.

Seeking to explain the growth of robotic surgery, Catherine Mohr—a professor of surgery at Stanford University School of Medicine and director of medical research at Intuitive Surgical, which created the da Vinci Surgical System—argues that the economics of minimally invasive surgery (MIS) are "simple": robotic surgeries save hospitals money.

Mohr writes when MIS was first introduced in 2000, only about 1,000 robotic surgeries were performed worldwide and the cost for each procedure—including technology, training, supplies etc.—was largely prohibitive, totaling nearly $11,500 per surgery. However, by 2009, researchers had established the "superior outcomes" of MIS—including shorter LOS, less post-operative pain and accelerated recoveries—and more than 200,000 robotic surgeries were performed that year. For prostatectomies in particular, robot-assisted procedures grew at an "unprecedented" rate, accounting for 75% of all prostate surgeries performed in 2009.

Although improved outcomes boosted patient demand for MIS, Mohr says that other factors contributed to the technology's increased utilization. Specifically, she contends that although MIS is expensive, hospitals are "eager" to develop robotic surgery programs because improved patient outcomes—mainly shorter LOS and fewer complications—reduce overall treatment costs.

Mohr states that patients who undergo MIS leave the hospital an average of two and a half days earlier than patients who undergo open surgery. According to Mohr, discharging patients earlier compensates for the costs associated with operating an MIS program and actually saves facilities about $500 per procedure. In addition, studies show that MIS patients have fewer complications and blood transfusions, which produce high costs that hospitals must absorb. These costs may even obscure the cost of the original surgery, according to Mohr. However, for each MIS performed instead of an open or laparoscopic procedure, hospitals save an average of $700 in avoided complications and transfusions.

Based on these potential savings, Mohr concludes that although hospitals must spend an additional $3,000 per-procedure to provide MIS, facilities save $1,200 per-surgery in net cost savings, which can explain "much" of robotic surgery adoption.

However, critics question whether the purported cost benefits of robotic surgery warrant the expense—the latest da Vinci model costs $1.4 million, plus $140,000 for annual maintenance. However, providers note that such concerns may be outweighed by the “medical arms race” and the pressure hospitals often feel to purchase new technology to keep up with peer institutions (Mohr, "Freakonomics," Times, 7/20).


Matt Garabrant, Senior Consultant, Technology Insights

The author of this article raises some very good points and has approached the cost differential equation—between robotic surgery and more traditional methods—with the right key variables. Interestingly enough, however, Advisory Board research indicates that proliferation of robotic surgery has largely been driven by hospitals’ competitive strategy, as the pace at which surgeons have embraced the technology has created a very competitive market for robotic surgery. Few would question that there are legitimate cost savings opportunities for embracing minimally invasive surgical approaches. The touted robotic advantages of shorter length of stay, lower rates of complications, and less blood loss certainly confer cost savings, but not every case results in a better net margin relative to open or laparoscopic approaches.

Beyond the additional costs incurred due to robotic instruments, the fact of longer surgery times as surgeons weather the robotic learning curve and the amortization of the capital cost of the robot levy a burden on the equation, the impact of which is heightened in cases where the length of stay differential—the key cost control lever—is minimal.

Overall, the financial outlook of investing in a robot really depends on the case mix slated for robotic surgery. The pace of adoption has been dramatic, and continues as robotic surgery is embraced in an increasing number of procedures and surgical specialties. Financial success for an institution, however, is often dependent upon the hospital’s internal processes for determining which cases get triaged to the robot versus other more conventional approaches, in order to ensure clinically and financially justified use of the robot.

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