COMMENTARY JSLS How Managed Care May Choose Hospitals for Contracts for Laparoscopic Cholecystectomy Dennis Edward Weiland, MD,1Daniel Martin Caruso, MD,1 Daniel Eric Wesche, MD,1 Ralph Curtis Bay PhD2 ABSTRACT Background and Objectives: Maricopa Medical Center (MMC) was found to have higher charges and length-of-stays than 16 other regional hospitals in an analy- sis of DRG categories for gallbladder disease. These com- parative figures identified MMC as being inefficient and demanded review to determine the reasons for the ineffi- ciencies. Methods: In an attempt to determine the reason for inef- ficiency of charges and length-of-stay for the laparoscopic portion of laparoscopic cholecystectomy, matched pairs of open cholecystectomy and converted laparoscopic chole- cystectomy from a data base of 633 patients with cholecys- tectomies were reviewed. Thirty-five matches for age,sex and similar diagnosis were successful. Results: Matched pair evaluation disclosed a $6,880 dif- ference in charges, which was attributed solely to the charge for laparoscopy. Subsequent chart analysis showed a high charge for instrumentation, prolonged anesthesia and operative times and longer preoperative delays before surgery. Moreover, no matter what the conversion rate is, open cholecystectomy was more cost effective. However, if there is a conversion rate of 5%, total hospital charges for laparoscopic cholecystectomy would have to be reduced to $12,679 (a reduction of $3,332 from $16,011) to make laparoscopic cholecystectomy cost-effective. Conclusions: Cost-effective decision tree analysis of matched pair comparisons and sensitivity analysis proves to be an effective technique in evaluating the cost-effective- ness of laparoscopic cholecystectomy in a hospital popula- tion. Key Words: Laparoscopic cholecystectomy, Managed care contracts. 1Departmentof Surgery, Maricopa Medical Center, Phoenix, AZ, USA. 2Departmentof Academic Affairs, Maricopa Medical Center, Phoenix, AZ, USA. Address reprint request to: Dennis E. Weiland, MD, Maricopa Medical Center, 2601 E. Roosevelt, Phoenix, AZ 85010,USA. INTRODUCTION Approximately 20 million people (10-15% of the adult pop- ulation) have gallstones and 1 million new patients are diag- nosed with cholelithiasis every year. As a result, the treat- ment of cholelithiasis has become the most costly digestive disease, with an estimated annual cost of more than $5 bil- lion.1,2 In September, 1992,the National Institute of Healthcon- vened a consensus development conference to discuss the treatment of cholelithiasis and laparoscopic cholecystecto- my.1 After considerable discussion and review of the cur- rent literature, the panel concluded that laparoscopic chole- cystectomy offered substantial advantages over the tradi- tional open cholecystectomy with no apparent increase in morbidity or mortality. Because of the reduction in pain and disability, the conference concluded that treatment costs would be equal to or slightly less than the cost of open cholecystectomy and that there would be substantial savings to patients and society because of the shortened period of disability. The disability and loss of income following standard open cholecystectomy further increase cost, but these items are generally not measured by traditional appraisal methods. This convalescent period and, consequently, costs have been greatly reduced by laparoscopic cholecystectomy. This example of cost analysis should be requested by busi- ness and possibly patients, as they are impacted the most. Indeed, charges (notcosts) for laparoscopic cholecystecto- my often surpass those of open cholecystectomy. This is surprising because charges should reflect the costs resulting from increased length-of-stay (LOS), nursing and hospital support required by open cholecystectomy. The charges for equipment and other technical requirements for laparo- scopic procedures probably explain the excess charges noted in laparoscopic cholecystectomies. Surgeons at Maricopa Medical Center (MMC) identified excessive LOS and charges by comparing the cholecystec- tomy DRG (Diagnostic Related Group) 195 with 16 other hospitals in the region.3 Eleven of 20 cases (55%) werecon- verted laparoscopic cholecystectomies. The remainder JSLS (1997)1:285-288 285