Doing the Math: Can the Robot Be Cost-Effective for General Surgery?

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Seeking Real Numbers To Find in What Scenarios the Robot Can Make Sense Financially: Part 1 of 2

Author: Victoria Stern

Debate over the value of robotic surgery is far from resolved. General surgeons tend to agree that the current robotic platform delivers what it promises—enhanced visualization, dexterity and control on the part of surgeon—but that these perks come at a high financial investment. Given the costs, it is unclear whether robotic surgery can become cost-efficient and thus whether the surgical community can justify its use.

“There are a lot of strong opinions when it comes to robotic surgery,” said Julio Garcia Aguilar, MD, PhD, chief of colorectal service and Benno C. Schmidt Chair in Surgical Oncology at Memorial Sloan-Kettering Cancer Center in New York City, and a leader in robotic colorectal surgery. “Some surgeons are strongly in favor of robotics, and others are completely against it because there is insufficient evidence to recommend it. I can see both sides of the argument.”

This article will attempt to uncover whether robotic surgery can become cost-effective. A cost-effectiveness analysis of robotic surgery would incorporate direct expenses, such as capital, maintenance and instrument costs as well as indirect costs, such as complications, hospital length of stay (LOS) and readmissions.

Regarding direct costs, a da Vinci Surgical System, developed and sold by Intuitive Surgical, starts at about $600,000 but can increase to as much as $2.5 million, depending on the model and add-ons. Institutions are then faced with yearly maintenance fees that range from $100,000 to $170,000, as well as robot-specific instruments and accessories, which can add $700 to $3,200 to a procedure. Instruments alone tend to cost $2,300 for a 10-use device. The lifetime of a da Vinci robot is a maximum of seven years.

Studies attempting to estimate the short-term costs associated with robotic procedures have largely shown that hospitals spend between $1,000 and $4,000 more per robotic case compared with laparoscopic or open procedures, in addition to the cost to purchase and maintain the robot. A 2010 New England Journal of Medicine report estimated that if robot-assisted operations replaced conventional procedures, an additional $2.5 billion would be spent in annual health care costs (2010;363:701-704).

Even with these cost estimates, the use of the da Vinci Surgical System has skyrocketed in the 15 years since the FDA approved its use. In 2000, about 1,000 robotic operations were performed worldwide, but by the end of 2014, that number had increased to 570,000, according to Intuitive Surgical’s 2015 10-K report. The majority of procedures performed in 2014 were robot-assisted hysterectomies (approximately 203,000 procedures) and prostatectomies (125,000 procedures). As of Dec. 31, 2014, 3,266 systems were being used worldwide, 2,223 of which were in the United States. The report also disclosed that total revenue for Intuitive Surgical in 2014 was $2.1 billion, 70% of which ($1.47 billion) was from purchases in the United States.

“Robotic surgery seems like a losing financial proposition,” said Patricia Sylla, MD, FACS, FASCRS, a colorectal surgeon at Mount Sinai Hospital in New York City. “There’s never been a frank talk about the costs of robotic surgery from an administrative standpoint, and as surgeons, it’s hard to tell how we can generate money for the hospital given that laparoscopic and robotic procedures are reimbursed equally.”

For the majority of cases, Peter Dunn, MD, director of perioperative services at Massachusetts General Hospital, Boston, has found that robotic surgery is costly without significant benefit. “There is no scientific data to show robotic surgery is better for patients,” said Dr. Dunn. “The bulk of the evidence in favor of robotic surgery remains anecdotal, and I have found that other minimally invasive techniques are less expensive and have similar or superior clinical outcomes compared to robotic surgery.”

Some hospital administrators, however, have uncovered ways to minimize costs associated with robotic surgery and, in some instances, make it cost-effective. When Terry Loftus, MD, chief medical director of Surgical Services and Clinical Resources for Banner Health, Phoenix, started his role, the chief financial officer (CFO) asked him to gain a better understanding of robotic surgery.

“The CFO said that we were seeing a lot of costs and interest going into robotics but it wasn’t clear whether there was value to it,” recalled Dr. Loftus, a general surgeon who specialized in laparoscopic surgery, not robotics, before taking his position at Banner Health. “I was a skeptic about robotic surgery, but over time, as I’ve looked at the numbers as an administrator, I’ve started to change my tune. I’m becoming more of a believer, a reserved believer.”

Dr. Loftus has spent the past two years studying costs and outcomes associated with robotic surgery in the Banner Health network, which has 28 hospitals and 20 robots.

“I can’t ignore costs in my role, particularly as they apply to new purchases,” Dr. Loftus said. “Every time we decide about the capital purchase of a robot, we have to give a lot of attention to whether it will be good value for the institution or not.”

What Dr. Loftus has come to realize is that a hospital can improve patient care and generate a decent margin from robotic surgery if it considers the robotic system as a program, not a piece of technology.

“You have to create a sense of organization around robotic surgery to understand the circumstances under which it works best and avoid unnecessary costs and wasteful use,” Dr. Loftus said. “That is probably a major distinguishing factor between hospitals that find the robot a cost-effective investment and those that don’t.”

Minimizing Costs of Robotic Systems

The following sections will describe several scenarios in which hospitals and surgeons can reduce costs associated with robotic surgery, assuming an institution has decided to invest in a robot.

Judicious Use of Instruments

One key to making robotic surgery more cost-efficient is simply minimizing the number of tools surgeons use.

“When I started analyzing robotic surgery, one of the first things I noticed was the range of supply costs,” Dr. Loftus said. “We found that the costs of instruments for robotic cases varied threefold. The supply costs were three times greater for the highest-cost case compared with the lowest-cost case, but there was no difference in quality. In other words, there was no correlation between supply costs and surgical quality.”

Dr. Loftus recalled that Randy Fagin, MD, chief administrative officer at Texas Institute for Robotic Surgery in Austin, observed an identical pattern across the HCA Healthcare network, which has 152 robots. “The information looked the same in two completely different health systems,” Dr. Loftus said.

Although minimizing the number of instruments used in robotic surgery is a sound way of keeping costs down, this argument is not exclusive to robotic surgery. Surgeons and administrators can apply this logic to laparoscopic and open surgery, also making these approaches less costly.

Several years earlier, Dr. Loftus had noticed the same variations in the costs of laparoscopic instruments.

“Essentially, we’ve allowed bad habits from the laparoscopic days to roll over into robotics,” Dr. Loftus said. “We may have been able to get away with these costs in laparoscopic surgery, but robotic equipment tends to be more expensive. When you carry over the same habits into robotics, you’re increasing that cost problem by a higher magnitude.”

Surgeon Experience

Just as the key to real estate is “location, location, location,” the key to robotic surgery is “exposure, exposure, exposure,” Dr. Loftus said.

Exposure can refer to how much experience a surgeon has with a specific type of operation. “We found that more experience with a robotic approach leads to better outcomes,” Dr. Loftus said.

Between October 2013 and September 2014, Dr. Loftus and his colleagues compared the outcomes of robotic surgeons in 10 hospitals based on their volume of cases. Dr. Loftus observed significant differences in complications, LOS, readmissions and total costs between the most experienced robotic surgeons who averaged about 80 cases per year and least experienced robotic surgeons who averaged closer to five cases per year. Low-volume surgeons had a 36.2% greater likelihood of complications, 11.1% greater LOS and 65.6% greater readmission rate, and incurred 20.4% more in costs compared with high-volume surgeons.

Conor P. Delaney, MD, PhD, chief of colorectal surgery and vice-chair of surgery at the University Hospitals Case Medical Center in Cleveland, and his colleagues found similar trends when comparing outcomes of robotic colorectal surgery from low- and high-volume providers (J Am Coll Surg 2013;217:1063-9.e1). After evaluating 1,428 robotic colorectal cases across 123 hospitals and 411 surgeons, Dr. Delaney and his colleagues found that lower-volume surgeons, who performed about 95% of procedures, had significantly more complications, longer LOS and higher costs of care.

“If a surgeon just dabbles on the robot, he or she is probably getting worse outcomes at much higher costs,” Dr. Loftus said. “That is one direct reason why costs are so elevated with robotic surgery. When evaluating a robotic program, surgeon experience is a key factor driving costs.”

Dr. Aguilar agreed that surgeon experience is critically important for improving outcomes in minimally invasive and open procedures. “It’s been shown in many studies that the surgeon is a significant factor,” he said. “Surgeons do not have the same level of skill across the board in robotics and that will impact outcomes.”

Industry Competition

Currently, Intuitive Surgical is the only robotics game in town. Without competition in the robotic market, the prices for the technology have largely stayed stagnant.

“In the absence of competition, the capital, maintenance and operational costs will remain high and will be an appropriate barrier to its adoption,” said David Jaques, MD, vice president of surgical services at Barnes-Jewish Hospital and professor of surgery at Washington University, both in St. Louis.

Until there is competition to lower the initial costs of the system, perhaps the easiest way to save on the da Vinci system is to purchase an older model or the new Si, which is about half the capital investment of the newest Xi model that can cost more than $2 million.

“Now that the new Xi model is out, the costs of the older Si model have gone down considerably,” Dr. Loftus said. “The Xi is advantageous for the more technically demanding cases, but most cases can be done on a lower-cost robot. Hospitals can reserve the Xi for the complex inpatient cases.”

Defining Appropriate Use

Being selective about which cases are performed robotically is also important for keeping costs down.

“When I made a list of all cases done robotically in the Banner network, I saw some things I couldn’t believe,” Dr. Loftus said. “Some physicians were doing a range of procedures, such as biopsies and diagnostic laparoscopies, using the robot, which is clearly an inappropriate use of the technology. Certain cases should not be done robotically because there is no evidence to support it and it’s not cost-effective.”

After making this observation, Dr. Loftus helped set up a tiered system at one hospital, which spread across the Banner network. The tiered system provides a graded evaluation of robotic cases where tier 1 cases show evidence of strong clinical and financial effectiveness and tier 4 cases have no evidence. As an example, in gynecology, tier 4 procedures include diagnostic laparoscopy, simple biopsy, ectopic pregnancy, ovarian cystectomy and tubal ligation, whereas tier 1 cases include robotic hysterectomy for endometrial or cervical carcinoma.

The system, implemented in January 2014, required surgeons to request institutional approval before performing tier 4 cases robotically. In 2012, 12.6% of the general surgery cases scheduled throughout Banner Health hospitals would have been considered tier 4, but by the end of 2014, only 0.6% of cases were tier 4. In other words, before implementing the tiered system, about 126 of every 1,000 cases would be tier 4, but after, only six cases were tier 4. According to Dr. Loftus, each tier 4 case costs an additional $1,400 to $2,200 compared with its laparoscopic counterpart. Thus, the clinical practice eliminated 120 tier 4 cases for a potential cost savings between $168,000 and $264,000. Because last year, Banner Health performed about 3,700 robotic cases, it saved between $621,600 and $976,800.

“Once we started to reduce those tier 4 cases, we eliminated so much waste and excess costs in the system,” Dr. Loftus said. “It’s great that some surgeons are enthusiastic about the technology, but the robot is not designed for everything.”

For instance, with hysterectomies, robotic surgery may only be worthwhile in very specific cases. In 2013, James T. Breeden, MD, president of the American College of Obstetricians and Gynecologists issued a cautionary statement asserting that “while there may be some advantages to the use of robotics in complex hysterectomies, especially for cancer operations that require extensive surgery and removal of lymph nodes, studies have shown that adding this expensive technology for routine surgical care does not improve patient outcomes.”

Similarly, according to Dr. Delaney, robotic colorectal surgery would fall in the low to no evidence category. When comparing laparoscopic and robot-assisted colorectal surgery in a large national inpatient database analysis, Dr. Delaney and his colleagues found that LOS and complications were no different, but that robotic cases took longer (39 minutes) and were more costly ($5,272 more considering variable costs and $4,432 more considering fixed costs; Surg Endosc2014;28:212-221).

“Best-case scenario is that laparoscopic and robotic colon surgery is the same in terms of outcomes, but [the robotic] comes at higher costs,” said Dr. Delaney, also the Jeffrey Ponsky Professor of Surgical Education at Case Western Reserve University, in Cleveland. “There is continued discussion about possible benefits of the robot in rectal surgery, but we need more data to show whether this benefit is worth the costs associated with the technology.”

According to Akash Bijlani, director of Healthcare Economics and Market Access at Intuitive Surgical, the potential for robotic colorectal surgery may play out when moving from open to minimally invasive colorectal procedures, considering that about 50% to 70% of colectomies in the United States are performed open. But this story continues to evolve.

Still, Dr. Jaques pointed out, “The failure to spend unwisely should not be thought of as a savings. Rather, it is a value-driven decision that avoids cost.”

In other words, for hospitals that have already invested in a robot, effectively managing how the robot is used becomes critical for minimizing extra costs and ensuring the best patient care.

Drs. Aguilar, Delaney, Dunn, Jaques, Loftus and Sylla reported no conflicts of interest.


Part 2 of this series will be published next month and will deal with specific ways that the robot could lead to cost savings and how the robot affects a hospital’s bottom line.


Original story can be found here:


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