The Cost Effectiveness of Upper

Gastrointestinal Endoscopy

May 1981

NTIS order #PB81-221814
CAS E STUDY # 8

THE IMPLICATIONS OF

COST-EFFECTIVENESS

ANALYSIS OF

MEDICAL TECHNOLOGY

MAY 1981

BACKGROUND PAPER #2: CASE STUDIES OF

MEDICAL TECHNOLOGIES

CASE STUDY #8: THE COST EFFECTIVENESS OF

UPPER GASTROINTESTINAL ENDOSCOPY

Jonathan A. Showstack, M.P.H.

Senior Research Associate

and

Steven A. Schroeder, M.D.

Professor of Medicine

Health Policy Program, University of California, San Francisco

With Commentary by the American Society for Gastrointestinal Endoscopy

I

OTA Background Papers are documents that contain information believed to be

useful to various parties. The information undergirds formal OTA assessments or is

an outcome of internal exploratory planning and evaluation. The material is usually

not of immediate policy interest such as is contained in an OTA Report or Technical

Memorandum, nor does it present options for Congress to consider.

- ,,, .

\

\ Q

—. . +/

‘! . “ :.:.:.:, , .

w

‘.. .

,

., ;

!ir/--- .- . . . .’ .-..

‘,, .

CONGRESS OF THE UNITED STATES

Office of Technology Assessment

Washington D C 20510
Library of Congress Catalog Card Number 80-600161

For sale by the Superintendent of Documents,

U.S. Government Printing Office, Washington, D.C. 20402
Foreword

This case study is one of 17 studies comprising Background Paper #2 for OTA’s

assessment, The Implications of Cost-Effectiveness Analysis of Medical Technology.

That assessment analyzes the feasibility, implications, and value of using cost-effectiveness and cost-benefit analysis (CEA/CBA) in health care decisionmaking. The major, Policy-oriented report of the assessment was published in August 1980. In addition

to Background Paper #2, there are four other background papers being published in

conjunction with the assessment: 1) a document which addresses methodological

issues and reviews the CEA/CBA literature, published in September 1980; 2) a case

study of the efficacy and cost-effectiveness of psychotherapy, published in October

1980; 3) a case study of four common diagnostic X-ray procedures, to be published in

summer 1981; and 4) a review of international experience in managing medical technology, published in October 1980. Another related report was published in

September of 1979: A Review of Selected Federal Vaccine and immunization Policies.

The case studies in Background Paper #2: Case Studies of Medical Technologies

are being published individually. They were commissioned by OTA both to provide

information on the specific technologies and to gain lessons that could be applied to

the broader policy aspects of the use of CEA/CBA. Several of the studies were specifically requested by the Senate Committee on Finance.

Because of particular circumstances regarding this case study on gastrointestinal

endoscopy, a commentary by the American Society for Gastrointestinal Endoscopy is

presented immediately following the case study. The case study authors’ response is

presented after the commentary.

Drafts of each case study were reviewed by OTA staff; by members of the advisory panel to the overall assessment, chaired by Dr. John Hogness; by members of

the Health Program Advisory Committee, chaired by Dr. Frederick Robbins; and by

numerous other experts in clinical medicine, health policy, Government, and economics. We are grateful for their assistance, However, responsibility for the case studies remains with the authors.

#

(yd~.

.

JOHN H, GIBBONS

Director

. . .

Ill
Advisory Panel on The Implications of

Cost= Effectiveness Analysis of Medical Technology

John R. Hogness, Panel Chairman

President, Association of Academic Health Centers

Stuart H. Altman Sheldon Leonard

Dean Manager

Florence Heller School Regulatory Affairs

Brandeis University General Electric Co.

James L. Bennington

Chairman

Department of Anatomic Pathology and

Clinical Laboratories

Children Hospital of San Francisco

John D. Chase

Associate Dean for Clinical Affairs

University of Washington School of Medicine

Joseph Fletcher

Visiting Scholar

Medical Ethics

School of Medicine

University of Virginia

Clark C. Havighurst

Professor of Law

School of Law

Duke University

Barbara J. McNeil

Department of Radiology

Peter Bent Brigham Hospital

Robert H. Moser

Executive Vice President

American College of Physicians

Frederick Mosteller

Chairman

Department of Biostatistics

Harvard University

Robert M. Sigmond

Advisor on Hospital Affairs

Blue Cross and Blue Shield Associations

Jane Sisk Willems

VA Scholar

Veterans Administration
OTA Staff for Background Paper #2

Joyce C. Lashof, Assistant Director, OTA

Health and Life Sciences Division

H. David Banta, Health Program Manager

Clyde J. Behney, Project Director

Kerry Britten Kemp, * Editor

Virginia Cwalina, Research Assistant

Shirley Ann Gayheart, Secretary

Nancy L. Kenney, Secretary

Martha Finney, * Assistant Editor

Other Contributing Staff

Bryan R. Luce Lawrence Miike Michael A. Riddiough

Leonard Saxe Chester Strobel*

OTA Publishing Staff

John C. Holmes, Publishing Officer

John Bergling* Kathie S. Boss Debra M. Datcher

Patricia A. Dyson* Mary Harvey* Joe Henson

● OTA contract personnel.
Preface

This case study is one of 17 that comprise

Background Paper #2 to the OTA project on the

Implications of Cost-Effectiveness Analysis of

Medical Technology. * The overall project was

requested by the Senate Committee on Labor

and Human Resources. In all, 19 case studies of

technological applications were commissioned

as part of that project. Three of the 19 were specifically requested by the Senate Committee on

Finance: psychotherapy, which was issued separately as Background Paper #3; diagnostic Xray, which will be issued as Background Paper

#5; and respiratory therapies, which will be included as part of this series. The other 16 case

studies were selected by OTA staff.

In order to select those 16 case studies, OTA,

in consultation with the advisory panel to the

overall project, developed a set of selection

criteria. Those criteria were designed to ensure

that as a group the case studies would provide:

●

●

●

●

●

●

●

examples of types of technologies by function (preventive, diagnostic, therapeutic,

and rehabilitative);

examples of types of technologies by physical nature (drugs, devices, and procedures);

examples of technologies in different stages

of development and diffusion (new, emerging, and established);

examples from different areas of medicine

(such as general medical practice, pediatrics, radiology, and surgery);

examples addressing medical problems that

are important because of their high frequency or significant impacts (such as

cost);

examples of technologies with associated

high costs either because of high volume

(for low-cost technologies) or high individual costs;

examples that could provide informative

material relating to the broader policy and

methodological issues of cost-effectiveness

or cost-benefit analysis (CEA/CBA); and

* Office of Technology Assessment, U.S. Congress, The implications of Cost-Effectiveness Analysis of Medical Technology, GPO

stock No, 052-003 -00765-7 (Washington, D.C.: U, S, Government

Printing Office, August 1980),

● examples with sufficient evaluable literature.

On the basis of these criteria and recommendations by panel members and other experts,

OTA staff selected the other case studies. These

16 plus the respiratory therapy case study requested by the Finance Committee make up the

17 studies in this background paper.

All case studies were commissioned by OTA

and performed under contract by experts in academia. They are authored studies. OTA subjected each case study to an extensive review

process. Initial drafts of cases were reviewed by

OTA staff and by members of the advisory

panel to the project. Comments were provided

to authors, along with OTA’s suggestions for

revisions. Subsequent drafts were sent by OTA

to numerous experts for review and comment.

Each case was seen by at least 20, and some by

40 or more, outside reviewers. These reviewers

were from relevant Government agencies, professional societies, consumer and public interest

groups, medical practice, and academic medicine. Academicians such as economists and decision analysts also reviewed the cases. In all,

over 400 separate individuals or organizations

reviewed one or more case studies. Although all

these reviewers cannot be acknowledged individually, OTA is very grateful for their comments and advice. In addition, the authors of

the case studies themselves often sent drafts to

reviewers and incorporated their comments.

These case studies are authored works

commissioned by OTA. The authors are responsible for the conclusions of their specific case study. These cases are not statements of official OTA position. OTA does

not make recommendations or endorse particular technologies. During the various

stages of the review and revision process,

therefore, OTA encouraged the authors to

present balanced information and to recognize divergent points of view. In two cases,

OTA decided that in order to more fully

present divergent views on particular technologies a commentary should be added to

the case study. Thus, following the case
.

studies on gastrointestinal endoscopy and

on the Keyes technique for periodontal disease, commentaries from experts in the appropriate health care specialty have been

included, Mowed by responses from the

authors.

The case studies were selected and designed to

fulfill two functions. The first, and primary,

purpose was to provide OTA with specific information that could be used in formulating

general conclusions regarding the feasibility and

implications of applying CEA/CBA in health

care. By examining the 19 cases as a group and

looking for common problems or strengths in

the techniques of CEA/CBA, OTA was able to

better analyze the potential contribution that

these techniques might make to the management

of medical technologies and health care costs

and quality. The second function of the cases

was to provide useful information on the specific technologies covered. However, this was

not the major intent of the cases, and they

should not be regarded as complete and definitive studies of the individual technologies. In

many instances, the case studies do represent excellent reviews of the literature pertaining to the

specific technologies and as such can stand on

their own as a useful contribution to the field. In

general, though, the design and the funding

levels of these case studies was such that they

should be read primarily in the context of the

overall OTA project on CEA/CBA in health

care.

Some of the case studies are formal CEAs or

CBAs; most are not. Some are primarily concerned with analysis of costs; others are more

concerned with analysis of efficacy or effectiveness, Some, such as the study on end-stage

renal disease, examine the role that formal

analysis of costs and benefits can play in policy

formulation. Others, such as the one on breast

cancer surgery, illustrate how influences other

than costs can determine the patterns of use of a

technology. In other words, each looks at evaluation of the costs and the benefits of medical

technologies from a slightly different perspective. The reader is encouraged to read this study

in the context of the overall assessment’s objectives in order to gain a feeling for the potential

role that CEA/CBA can or cannot play in health

care and to better understand the difficulties and

complexities involved in applying CEA/CBA to

specific medical technologies.

The 17 case studies comprising Background

Paper #2 (short titles) and their authors are:

Artificial Heart: Deborah P. Lubeck and John P.

Bunker

Automated Multichannel Chemistry Analyzers:

Milton C. Weinstein and Laurie A. Pearlman

Bone Marrow Transplants: Stuart O. Schweitzer and C. C. Scalzi

Breast Cancer Surgery: Karen Schachter and

Duncan Neuhauser

Cardiac Radionuclide Imaging: William B.

Stason and Eric Fortess

Cervical Cancer Screening: Bryan R. Luce

Cimetidine and Peptic Ulcer Disease: Harvey V.

Fineberg and Laurie A. Pearlman

Colon Cancer Screening: David M. Eddy

CT Scanning: Judith L. Wagner

Elective Hysterectomy: Carol Korenbrot, Ann

B. Flood, Michael Higgins, Noralou Roos,

and John P. Bunker

End-Stage Renal Disease: Richard A. Rettig

Gastrointestinal Endoscopy: Jonathan A. Showstack and Steven A. Schroeder

Neonatal Intensive Care: Peter Budetti, Peggy

McManus, Nancy Barrand, and Lu Ann

Heinen

Nurse Practitioners: Lauren LeRoy and Sharon

Solkowitz

Orthopedic Joint Prosthetic Implants: Judith D.

Bentkover and Philip G. Drew

Periodontal Disease Interventions: Richard M.

Scheffler and Sheldon Rovin

Selected Respirator y Therapies: Richard M.

Scheffler and Morgan Delaney

These studies will be available for sale by the

Superintendent of Documents, U.S. Government Printing Office, Washington, D.C. 20402,

Call OTA’s Publishing Office (224-8996) f o r

availability and ordering information.

. . . 11111
Case Study #8

The Cost and Effectiveness of

Upper Gastrointestinal Endoscopy

Jonathan A. Showstack, M.P.H.

Senior Research Associate

and

Steven A. Schroeder, M.D.

Professor of Medicine

Health Policy Program

University of California, San Francisco

AUTHORS’ ACKNOWLEDGMENTS

We would like to thank David Altman, M. D., Andrew Lipton, M. D., Anne Scitovsky, Lois Myers, Michael Matsumoto, and our colleagues at the University of

California Health Policy Program for their comments and criticisms of an earlier draft

of this paper. We also thank Howard Steinberg, M. D., for allowing us to use his unpublished data, Judy Schwartz for her assistance in data collection, Elizabeth Afshari

for her secretarial support and assistance in data collection, and Blue Shield of California for making available data on endoscopies reimbursed through the programs it

administers.

All opinions and conclusions expressed in this paper are those of the authors.
. . . —— . . .——— - . .—. .—. . . —_ .— ~- —

Contents >-

.,

Page Preface. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

3

Introduction. . . . .. .. .. .. .. .. ... ... .$.....,

,. ,. . . . . . . . . . . . . . ● e .-,

‘ ~~Clinical Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

.****** ● *

***.*.. . .

Cost of Endoscopy . . . . . . . . . . . . . . . . . ., . . . ., ....0.,. .. o.ece, ..oo, .c. .

Clinical Cost (Morbidity andMortafity) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Economic Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5

7

7

8

Issues in Studying the Benefits and Costs of Endoscopy . . . . . . . . . . . .

“ Discussion . . . . . . . . . . . . . . . . ,. .. ., .,, .., ... O,..O.O ,., ,...,

“ Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

,

References . . . . . . . . . . . . . . . . ...........+., . . . . . . . . . . . . . . . .

Commentary by the American%ciety for Gastrointestinal Endoscopy

Authors Response to ASGE Commentary. .,.,.. . . . . . . . . . . . . . . . .

LIST OF TABLES

● ☛✎✎☛☛✎ ✎ ✎ 11

✎ ✎ ✎ ✎ ✎ ✎ ✎ ✎ ✎

✎✎✌☛☛✎ ✎ ✎ ✎ 15

● ☛✎✎☛✎✎ ● ✎

● ✎☛✎☛✎✎ ✎✌ 18

✎☛☛✎✎✌✎ ✎ ✎ 20

TableNo. Page

l. Most Common Diagnoses for a Sample of Endoscopies Billed to California

Medicare, Medicaid, CHAMPUS, and BlueShieldStandardPolicies, 1976 . . . .

2. Selected Endoscopic Procedures Billed to CaliforniaMedicare, Medicaid,

CAMPUS, andBlueShieldStandard Policies During 1977 . . . . . . . . . . . . . . .

3. One Year Cost Assumptions . . . . . . . . . . . . . . . ., .......,..,,+ .,, .....O

A-l. Estimate of OverallCosts and RecurringCosts per Procedure in

5

9

9

Physician’s Office. ...**. ● ✎✎✎☛✎✎ ✎ ✎✎☛✎☛☛☛ ✎ ✎ ✎ ✎ ✎ ✎ ✎ ✎ ✎✎✎☛✎✎✎✌ ✎ ✎☛✎☛✎✎✎ ✎ ✎ 19

.
Case Study #8:

The Cost and Effectiveness of

Upper Gastrointestinal Endoscopy

Jonathan A. Showstack, M.P.H.

Senior Research Associate

and

Steven A. Schroeder, M.D.

Professor of Medicine

Health Policy Program

University of California, San Francisco

PREFACE

Upper gastrointestinal endoscopy is only one of many relatively new diagnostic

and therapeutic technologies that are in widespread use in the medical care system. Examples of others are coronary angiograms, renal hemodialysis, and fetal monitoring.

Few new technologies are evaluated thoroughly before they become part of “standard

practice.” Evaluating their worth and attempting to make their use as efficacious as

possible, therefore, presents many formidable problems. This report presents an

analysis of the cost and efficacy of the current use of upper gastrointestinal endoscopy.

However, the analyses and conclusions reached have parallels in many other medical

technologies already in current use in a wide variety of medical specialties in many different settings.

INTRODUCTION

For more than 100 years, physicians have

been able to see the mucosa of the stomach

through the use of a rigid gastroscope. In the

1930’s, the viewing technique became relatively

safe with the introduction of the semirigid

gastroscope (37). Because this instrument lacked

flexibility, it frequently did not allow viewing of

major portions of the stomach (6). It was not

until the introduction of the flexible fiberoptic

endoscope in 1957 that endoscopy came to be

widely used as a diagnostic procedure.

Upper gastrointestinal endoscopy is the generic term for all types of visualization of the

upper gastrointestinal tract that use the fiberoptic endoscope. This report discusses the most

common and basic use of an endoscopy —visualization of the upper gastrointestinal tract from

the esophagus to an upper portion of the small

intestine. Although there are also several complex procedures that use an endoscope (e.g.,

endoscopic retrograde cholangiopancreatography), the report does not discuss these.

The fiberoptic endoscope consists of two

bundles of glass fibers that transmit light in a

coherent manner. The placement of lenses at

each end of one of the bundles allows an image

of an object illuminated at one end of the bundle

to be seen at the other end; clear images are

3
4 ● Background Paper #2: Case Studies of Medical Technologies

transmitted by the bundle even when the fibers

are bent or curved. The other glass-fiber bundle

transmits light from a source outside the patient

to illuminate the viewed object. Additional

channels are included to inject air through the

endoscope to inflate the stomach and duodenum

to aid viewing, and to provide water to clean the

lens. One or more hollow channels are included

to allow passage of miniature forceps and snares

to take biopsies of suspicious material or grasp

small foreign objects.

Generally, the physician-endoscopist is assisted by a nurse during the procedure, although

the procedure can be performed on an emergency basis without assistance. Preparation for an

endoscopy is generally limited to three steps:

The patient is briefed on the procedure; a mild

anesthetic is sprayed into the patient’s pharynx;

the patient is then given a tranquilizer (usually

intravenous diazepam). The patient, generally

lying on his or her left side and sometimes

strapped onto the examining table, is awake but

drowsy during the procedure. Most patients remember little of the experience.

The physician passes the endoscope past the

hypopharynx and is able to see the esophagus

on a viewing screen at the end of the endoscope.

(A second, “training,” viewpiece can be attached for a second observer or a camera. ) The

endoscope is moved forward and back by simply pushing or pulling the tube. The tip of the

endoscope can be moved from side to side or

turned back on itself (up to a 180° turn) by

moving a lever on the controls. This allows the

endoscope to be directed to or through any area

that the physician wishes. In this way, the endoscope can be passed through the stomach,

into and through the duodenum, and into the

proximal small intestine.

One potential problem for the endoscopist is

getting “lost” in the stomach. The image that the

physician sees is distorted, from back to front,

by the wide-angle objective lens. The light

source and field of view of the endoscope allow

detailed, clear vision only 1 or 2 inches in front

of the lens. This limitation, plus the lack of

“markers” in much of the upper gastrointestinal

tract, make it possible for an inexperienced endoscopist to lose track of where the tip of the endoscope is in relation to the patient. Furthermore, because of the distortion and lack of

depth perception created by the wide-angle lens,

it often takes multiple attempts at biopsies to

obtain samples of mucosa from the exact area

desired.

An endoscopy of the esophagus, stomach,

and duodenum generally takes less than 30 minutes from initial medication to removal of the

endoscope (32). An additional 10 minutes may

be spent by the physician dictating notes concerning the procedure. The difference between

exploring the stomach only and exploring the

duodenum as well is possibly 5 more minutes of

examination. Biopsies of a suspicious area in the

duodenum might take another 5 minutes. Waye

states that a complete endoscopic examination

should take no more than 15 minutes (47). A

nurse may assist during the procedure by helping to keep the patient in place on the examining

table. The nurse also assists with the orientation

and premeditation of the patient, and with the

use of forceps.

Training in the use of an endoscope is a standard part of residency programs for gastroenterologists (2). Present guidelines suggest that the

trainee should perform 50 to 100 upper gastrointestinal endoscopies under supervision (19).

There has been some debate over this emphasis

in training programs. Some claim that gastroenterological clinical trainees devote too much

time to training in procedures, while others

argue that not only should gastroenterologists

receive intensive training in the technique, but

also training should be made available to all

physicians interested in using an endoscope in

their practices (13,23). In fact, any physician

(not just gastrointestinal specialists) can perform and be reimbursed by health insurers for

performing an endoscopy—no matter what type

of formal training in the procedure, if any, the

physician has undergone. Physicians can use the

equipment in hospital facilities or can purchase

the equipment for about $10,000 (affordable to

most) for use in their private offices. There is no

additional malpractice premium in California

resulting from use of the procedure.
Case Study #8: The Cost and Effectiveness of Upper Gastrointestinal Endoscopy ● 5

Endoscopies are generally performed to document a condition, such as the size of a hiatal hernia or the site of an upper gastrointestinal

hemorrhage. Table 1 lists the most common

diagnoses for which all endoscopies, and esophagoscopies and gastroscopies only, were billed

to Blue Shield of California during 1976 (43).

These diagnoses were determined as the result of

a procedure and are not necessarily the same as

CLINICAL EFFECTIVENESS

The clinical value of endoscopy

First, by allowing physicians to see

of the upper gastrointestinal tract,

can provide valuable information

is twofold.

the mucosa

endoscopy

in certain

cases. Second, by enabling physicians to obtain

specimens of mucosal tissue through biopsy and

cytology, it can provide confirmatory diagnostic information.

In a well-documented discussion of endoscopy, Waye lists the indications, therapeutic

uses, and contraindications for endoscopy (47).

The three primary indications he lists for the use

of endoscopy are upper gastrointestinal hemorrhage, pathologic lesion on X-ray, and symptoms unexplained by X-ray (e.g., gastritis). The

therapeutic uses of endoscopy Waye lists are

rupture of esophageal mucosal rings, removal of

foreign objects in the esophagus and stomach,

and stopping of gastrointestinal bleeding by

electrocoagulation or other means. The only

contraindication Waye lists is an uncooperative

patient. Waye points out that a patient can inflict severe damage on a fiberoptic endoscope by

biting the instrument.

indications for performing the procedure. In addition to hiatal hernia and upper gastrointestinal bleeding, the most common diagnoses obtained from performing an endoscopy included

gastritis, duodenitis, and stomach ulcers. All

types of primary cancer of the upper gastrointestinal tract accounted for 9 percent of all

diagnoses. Similar results are documented by

Fisher, et al. (17).

Colcher lists a wide variety of indications for

performing endoscopy (10). He also notes that it

is important to examine the esophagus, stomach, and duodenum simultaneously. Among the

many indications based on radiologic diagnosis

Colcher lists are presence of a gastric ulcer,

gastric carcinoma or lymphoma, benign tumors, “large folds, ” deformed antrum, pyloricchannel obstruction, and postoperative inspection of the stomach. Two of the many indications based on the clinical manifestations he lists

are acute upper gastrointestinal tract bleeding

and “postoperative problems. ” Some of the

therapeutic procedures Colcher lists are management of benign esophageal strictures, webs

or rings, and polypectomy.

It is clear that Waye’s, Colcher’s, and others’

lists of indications for endoscopy are quite

broad and inclusive. The lack of specific indications is illustrated by Belber in Gastrointestinal

Disease (a standard textbook): “Indications are

really so broad that we could summarize by saying that whenever we suspect the upper gastrointestinal tract may be the site of disease, sympTable 1 .—Most Common Diagnoses for a Sample of Endoscopies Billed to California Medicare, Medicaid,

CHAMPUS, and Blue Shield Standard Policies, 1976

Total endoscopies (N = 5,515) Esophagoscopies (N = 536) Gastroscopies (N = 851)

1. Hiatal hernia (13% ) 1. Hiatal hernia (14%) 1. Upper gastrointestinal bleed (18°/0)

2. Upper gastrointestinal bleed (12°76) 2. Caustic substance (9°/0) 2. Hiatal hernia (12°/0)

3. Gastritis and duodenitis (10°/0) 3. Obstruction of the esophagus (8°/0) 3. Stomach ulcer (1 10/0)

4. Stomach ulcer (10%) 4. All other (69°/0) 4. All other (59°/0)

5. Upper gastrointestinal cancer (90/. )

6. All other (46°/0)

SOURCE: H. Steinberg. University of California, San Francisco, Calif. unpublished data, 1978.
6 ● Background Paper #2: Case Studies of Medical Technologies

tomatic or nonsymptomatic, we feel it is advisable to have a look” (6). Belber goes on to list

only three absolute contraindications to endoscopy: an unwilling or uncooperative patient, the

probability that a viscus (internal organ) is perforated, or a patient in shock. Sullivan (46 )

and Colcher (11) list similar contraindications.

Thus, almost all patients with even minor upper

gastrointestinal symptoms are potential candidates for an endoscopy.

Ultimately, criteria for use of any diagnostic

tool must be based on improvement in patient

outcome or increased efficiency of care as a result of administration of the diagnostic test or

procedure. Studies on the diagnostic value of

endoscopy generally fall into two categories: a

general category of studies of clinical indications for endoscopy, and a separate category of

studies of endoscopy’s value in the specific case

of upper gastrointestinal hemorrhage.

In the broadest published study of the value

of endoscopy for nonbleeding patients, Cameron and Ott (9) reported the results of 1,360 examinations. All patients had been previously examined by upper gastrointestinal X-ray. The

question that Cameron and Ott asked is, “For

symptomatic patients, what information is provided by endoscopy in addition to that provided

by the upper gastrointestinal X-ray series?” To

limit their study to major conditions, the authors specifically excluded as significant findings: hiatal hernia, gastric and duodenal scarring, gastritis, and gastric erosion. Overall, endoscopy altered the diagnosis in 18 percent of

the examinations, and yielded additional findings of possible clinical significance in another 7

percent. In cases where X-ray results were negative, endoscopy produced significant positive

findings 11 percent of the time,

As a diagnostic tool, endoscopy can provide

excellent new information in some cases (e. g.,

locating the site of an upper gastrointestinal

hemorrhage not seen on X-ray), while adding

confirmatory information in other cases (e. g.,

ruling out peptic ulcer disease in favor of

gastritis). Perhaps a key to evaluating the

clinical effectiveness of upper gastrointestinal

endoscopy is the current lack of effective treatments for the most common upper gastrointestinal diseases. In many cases, the major treatment decision for upper gastrointestinal diseases

is whether to perform surgery. However, in

almost all cases, this decision is based on

clinical, rather than morphologic, criteria. The

diagnostic yield from an endoscopy, therefore,

may add very little to the decisionmaking process once an adequate clinical picture is obtained.

E.g., in the case of peptic ulcer disease, the major indications for surgery are perforation,

organic obstruction, intractable bleeding, and

refractoriness to medical therapy (41). None of

these requires the performance of an endoscopy

for confirmation.

Gastric cancer presents another example of a

condition for which endoscopy may provide

useful additional information but rarely affects

the decision of whether to perform surgery, An

X-ray will reveal a gastric abnormality in approximately 90 percent of symptomatic patients, but will fail to differentiate between

benign and malignant lesions about 25 percent

of the time (26). Primarily because of its ability

to provide directed biopsies of suspicious tissue,

an endoscopy can help to rule out gastric cancer. The reassurance this provides to the patient

may be one of the largest benefits of endoscopy.

However, it is very difficult to quantify this reassurance value. This may cause cost-effectiveness equations to have an artificially low-effectiveness value. Ruling out gastric cancer may

also prevent unnecessary exploratory surgery.

In a study of patients with confirmed gastric

cancer, Olearchyk (32) states that an upper gastrointestinal X-ray series was positive in 95 percent of 206 patients who underwent this test,

while an endoscopy with biopsy was positive in

69 percent of the 70 patients who underwent the

latter procedure (although a true-positive rate

approaching 95 percent for an endoscopy with

biopsy is at last theoretically possible). Others

point out the need for biopsies when viewing

early gastric cancer or chronic gastritis (18,40).

The definitive diagnosis of gastric cancer by

endoscopy (as opposed to ruling out the disease)

provides little benefit to the patient because of

the current lack of adequate treatment for this
Case Study #8: The Cost and Effectiveness of Upper Gastrointestinal Endoscopy ● 7

condition and poor 5-year survival rates. In

fact, the decision to operate in the case of gastric

cancer is based almost entirely on how widely

metastasized the disease is. An endoscopy provides little or no additional information to

answer this question.

In the specific case of upper gastrointestinal

hemorrhage, it seems clear that endoscopy leads

to increased diagnostic accuracy, but there is little evidence that it changes morbidity or mortality rates. The improved diagnostic accuracy

afforded by endoscopy has been shown in several studies (12,21,28,44,45). However, a lack

of difference in outcome for bleeding patients

who undergo a diagnostic endoscopy has been

documented by a variety of controlled prospective studies.

Sandlow, et al. (35), studied 150 patients who

were randomly assigned to a group that underwent an emergency endoscopy followed by barium-contrast X-ray or to a group that underwent

the same studies delayed until 1 week after admission. The patients in the first group fared

either no better or even worse than the patients

in the latter group. A study by Allan, et al. (l),

assigned patients to either immediate endoscopy

or to an initial barium-contrast examination

after which endoscopy was performed on only

34 percent of the cases for particular clinical indications. There was no difference in outcome

between these two groups. In a study by Dronfield, et al. (14), 322 patients were randomly

assigned to either endoscopy or radiology. The

diagnostic yield was higher in the endoscopy

than the radiology group, but there was no difference between the two groups in management

COST OF ENDOSCOPY

Clinical Cost (Morbidity and Mortality)

Because of the instrument’s flexibility and

ease of handling, endoscopy with a flexible

fiberoptic endoscope produces a relatively low

rate of complications (20,25,30,42). The American Society for Gastrointestinal Endoscopy

(ASGE) surveyed its members in 1974 to determine rates of morbidity and mortality associor survival. Two other prospective studies also

document similar findings of increased diagnostic yield but no difference in outcome

(22,31). Thus, while endoscopy clearly increases

the diagnostic yield for certain patients, there is

little evidence that outcome has been improved

by performing an endoscopy in addition to an

upper gastrointestinal X-ray series. In a review

of several of the aforementioned studies, Eastwood asks, “Unquestionably, the sooner endoscopy is performed after a bleeding episode,

the greater the diagnostic yield, but is that better

for the patient?” (15). He goes on to state that,

“Although it seems reasonable, the necessity of

a definite diagnosis before therapy for active

upper gastrointestinal bleeding has not been

proved. ”

However, a caveat must be noted here for the

case of upper gastrointestinal hemorrhage and

gastric carcinoma. The results cited above are

for the diagnostic uses of endoscopy. Therapeutic methods under development for the control of gastrointestinal hemorrhage through the

use of an endoscope may alter this picture for

some specific causes of hemorrhage (36), It also

should be noted that, while having little positive

effect on patient outcome, an endoscopy to document a healing ulcer or to rule out gastric

cancer may substitute for an upper gastrointestinal X-ray series. Of course, if both endoscopy

and an upper gastrointestinal series are performed, the diagnostic effect of the combined

procedures may be marginal, while the higher

cost is substantial. In current practice, either or

both procedures are performed for many different types of upper gastrointestinal disease.

ated with various types of gastrointestinal endoscopy (42). Of the 642 questionnaires that

ASGE sent to its members, 404 (64 percent)

were returned. Almost all the respondents (86

percent ) were gastroenterologists.

The reported examinations had an overall

complication rate of 1.3 per 1,000 cases. Absolute numbers of complications in this series of
8 ● Background paper #2: Case Studies of Medical Technologies

211,000 examinations were as follows: perforation, 70; bleeding, 63; cardiopulmonary complications, 129; and infection, 17. There were an

additional 228 miscellaneous complications,

which were attributed primarily to medication

reactions (hives, thrombophlebitis). If the latter

are included, the overall complication rate becomes 2.3 per 1,000 examinations. There were

13 fatalities in this series. Perforations accounted for five fatalities, bleeding accounted

for two, and cardiopulmonary complications

for six.

Two-thirds of the perforations occurred in the

esophagus; the rest occurred primarily in the

stomach. Of the 63 cases of bleeding that were

attributable to the endoscopic procedure, approximately one-third were the result of biopsies (although there was no indication of the

severity of the bleed). Cardiopulmonary complications of the endoscopic procedure were

primarily caused by severe respiratory depression or arrest secondary to intravenous diazepam (tranquilizer) or to aspiration. There were

an additional three cases of respiratory arrest

secondary to pharyngeal anesthesia. Thus, perforation occurred in approximately 1 out of

3,300 examinations, bleeding in approximately

1 out of 3,500, and cardiac and pulmonary complications in approximately 1 out of 1,600.

In another report, Hafter (20) discusses data

on approximately 400,000 endoscopies, of

which 211,000 were from the Silvis study cited

above (42). Hafter reports an overall perforation rate of approximately 1 per 3,000 examinations, an aspiration rate of slightly less than 1

per 1,000 examinations, and an overall mortality rate of approximately 1 per 20,000 examinations. He also reports a comparison between

semirigid and flexible instruments used in endoscopy. The data for the semirigid endoscope

show a perforation rate of approximately 2 per

1,000 and a mortality rate of approximately 1

per 5,000. Thus, it seems that the introduction

of the flexible fiberoptic endoscope has reduced

the rate of serious complications and deaths

resulting from this procedure by a factor of approximately four. However, Silvis notes that

the decrease in perforation has been offset by an

increase in complications due to bleeding related

to the introduction of biopsy techniques (42).

Further, Silvis notes, “If bleeding and perforation are combined, the complications from mechanical problems remain approximately the

same [between semirigid and flexible instruments ] at 0.6 per 1,000 cases. ”

An additional potential hazard of endoscopy,

transmission of an infectious organism (Salmonella typhimurium), has been documented by

Beecham, et al. (5). This presumably rare event

was attributed to inadequate disinfection of the

endoscopic equipment.

Thus, while complications secondary to this

procedure are relatively rare, they are not insignificant when one considers the number of

endoscopies that are being performed in this

country. As described below, at least 500,000

endoscopies per year are performed in the

United States. Thus, over 650 patients may suffer serious complications, and approximately 25

patients may die as a result of the procedure

each year.

Economic Cost

In the assessment of the cost effectiveness of

upper gastrointestinal endoscopy, two central

questions emerge: What does it cost physicians

to perform an endoscopy? and, What do doctors charge for an endoscopy? Since many, if

not most, endoscopies are done in hospitals,

hospital charges for the examination room and

anesthesia are often added to physician charges.

The data reported below on the incidence and

charges for endoscopy in California, obtained

from Blue Shield of California, reflect only

physician charges. Since they do not include

hospital charges, these data underestimate the

true overall cost of endoscopy to society.

To administer the Northern California Medicare Program, Blue Shield of California collects

billing data from a variety of programs, including Blue Shield standard policies, Northern

California Medicare, California Medicaid, and

California CHAMPUS (the programs that Blue

Shield of California administers directly). Blue

Shield also collects data from Occidental Life Insurance Co., which administers Southern California Medicare. As a result, Blue Shield data
Case Study #8: The Cost and Effectiveness of Upper Gastrointestinal Endoscopy ● 9

cover approximately 25 percent of the health insurance market in California.

During 1977, more than 12,735 endoscopies

were billed to the aforementioned programs,

which represent about 5 million potential beneficiaries (see table 2). The median charge was

approximately $240. The most common procedure was an esophagogastroduodenoscopy,

which had a statewide median charge of approximately $250; performing one or more biopsies

adds approximately $30 to this charge. The median charge for esophagoscopy and gastroscopy

alike is approximately $200; a biopsy adds $45

to the charge for esophagoscopy and $40 to the

charge for gastroscopy.

An overall estimate of national costs in 1977

may be made if it is assumed that endoscopies

were performed at the same rates and charges

for the entire population of the United States as

for the 25 percent of the California population

that Blue Shield’s data represent. Under these

assumptions, the total number of endoscopies

performed in the United States during 1977

would have been approximately 510,000, for

total aggregate physician charges of approximately $122 million. 1 (An unknown proportion

of endoscopies are performed in hospital facilities, for which there is an additional charge. )

On the individual level, endoscopies are quite

lucrative, given that they rarely take more than

45 minutes to perform. However, the quotation

of what doctors charge for a service does not

answer the question of what the service costs to

perform. The following hypothetical cost analysis should shed some light on this matter.

The basic assumption in this example is that

the doctor spends his or her entire time actually

performing endoscopies; i.e., there are no other

clinical procedures being charged for during this

time. An additional assumption is that the op-

‘ Data rep{~rted by Mencfenhall, et al, (28), Indicate that gastr{~-

enter(~log]sts alone ma}’ account ftlr this many procedures. It I\

Ilkely that Blue Shlelcf ~~t Callf(>rnla data overestimate the percenta~e (~t elcierly patients ancf chllcfren cfue t[~ the mal(~rl ty c~f the & ta

com I ng t rom medlca re and m edlca Id bI I I I ng<. Th 1> I naccu racy may

reduce the genera I Izab] ] I t)’ of t hew data d nd lead to d n overe+t I -

mate when pro]ec teci to a na t I t)na I axe cf IS t rlbu t Ion An u nk n(~w n

number of other procedures and procedures billed with modifiers

are excluded from the Blue Shield data reported.

Table 2.—Selected Endoscopic Procedures’ Billed

to California Medicare, Medicaid, CHAMPUS, and

Blue Shield Standard Policies During 1977

Approx -

i mate

Type of procedure Number of median

(1974 CRVS No.b

) procedures charge

Esophagoscopy (40100). . . . . . . . ‘-1 ,063 $20 0

Esophagoscopy, with biopsy (40105). 932 245

Gastroscopy (40160) . . . . . . . 1,614 200

Gastroscopy, with biopsy (40165). 1,351 240

Esophagogastroduodenoscopy

(40140) ... . . . . . . . . . . . . . . . 4,027 250

Esophagogastroduodenoscopy,

with biopsy (40145). . . . . . . 1,153 280

Others (40102, 40120, 40125). ... . . . 2,595 240

Total. . . . . . ... . . . . . . . . . 12,735 $240

a — — Procedures billed without modifiers

bCalifornia Medical Association, 1974 Revision of the 1969 California Relative

Value Studies (San Francisco: Sutter Publications, 1975)

timal charge (and reimbursement) for a procedure should be set at an efficient level of

operation.

In this example, a gastroenterologist is hired

full-time by a physician group practice to perform endoscopies. In order to support this

work, a nurse is hired full-time, and a secretary

devotes approximately 50-percent time to the

appropriate paperwork (see table 3). Also included in this example are costs for four rooms

(one examining room, two offices, and one supply room); the endoscope (depreciated over 5

years); and general overhead costs of 20 percent

(fringe benefits, insurance, telephone, etc.).

Table 3.—One-Year Cost Assumptions

Gastroenterologist (full-time, net income). . . . . . = $65,000

Nurse (full-time, net income) . . . . . . . . . . . . . . . . . = 15,000

Secretary (@ $10,000 per year,

half-time net income) . . . . . . . . . . . . . . . . . . . . . . = 5,000

4 rooms (370 ft2 @ $1.50/ft2 per month). . . . . . . . . . = 6,660

1 examining room, 10 x 10

2 offices, 10’ x 10

1 supply room, 10 x 7‘

Equipment (depreciated at 20% per year,

plus 10°/0 per year interest expense). . . . . . . . . . = 3,450

Endoscope = $10,000

Table = 1,500

Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $95,110

Overhead @ 20% (fringe benefits, telephone,

insurance, supplies, etc.) . . . . . . . . . . . . . . . . . . 19,022

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $114,132
10 ● Background Paper #2: Case Studies of Medical Technologies

As can be seen in table 3, the cost of maintaining a full-time endoscopist is approximately

$114,000 per year. The “cost” of performing

an endoscopy should then be, on average,

$114,000 divided by the yearly number of procedures. Assuming a 230-day working year (5

days per week for 46 weeks), three examples of

yearly volume and average cost per endoscopy

are:

40 minutes/endoscopy (12/day) =

2,760/year = $41/endoscopy

60 minutes/endoscopy (8/day) =

1,840/year = $62/endoscopy

80 minutes/endoscopy (6/day) =

1,380/year =$83/endoscopy

Even the lowest volume shown (six per day)

still results in a cost barely more than a third

of the typical charge for endoscopies billed

through Blue Shield of California. This not only

assumes some slack-time, but also does not include any additional revenue generated during

this time. Note also that to affect the cost per endoscopy, the itemized costs listed in table 3

would have to be changed greatly. For example,

if one were to double the costs in table 3 (i. e.,

pay the physician a net l-year income of

$130,000), the cost per endoscopy, even at the

lowest volume, would still be far below the

typical charge for the procedure.

Note that the charge for use of an examining

room is built into the above figures. Therefore,

it is more lucrative for the physician to perform

an endoscopy in a facility provided by a hospital than to perform the procedure in his or her

own office. In the hospital, the physician does

not have to absorb the costs of the examining

room, equipment, and other indirect office

costs. For instance, the University of California,

San Francisco Hospital charges a patient $140

for the use of its endoscopy facilities. The doctor

then charges the patient an additional fee for

professional services, generally the same fee as

would be charged for a procedure performed in

the physician’s office.

The most realistic example is probably 60

minutes per endoscopy (at a cost of $62), with

40 minutes per endoscopy ($41) being optimal

(i.e., the true average cost of performing an endoscopy with little slack time and no other income during this time). Thus, physician charges

for endoscopy are from three to six times the actual cost of performing the procedure. For the

physicians, endoscopies may be economic “winners” that make up for economic “losers” such

as being reimbursed at a much lower rate for

performing a complete history and physician examination. The fact that there are winners and

losers is also true of most other clinical specialties, where technological care is reimbursed

more highly than consultative care (39).

As Petersdorf stated in an editorial in the Annals of Internal Medicine (34):

The fee for endoscopy, no matter how simple,

is several times that for a complete history and

physical examination that leads to a brilliant

diagnosis, or for a life-saving maneuver that

does not involve the use of a hollow tube, a

knife, or electrocautery.

A more specific question related to the economics of endoscopy asks how much money

gastrointestinal specialists typically earn from

endoscopies. Using data from a national survey

of gastroenterologists by Mendenhall, et al.

(29), we estimate the mean yearly number of endoscopies performed by gastroenterologists in

the United States in 1976 to be 275. This figure is

approximately the same as that reported for the

members of ASGE who responded to ASGE’s

survey of complications of endoscopy (42). If

this yearly number of endoscopies is multiplied

by $240, which is the median physician charge

billed to Blue Shield of California during 1977,

$66,000 (275 X $240) is the approximate mean

annual gross charges by gastroenterologists in

the United States for the physician services component of performing endoscopies. This figure

excludes other charges to the same and other patients (e.g., for consultative, diagnostic, and

therapeutic services).

One further note on the cost of performing an

endoscopy: The cost described above generally

refers to routine, scheduled procedures. Performance of an emergency endoscopy (e.g., in

the middle of the night on an acutely bleeding

patient in a hospital emergency room) requires

great skill and incurs several different types of
Case Study #8; The Cost and Effectiveness of Upper Gastrointestinal Endoscopy ● 11

costs not figured into the above calculation. of endoscopic procedures are done under such

However, it is likely that only a small minority difficult circumstances.

ISSUES IN STUDYING THE BENEFITS

AND COSTS OF ENDOSCOPIES

The goal for any diagnostic technology is to

improve the diagnostic process so that the outcome will be better than that which would have

resulted without the use of the technology. One

way a better outcome can result is through the

definitive diagnosis of a condition while it is still

in an early, treatable stage. A second, though

much less valuable, goal for the use of a technology is to lead to a definitive diagnosis even

though the diagnosis will not directly benefit the

outcome. It is possible that the result of a definitive diagnosis in such an instance will be better management of the condition (even without

improved outcome). A final goal of a diagnostic

technology is to replace other, less definitive,

technologies and/or to improve diagnostic efficiency.

There are very few data in the literature to

substantiate a claim that upper gastrointestinal

endoscopy leads to either better outcome or reduced use of other similar technologies. Endoscopy does approach the less valuable goal of improved diagnosis leading to better management

of some conditions (e. g., upper gastrointestinal

bleeding) without confirmed better outcome.

One would think that the value of a technology that allows a physician to see a part of the

body that could otherwise not be seen without

surgery or X-ray would be easy to document.

However, in the case of endoscopy this documentation would take expensive, time-consuming randomized controlled trials. The best outcome from these trials would be a set of criteria

to define when endoscopy should be performed,

by whom, and how often.

Definitive data are unlikely for several

reasons. First, in order to say definitively when

a diagnostic procedure should be used, one

should have an expectation of an improved outcome through the use of the procedure. It does

not seem that this will be true in the near future

for the major conditions for which endoscopy is

now used (i. e., upper gastrointestinal bleeding,

gastritis, and hiatal hernia). Second, in the case

of a life-threatening condition, such as gastric

cancer, it is highly unlikely that a randomized

controlled trial of endoscopy could be performed ethically, because such a trial would involve withholding this commonly accepted

clinical procedure. Third, aside from obtaining

directed biopsies, the ability of the endoscopist

to make judgments based on visual evidence is

the critical research question. A randomized

controlled trial would give information only on

a small set of endoscopists in a few settings. The

assumption that these data can apply to other

endoscopists in other settings is questionable.

Fourth, randomized controlled trials are extremely expensive. In an era of increased competition for resources, it is unlikely that large

trials would be funded for a technology such as

endoscopy that has such low morbidity and relatively low individual costs.

Cost-effectiveness and cost-benefit studies of

clinical diagnostic and therapeutic procedures

are limited in their usefulness because of great

difficulties in assessing benefits. Each of the

many steps taken by a physician, including both

physical examinations and diagnostic tests, add

incrementally to the knowledge needed to diagnose a condition. At what specific point is a particular question asked or procedure done? Since

the process is cumulative, procedural order may

be “correct,” but the marginal benefit from the

increased information will be different, depending on when the procedure is done or question is

asked. A protocol that would specify exactly

when an endoscopy should be performed in the

process of working-up the patient for a particular condition is conceivable, but given the

rather eclectic process that most physicians use

to reach a diagnosis, it seems unlikely that such

a protocol would be used often.
12 ● Background Paper #2: Case Studies of Medical Technologies

Endoscopy does not provide a number that

either defines or rules out a condition when

compared to a standard range of numbers. The

results of an endoscopy must be compared with,

and added to, other clinical information. The

assessment of benefits of an endoscopy, therefore, would require studying the incremental

benefits accrued from performance of the procedure at different points in the diagnostic

workups of many patients and conditions. Then

DISCUSSION

The literature abounds with enthusiastic endorsements for endoscopy. Upper gastrointestinal endoscopy is a procedure that is simple and

easily performed. It is also well-tolerated by the

patient and has relatively low rates of morbidity

and mortality. An endoscope is clearly a technological marvel, enabling physicians to see and

obtain tissue samples from areas of the body

that were previously out of reach. The endoscopic procedure is easily learned and can be

performed on an outpatient basis. Furthermore,

the procedure is “invasive” only in the sense that

the instrument enters an orifice of the patient;

an endoscopy does not penetrate tissue and does

not inject or deposit foreign substances into the

body. Clinical information about the cause of

the patient’s gastrointestinal symptoms is often

improved as the result of the performance of the

procedure.

These positive factors run up against society’s

need to allocate medical care resources efficiently—a need that implies that choices have to

be made with respect to which patients need

what types of medical care. Clearly, the cost to

both the individual patient and society would be

enormous if all patients with upper gastrointestinal symptoms were to undergo endoscopy. Three factors are particularly relevant

when considering the relative benefits of endoscopy: 1) the lack of documented improved

outcome as a direct result of endoscopy, 2) the

individual and social costs of the procedure, and

3) the implications of the widespread use of endoscopy for the organization and delivery of

medical care.

these benefits would have to be weighed against

the marginal costs associated with each endoscopy. Though theoretically possible, it is unlikely that current measures of cost and benefit are

sensitive enough to provide an accurate assessment of the relative benefits of endoscopy that

would be useful to the clinician or to third-parties that must decide whether to pay for the performance of an endoscopy.

Endoscopy provides additional information

and may help make a diagnosis more precise,

but it is not at all clear that many patients

benefit from this information. Even in the case

of upper gastrointestinal bleeding, where endoscopy has been shown to provide more precise

diagnosis than other techniques, there is no

documented evidence that endoscopy improves

outcome. By enabling the physician to perform

directed biopsies of suspicious tissue, endoscopy

also helps to confirm or rule out gastric cancer.

However, there is no evidence that given available therapies, 5-year survival rates are altered

by such early detection. While it is possible that

endoscopic diagnosis of gastric cancer alters

therapy, such as by preventing surgery, data

documenting the extent of this effect are not

available. Endoscopy is useful to document the

postoperative patient’s condition, to search for

bleeding sites not found by X-ray, to examine

patients with upper gastrointestinal symptoms

in the absence of other positive findings, and to

remove mucosal polyps. Most, if not all, patients would progress satisfactorily without

these endoscopic findings and procedures.

The economic costs of endoscopy seem out of

proportion to the clinical value of the procedure. Current financial and professional incentives encourage performance of endoscopies,

while they discourage cognitive processes such

as complete histories and physical exams (39).

The incentive to perform endoscopies is not

limited to gastroenterologists, but applies to all

types of physicians. Surgeons and general internists also commonly perform endoscopies. The
Case Study #8: The Cost and Effectiveness of Upper Gastrointestinal Endoscopy 13

same physician who orders an endoscopy can

also perform the procedure in his or her own office for a minimal investment in time and

equipment.

Procedures often become associated with

medical specialties (38). New specialties are

formed as new procedures are developed—e.g.,

a new specialty society has been formed for

physicians who are endoscopists, the ASGE. As

endoscopy has become a major part of the practice of gastroenterology, there has been concern

expressed about the increasing procedural orientation of the specialty and the ability of society

to support the rapidly expanding pool of gastroenterologists (7,27). (The American Board of Internal Medicine subspecialty exam in gastroenterology certified 20 physicians in 1966, 215 in

1973, and 557 in 1977 (27). ) Fred Kern, in his

1976 presidential address to the American Gastroenterological Association, observed (24):

. .

< we are in serious danger of becoming technicians rather than consultants and teachers.

Our medical and surgical colleagues call upon us

for our technical skills, not for our wise advice.

Furthermore, our enthusiastic and often uncritical acceptance of endoscopic procedures and the

nearly open-ended list

use are troublesome.

Kern also wondered

(for the procedure)

endoscopies.”

More recently, Kern

of indications for their

“whether smaller fees

would lead to fewer

has discussed the problem of gastroenterologists spending a- disproportionate amount of time performing procedures during training rather than in consultation and learning clinical skills. He has even

called for the training of “non-M. D. assistants”

to perform endoscopies under the supervision of

a gastroenterologist (23). Thus, it appears that

the reimbursement for and ease of performance

of endoscopy provides incentives not only for

procedural care over consultative care, but also

for specialty care over primary care.

Medical procedures that can be performed on

an ambulatory basis present complex problems

for those concerned with the regulation of the

process of medical care and reduction in the

overall cost of medical care. The cost of the

equipment falls well below any certificate-ofneed regulatory limits. While often performed

by gastroenterologists on a consultative basis,

endoscopy is also performed by other types of

physicians, especially internists and general

surgeons. Direct regulation of this procedure

appears to be an impossible task, but it seems

reasonable to lessen the financial incentive to

perform the procedure by lowering reimbursement for the procedure to a level that more

closely approximates the cost of performing the

procedure. However, we would note that a

unified approach to adjusting relative reimbursement must be taken by both public and

private third-party payers. If only the public

payers (primarily medicare and medicaid)

reduce payment for an endoscopy, a two-class

system of medical care would be reinforced,

with patients able to pay being more likely than

others to receive a needed procedure. Once

relative reimbursement is changed, studies

should be performed to determine how often the

procedure is used, by whom, and for what types

of patients and clinical indications. With this

additional information, more directed regulatory efforts might be possible.

Another adjustment that can be made in the

reimbursement structure for endoscopy is the

reduction of the number of descriptions of the

procedure from the current three or more to a

single overall description. There is very little

difference in the true cost of performing what is

now called an esophagoscopy with either a gastroscopy or a duodenoscopy. The descriptions

of these procedures should be combined into

one, that of esophagogastroduodenoscopy (or

just plain “endoscopy”), with a small additional

charge permitted in the case of performance of a

biopsy, cytology, polypectomy, or other diagnostic or therapeutic additions to the basic

procedure.

A physician may be certified as a gastroenterological subspecialist, a certification that requires that the physician be competent in the use

of an endoscope (2), but there is no other specific certification in endoscopy. Any physician can

perform and be reimbursed for performance of

an endoscopy. Even if hospitals were to require
14 ● Background Paper #2: Case Studies of Medical Technologies

some such certification to use their endoscopic

equipment, the physician could simply purchase

the equipment and perform the procedure in his

or her own office. Any measure of systemwide

benefits of endoscopy must assume a baseline

competence in performing the procedure. Data

we have obtained from Blue Shield of California

indicate that there are more nongastroenterologists performing endoscopies than gastroenterologists and that nongastroenterologists rarely

perform more than so procedures per year. In

fact, we estimate that the median number of endoscopies performed by a nongastroenterologist

is approximately 20 per year. This seems far too

low to maintain competence in the procedure.

We agree with Kern, Petersdorf, et al., who

worry that physicians are becoming too procedure-oriented, and specifically, that gastroenterologists are being considered more as

endoscopists than as subspecialists in internal

medicine. Clearly, competence in endoscopy

has become critical to the job prospects of

gastroenterologists (16). Most subspecialties in

medicine and surgery face the same problem,

e.g., cardiology with its catheterizations and

angiograms, pediatrics with its neonatal intensive care units, and nephrology with its renal

dialysis units.

We would like to reemphasize the problem of

quantifying benefits for diagnostic procedures.

Even though population studies may not detect

either clinically or statistically significant differences in outcome that can be attributed to the

use of a diagnostic procedure, there is always

the possibility that there are specific cases for

which knowledge gained from performance of a

procedure may be extremely beneficial. When

grouped with a larger number of cases, these

particular cases may get lost. Because of this

potential for benefit to individual patients, it is

important to perform studies to determine

which endoscopically obtained diagnostic information is associated with better prognosis. As

our understanding of the disease processes of

the upper gastrointestinal tract improves, it may

become possible to delineate specific, discrete

conditions and indications for which a diagnostic or therapeutic endoscopy should be

performed.

Given our present understanding of upper

gastrointestinal disease, perhaps it is inevitable

that many endoscopic procedures need to be

performed to ensure that those few will be done

that clearly benefit patients undergoing the procedure. The public policy question then becomes: What price, both financial and clinical,

and what effect on the medical care system are

we willing to absorb to support current use of

endoscopy and analogous technological procedures? The issue is not just whether upper

gastrointestinal endoscopy is useful now or will

become more so in the future, but whether current financial and other incentives that encourage the use of endoscopy should be continued in

light of our current knowledge of the effectiveness of the procedure.

One of the ways to provide for the most effective use of a technology such as endoscopy is for

the subspecialty societies, regulators, thirdparty payers, and physicians who either perform or refer their patients for performance of

an endoscopy to agree to specific definitions of

levels of competence and to discrete, limited a

priori indications for performing the procedure.

Guidelines for the use of endoscopy in the

management of patients with esophagitis and

patients with duodenal ulcer have recently been

issued jointly by the American Gastroenterological Association, the American College of

Gastroenterology, and ASGE (3,4). Unfortunately, these guidelines are so broad that they

are unlikely to lead to more efficacious use of

endoscopy. Another way to decrease unnecessary use of the procedure is to lower reimbursement by health insurers for the procedure to a

level that is closer to the actual cost of providing

the procedure. These are generic issues for most

medical technologies. They are more complex

for a technology such as endoscopy where benefits are so difficult to measure and so easy to

assume. The real and potential costs to patients

and society mandate that these issues be dealt

with as soon as possible.
Case Study #8: The Cost and Effectiveness of Upper Gastrointestinal Endoscopy ● 15

SUMMARY

Upper gastrointestinal endoscopy is an easily

performed diagnostic procedure that is welltolerated by patients. Although the majority of

endoscopies are done by general internists and

gastroenterologists, the procedure is performed

by physicians in many specialties.

Indications for upper gastrointestinal endoscopy are very broad, and there are few clinical

contraindications to the use of the procedure. It

is difficult, at best, to document improved outcome as a result of performance of an endoscopy, although the procedure does provide additional diagnostic information in many cases.

The ability to obtain biopsies of suspicious

tissue is one of the main values of endoscopy.

The reassurance to the patient that he or she

does not have cancer is a valuable, if difficult to

measure, result of the procedure.

The cost of performing an endoscopy is relatively low, Given an efficient production process, the estimated cost to a physician group

practice is approximately $41 to $83 per endoscopy, depending on volume. The median

charge in California in 1977 for the physician

services component of the procedure was

approximately $240. Thus, charges are from

three to six times the cost of performing the procedure. It is estimated that at least 500,000 enREFERENCES

1. AlIan, R., and Dykes, P., “A Comparison of

Routine and Selective Endoscopy in the Management of Upper Gastrointestinal Hemorrhage, ”

Am. ]. Gastroenty. 61:154, 1974.

2. American Board of Internal Medicine, “Guidelines for the Training of Gastroenterologists, ”

Gastroenty. 73:382, 1977.

3. American Society for Gastrointestinal Endoscopy, American Gastroenterological Association, American College of Gastroenterology,

“The Role of Endoscopy in the Management of

Esophagitis: Guidelines for Clinical Applications, ” revised, July 22, 1978.

doscopies are performed each year in the United

States, for total annual physician charges of at

least $122 million.

The value of an upper gastrointestinal endoscopy is generally limited by our current

understanding of and lack of effective treatments for the major disease processes of the upper gastrointestinal tract. As our understanding

increases and treatments become more effective,

so may the value of an endoscopy increase.

However, existing financial and clinical incentives undoubtedly encourage the performance

by physicians of many more endoscopies than

can be clinically justified at this time. Physicians, health insurers, and regulators must

define discrete a priori indications for performance of the procedure, levels of competence

to perform the procedure must be established,

and perhaps most importantly, relative reimbursement for performance of an endoscopy

must be lowered to more closely approximate

the cost of performing the procedure (and possibly to take into account the circumstances

under which the procedure was performed, such

as routine or emergency). Without such

changes, physicians may continue to perform

endoscopies on many patients with upper gastrointestinal symptoms—for most of whom

there will be little or no direct benefit.

4. “The Role of Endoscopy in the Management of Patients With Duodenal Ulcer, ” revised,

1978.

5. Beecham, H. J., 111, et al., “Salmonella Typhimurium: Transmission by Fiberoptic Upper Gastrointestinal Endoscopy, ” ]. A.M.A. 241 :1013,

1979.

6. Belber, J. P., “Gastroscopy and DuodenosCopy, “ in Gastrointestinal Disease, M. H.

Sleisenger and J. S, Fordtran (eds. ) (Philadelphia: W. B. Saunders Co., 1978).

7. Benson, J. A., Jr., “Enough is Enough, and More

is Less, ” Gastroe?~ty. 75:353, 1978.
16 ● Background Paper #2: Case Studies of Medical Technologies

8.

9.

10.

11.

12.

13.

14.

15.

16.

17.

18.

19.

20.

21.

22.

23.

24.

California Medical Association, 1974 Revision

of the 1969 California Relative Value Studies

(San Francisco: Sutter Publications, 1975).

Cameron, A. J., and Ott, B. J., “The Value of

Gastroscopy in Clinical Diagnosis: A ComputerAssisted Study, ” Mayo Clin. P. 52:806, 1977,

Colcher, H., “Current Concepts—Gastrointestinal Endoscopy, ” N. Eng. j. Med. 293:1129,

1975.

“Endoscopy of the Stomach and Duodenum:” in Gastroenterology, H. L. Bockus

(cd.) (Philadelphia: w. B. Saunders Co., 1974).

Cotton, P. B., et al., “Early Endoscopy of

Esophagus, Stomach, and Duodenal Bulb in

Patients With Haematemesis and Melaena, ”

Br. Med. ]. 2:505, 1973.

Dagradi, A. E., “State-of-the-Art: The Training

of a Gastrointestinal Endoscopist, ” Am, ). Gastroenty. 71:224, 1979.

Dronfield, M. W,, et al., “A Prospective, Randomised Study of Endoscopy and Radiology in

Acute Upper-Gastrointestinal-Tract Bleeding, ”

Lancet, 1:1167, 1977.

Eastwood, G. L., “Does Early Endoscopy Benefit the Patient With Active Upper Gastrointestinal Bleeding?” Gastroenty. 72:737, 1977.

Falkenstein, D. B., et al., “Endoscopy: A Dominant Influence in the Gastroenterology Job Market, ” N. Eng. ]. Med. 297:116, 1977.

Fisher, J. A., et al., “Upper Gastrointestinal Endoscopy—A GP Service, ” Br. ]. IVlec/. 2:119$),

1977.

Fung, W, P., et al., “Endoscopic, Histological

and Ultra-Structural Correlations in Chronic

Gastritis, ” Am. 1. Gastroenty. 71:269, 1979.

Guidelines for Training in Endoscopy (Boston:

Federation of Digestive Disease Societies, Inc.,

1979).

Hafter, E., “The Risk of Oesophagoscopy and

Gastroscopy, ” SC. J. Gash-y. 12 (supp]. 47):12,

1977.

Katon, R. M., and Smith, F. W., “Panendoscopy in the Early Diagnosis of Acute Upper Gastrointestinal Bleeding, ” Gastroenty. 65:728,

1973,

Keller, R. T., and Logan, G. M., Jr., “Comparison of Emergent Endoscopy and Upper Gastrointestinal Series Radiography in Acute Upper

Gastrointestinal Hemorrhage, ” Gut 17:180,

1976.

Kern, F., Jr., “Clinical Training in Gastroenterology: A Proposal for Restoring Balance, ” Gastroenty. 6:1489, 1979.

“Gastroenterology, 1976: Good News

and Bad News, ” Gastroenty. 71 :537, 1976.

25.

26.

27.

28.

29.

30.

31.

32.

33.

34.

35.

36.

37.

38.

39.

Mandelsteam, P., et al., “Complications Associated With Esophagogastroduodenoscopy and

With Esophageal Dilation, ” Gastroirltest, E)Idose. 23:16, 1976.

McDonald, W. C., and Rubin, C. E., “Cancer,

Benign Tumors, Gastritis, and Other Gastric

Diseases, ” in Harrison Principles of Intertlul

Medicine, 8th cd., G. W. Thorn, et al. (eds. )

(New York: McGraw-Hill Book Co,, 1977).

McGill, D. G,, “Manpower in Gastroenterology, ” Gastroenty, 72:1345, 1977.

McGinn, F. P., et al., “A Prospective Comparative Trial Between Early Endoscopy and

Radiology in Acute Upper Gastrointestinal

Hemorrhage, “ Gut 16:70, 1975.

Mendenhall, R. C., et al., “Gastroentero]ogy

Study Report, ” USC/DRME D-1067 (Los Angeles: University of Southern California School of

Medicine, Division of Research in Medical Education, 1977).

Meyers, M. A., and Ghahremani, G. G., “Complications of Diagnostic Endoscopy: 1—Esophagoscopy and Gastroscopy, ” Radio. 115:293,

1975.

Morris, D, W., et al., “Prospective, Randomized

Study of Diagnosis and Outcome in Acute Upper-Gastrointestinal Bleeding: Endoscopy vs.

Conventional Radiography, ” Am. ~. Dig. Dis.

20:1103, 1975.

Myren, J., “The Cost of Gastroenterological Examinations, ” Scand. ]. Gastroent. 12(suppl. 47):

33, 1977.

Olearchyk, A. S., “Gastric Carcinoma: A Critical Review of 243 Cases, ” Am. }. Gastroenty.

70: 24, 1978.

Petersdorf, R. G., “Internal Medicine 1976:

Consequences of Subspecialization and Technology, ” Ann. Inter~l, Med. 84;92, 1976.

Sandlow, L. J., et al., “A Prospective Randomized Study of the Management of Upper Gastrointestinal Hemorrhage,” A rn. ], Gastroenty,

61:282, 1974.

Schapiro, R. H., “The Visible Vessel: Curse or

Blessing?” N. E)lg. /. Med. 300:1438, 1979.

Schindler, R., Gastroscopy (New York: Hatner

Publishing Co., 1966).

Schroeder, S. A., and Showstack, J. A., “The

Dynamics of Medical Technology Use: Analysis

and Policy Options, ” in Medical Technology:

The Culprit Behind Health Care Costs? proceedings of the Sun Valley Forum, S. Altman

and R. Blendon (eds. ), DHEW publ. No. (PHS)

79-3216 (Washington, 13. C.: U.S. Government

Printing Office, 1979).

, “Financial Incentives to Perform Med-
Case Study #8: The Cost and Effectiveness of Upper Gastrointestinal Endoscopy ● 17

40.

41.

42.

43.

ical Procedures and Laboratory Tests: Illustrative Models of Office Practice, ” Med. Cure

16:289, 1978.

Seifert, E., et al., “Diagnosis of Early Gastric

Cancer, ” Am. ], Gastroenty. 71:563, 1979.

Silen, W., “Peptic Ulcer, ” in Harrison Principles of Internal Medicine, 8th ed., G. W.

Thorn, et al. (eds. ) (New York: McGraw-Hill

Book Co., 1977).

Silvis, S. E., et al., “Endoscopic Complications:

Results of the 1974 American Society for Gastrointestinal Endoscopy Survey, ” ). A. M. A. 235:

928, 1976.

Steinberg, H,, University of California, San

Francisco, Calif., unpublished data, 1978.

44.

45.

46.

47.

Stevenson, G. W., et al., “Prospective Comparison of Double-Contrast Barium Meal Examination and Fiberoptic Endoscopy in Acute Upper Gastrointestinal Hemorrhage,” Br. Med. ].

2:723, 1976.

Sugawa, C., et al., “Early Endoscopy: A Guide

to Therapy for Acute Hemorrhage in the Upper

Gastrointestinal Tract, ” Arc/l, Surg. 107:133,

1973.

Sullivan, B. H., “Part II: Esophagoscopy and

Biopsy, ” in Gastroenterology, H. L. Bockus

(cd.) (Philadelphia: W. B. Saunders, 1974).

Waye, J. D., “The Current Status of Esophagoscopy, Gastroscopy, and Duodenoscopy, ” Mt.

Sirzai ]. Med. 42:57, 1975.
COMMENTARY BY THE AMERICAN SOCIETY FOR

GASTROINTESTINAL ENDOSCOPY

Chairman,

Bergein F. Overholt, M.D.

Ad Hoc Committee on Government Relations

American Society for Gastrointestinal Endoscopy

Manchester, Mass.

In defining costs of performing an upper gastrointestinal endoscopy (EGD), a more realistic

cost analysis would include all costs of space,

drugs, supplies, depreciated equipment costs,

repair costs for instruments, and realistic personnel costs.

The Showstack/Schroeder paper does not

contain some of these costs, and consequently

their estimates appear erroneous. Also, their

paper includes the physician’s fee, which we feel

should not be considered in estimating actual

costs of the procedure, Of course, the physician’s fee is variable, depending on experience,

geographic location, type of practice, etc., and

so we have not included it in our procedural

costing data.

Of particular concern is the lack of inclusion

of the real instrument costs, including a more

realistic 2-year depreciation because of the remarkable advances in equipment; the large

instrument repair bills occasioned by the kind of

wear attendant to this particular procedure; the

necessity for backup instruments; the necessity

for equipment for resuscitation in the event of

emergency; accessory equipment, electrosurgical power sources, disposable supplies, and

realistic personnel costs.

A true cost incorporating similar personnel

and space figures as Showstack and Schroeder

detail and assuming only 5&percent utilization

of facilities and personnel is presented in table

A-1. Assuming only 50 percent of personnel and

space costs and incorporating actual costs per

procedure, one can readily figure accurate and

true costs of an office EGD assuming a yearly

46-week working experience.

Although Showstack and Schroeder state the

average number of EGDs performed in 1976 was

18

275/year/endoscopist, a more realistic range today would be 368 to 690/year (8 to 15/week).

This results in the incorporation of only 50 percent of personnel and space expenses in the cost

analysis, as these resources would be free for

other uses when not being utilized for EGDs.

8 procedures/week x 46 weeks = 368 procedures ’year

10 procedures/week x 46 weeks = 460 procedures/year

12 procedures/week x 46 weeks = 552 procedures/year

15 procedures/week x 46 weeks = 690 procedures/ year

With personnel, space, and depreciated

equipment costs of $41,401.20 and with recurring per procedure costs of $29.70 per EGD,

the following range of true per procedure costs

in the physician’s office can be obtained by the

following formula:

Total fixes costs + recurring costs/EGD = true cost/EGD

Number of

EGDs/year

No. of fixe d t t,, /11 I Ill,{ True cost (-(). /

Fixed, costs. – FGSs [A I/l = cost FGD + cost = per FGD

41, 401. 20 – 368 = 112.50 + 29.70 = 142.20

41. 401. 20 - 460 = 90.00 + 29.70 = 119.70

41. 401. 20 – 552 = 7500 + 29.70 = 104.70

41. 401. 20 – 690 = 60.00 + 29. 70 = 89.70

It must be realized that when 16 or more procedures are done per week, full-time nurse, and

space expenses must be included because procedure set-up time, cleaning time, etc., become a

reality. Thus, if 25 procedures per week were

performed with full-time R.N. and space expenses included, cost per EGD is figured at

$79.70. However, added to this would be the

necessity for an additional examining room,

table, cart, endoscope, light source, suction

machine, oxygen, etc., which would bring the

cost above the $100 range.

Finally, it is reemphasized that these figures

represent realistic costs for an EGD performed

in the physician’s office and do not incorporate

the physician’s fee.
Case Study #8: The Cost and Effectiveness of Upper Gastrointestinal Endoscopy ● 19

Table A-1.—Estimate of Overall Costs and Recurring Costs per Procedure in Physician’s Office

(not including physician’s fee)

Personnel

Nurse ($15,000/yr; 1⁄2-time, net income) . . . . . . . $7,500.00

LPN ($10,000/yr; 1⁄2-time, net income) . . . . . . . . 5,000.00

Secretary ($10,000/yr; 1⁄2-time, net income). . . . 5,000.00

Space (585 ft2 @ $1.50/ft2/mos; 50% utilization) 5,265.00

1 examining room. . .......12'x10 = 120 ft2

2 offices . . . . . . . . . .......10'x12 = 240 ft2

1 supply room. . . . . . . . . . . . 10'x1O = 100 ft2

1 snare. . . . . . . . . . . . . . . . . . ($150)

2 cytology brushes. . . . . . . . ($200)

[Items in C have 1 year depreciation] 900.00

Subtotal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,501.00

Overhead @ 20% (light, electricity, heating,

fringe benefits, telephone, insurance, etc.). . . 6,900.20

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $41,401.20

1/2 waiting room area . . . . . . 1/2 — 10'x20 = 100 ft2

Recurring costs per procedure

1 dressing room . . ........5 ‘x5 = 25 ft2

Equipment

A. 2 endoscopes. . . . . . . . . . . . ($14,800)

1 light source . . . . . . . . . . . . ($1 ,000)

1 electrosurgical power

supply . . . . . . . . . . . . . . . . . ($1 ,000)

Items in A are depreciated over 2 years]

B. 1 mechanical table. . . . . . . . ($4,500)

1 patient cart. . . . . . . . . . . . . ($350)

1 endoscopic equipment

cart . . . . . . . . . . . . . . . . . . . ($350)

1 suction machine . . . . . . . . ($200)

1 tank oxygen . . . . . . . . . . . . ($200)

Emergency equipment

(ambu bag; defibrillator,

drugs) . . . . . . . . . . . . . . . . . ($6,000)

[Items in B are depreciated at 20% per year

over 5 years + 10% per year interest expense]

C. Endoscopic accessory

equipment:

3 biopsy forceps. . . . . . . . . . ($450)

A. Drugs(valium, demerol,

dyclone, narcan). . . . . . . . .

B. Disposable items

1 glove. . . . . . . . . . . . . . . .

4 syringes , . . . . . . . . . . . .

2 needles. . . . . . . . . . . . . .

8,400.00 1 scalp vein. . . . . . . . . . . .

Alcohol sponge, band aid,

cotton ball. . . . . . . . . . .

Five 4 x 4 sponges . . . . . . . .

1 disposable gown. . . . . . . .

1 trash bag , . . . . . . . . . . . . .

1 charge bill (triplicate) . . . .

Emesis basin, tissues

Iubrifax . . . . . . . . . . . . . . . .

Cleaning solution

(glutaraldhyde, alcohol). . .

2,436.00 Instruction and permit

sheet . . . . . . . . . . . . . . . . . .

C. Instrument repair cost . . . . . . . . .

$5.00/procedure

$0.10

0.40

0.10

0.50

0.05

0.05

0.90

0.05

0.50

1.00

1.00

0.05 4.70/procedure

. . . . 20.00/procedure

Total recurring costs per procedure . . $29.70/procedure — .
AUTHORS’ RESPONSE TO ASGE COMMENTARY

We appreciate the opportunity to review the

comments of Dr. Bergein Overholt, M. D., of

the American Society for Gastrointestinal Endoscopy (ASGE) concerning the report that we

prepared for the Office of Technology Assessment, The “Cost and Effectiveness of Upper

Gastrointestinal Endoscopy. ”

In responding to the ASGE concerns, we

would like to point out that our data on charges

as well as our cost estimates were for 1977. As

such, they would need to be adjusted if one

wished to judge the cost in 1980 of an upper

gastrointestinal endoscopy. According to Blue

Shield of California, the median physician

charge in California in 1979 (the most recent

year for which data are available) for an esophagogastroduodenoscopy was approximately

$275 (as compared to a median charge in 1977 of

approximately $250).

We describe below some specific issues that

we can see in the ASGE estimate of 1980 total

yearly costs, but the overall problem with their

analysis relates to using the wrong number as

the denominator in the equation:

Total yearly cost = Average cost per procedure

Yearly volume

Our analysis is based on a theoretical yearly

volume of procedures and the associated yearly

cost. ASGE, in general, estimates total yearly

costs, but uses current actual (low) volume

figures that have no direct relationship with

costs —e.g., our cost estimates are based on an

endoscopic procedure taking between 40 and 80

minutes, whereas ASGE estimates that the costs

of an endoscopy should be amortized over only

8 to 15 procedures per half week, that is, approximately 2 hours and 30 minutes down to 1

hour and 20 minutes per endoscopy. The ASGE

estimate assumes that the costs incurred are not

volume-dependent, i.e., that the nurse, secretary, rooms, etc., are not engaged in any other

activities while waiting for the next endoscopy

to take place. In contrast, our model assumes

little or no slack-time. We estimate the cost per

procedure, not the cost to an endoscopist of

maintaining the facilities to perform endoscopies even at low volume. (Note that we quote

in our paper a statement by Waye that an endoscopy should take no more than 15 minutes.

Surely, even our time estimates are generous!)

This volume estimate is central to the ASGE

argument, as is shown by the following analysis

using the ASGE (half-time) 1980 cost estimates

($41,401 fixed costs per year and $30 per procedure) and our estimates of (half-time) volume

(we have also added the cost of a half-time endoscopist @ $50,000 per year net):

80 minutes /endoscopy = 690/1⁄2 year = $162/procedure

60 minutes /endoscopy = 920/1⁄2 year = $129/procedure

40 minutes/endoscopy = 1,380/1⁄2 year = $96/procedure

Thus, even if one accepts the ASGE 1980 cost

estimates, the costs are still only approximately

35 percent to 60 percent of the typical 1979

charges for the procedure. The point that we

make in our paper regarding the difference between costs and charges for endoscopies in 1977

still holds. Note also that, using 1979 charge

data, if endoscopists perform between 368 and

690 procedures a year, as the ASGE estimates,

the average annual gross charges by endoscopists in California for endoscopies alone is between approximately $101,200 to $189,750 (368

X $275; 690 X $275).

Of course, the cost per endoscopy computed

above used ASGE estimates of 1980 costs, We

question several cost assumptions made by

ASGE. Most importantly, ASGE estimates that

there is a $20 “equipment repair cost” (included

in their “recurring costs”) per endoscopy. Since

$20 times the ASGE estimates of volume (368 to

690 procedures per year) equals between $7,360

and $13,800 per year, one has to wonder why

an endoscopist repairs equipment rather than

replaces equipment. None of the endoscopists to

whom we have spoken has experienced repair

bills that even approach the ASGE estimates. In

addition, most other ASGE cost estimates are

for 1980 and are somewhat generous—e.g., one

might question the inclusion of an L.P.N. as

well as the amount of time allocated for a

secretary (is a half-time secretary really necessary for barely more than one endoscopy per

day?). Finally, ASGE does not account for the

fact that many endoscopies are done in hospitals

20
Case Study #8: The Cost and Effectiveness of Upper Gastrointestinal Endoscopy ● 21

for which the physician does not incur many of in our paper: Charges for an endoscopy are relathe overhead costs estimated by the ASGE. tively high compared to the cost of performing

In general, we feel that the ASGE cost esti- the procedure.

mates actually support the point that we make

 U. S. GOVERNMENT PRINTING OFFICE 1981 341-844/ 1005