How to reduce surgical care costs

U.S. healthcare costs continue to balloon. Between 2018 and 2022, for example, per-person healthcare spending increased by nearly 19%, and surgical care claimed a large portion of that increase.

From musculoskeletal (MSK) surgeries like spinal fusions to cardiovascular procedures like stent placements, surgical care costs can spiral out of control, consuming a significant chunk of a company’s healthcare budget. In 2022, surgical care emerged as a top expenditure for over a third of employers, with over half viewing surgical spend as a problem.

As the healthcare industry grapples with rising costs, it’s imperative for employers to strategize ways to curtail spending while continuing to ensure quality healthcare for their employees.

Why is surgical care a top area of healthcare spend?

The high cost of surgical care

Surgical care comes with a hefty price tag, much of which is often passed on to self-insured employers. Some of the most common surgeries come with the highest costs–consider, for example, knee replacement surgery cost, which is an average of $20,000. In 2022, the median cost for a heart bypass surgery was over $36,000. Even gastric bypass surgery, widely considered to be less invasive than heart or knee surgery, starts at $17,000 and can run upwards of $26,000.

These figures represent the monetary cost of long inpatient stays, anesthesia, multiple doctors and healthcare professionals, and, in some cases, follow-up interventions. For example, a knee replacement patient might require many months of outpatient physical therapy at baseline; in some cases, they might even require additional emergency or inpatient visits.

(It’s worth noting that when you partner with a value-based centers of excellence (COE) program like Carrum Health—in which there are provider-held warranties for 30 days post-surgery—the risk of complications and readmissions decreases.)

High rates of unnecessary surgery

Overutilization remains a prevalent issue in surgical care, with many surgeries being prescribed despite the patient being a good candidate for less invasive options. Studies reveal high rates of unnecessary surgery, with researchers claiming that almost one in three knee replacement surgeries were inappropriate.

Alarmingly, the numbers are even higher for stent placement surgery, with numerous studies showing that up to 50% are unnecessary. Less invasive surgeries are not exempt from this trend, with unnecessary shoulder and back surgeries being prescribed at rates reaching 50%. Failed surgeries often mean continued interventions for patients–and thus higher costs due to factors such as expensive revision procedures, higher rates of complications, and prolonged opiate usage.

The pandemic backlog

The COVID-19 pandemic exacerbated the situation, leading to a backlog of postponed surgeries. The consequences of this backlog are far-ranging, with longer wait times leading to worsening health effects, which prompt more extreme interventions. The growing shortage of physicians in surgical care specialities means this issue will only continue to worsen, further amplifying the financial strain on employers.

Why are there so many unnecessary surgeries? 

The prevalence of unnecessary surgeries stems from various factors, but some may argue it is the direct result of a medical industry that trains surgeons to perform surgery rather than prevent it.

But perhaps the most significant driver is the fee for service healthcare model entrenched in our healthcare system. Under this model, surgeons are incentivized to perform more surgical care, often without sufficient consideration of alternative, less invasive treatment options.

Additionally, ingrained practices and referral patterns contribute to the prescription of unnecessary surgeries, perpetuating a cycle of escalating healthcare costs.

3 ways employers can reduce their surgical care spend 

On the surface, it seems pretty simple: To spend less on surgical care, have your employees get fewer surgeries! But ensuring patients are always getting the most appropriate care isn’t easy (which is where a value-based center of excellence program comes in). Plus, sometimes surgery is the best option—it’s the high and unpredictable prices that are the problem.

So, how can employers set themselves and their employees up for success when it comes to surgical care spend?

1. Prioritize preventive care

Investing in preventive measures can mitigate the eventual need for invasive surgery. Encouraging lifestyle modifications such as proper nutrition, regular exercise, and ergonomic practices can prevent conditions that often necessitate surgical care.

For example, heart bypass surgery is less likely to be needed by people who proactively boost their heart health, which includes habits such as avoiding tobacco products, regularly exercising, eating a Mediterranean diet, reducing daily stress, and getting regular health screenings. Similarly, some musculoskeletal pain can be prevented by daily exercise, a good ergonomic setup, and maintaining a healthy weight.

By promoting a culture of well-being and offering resources for preventive care, employers can empower their employees to take proactive steps towards better health outcomes.

2. Provide conservative treatment options

Ensuring access to conservative treatment options such as physical therapy and nutritional counseling can help steer patients away from surgery. For employers, this looks like providing coverage or paid time off for physical therapy and investing in digital physical therapy programs like Hinge Health and Sword, which can provide flexible options for musculoskeletal pain management and reduce the reliance on surgical care.

Cost is also important when it comes to accessibility–if an overweight patient, for example, is referred to a nutritionist, they won’t be able to utilize the service if they cannot afford it. By adding nutrition sessions to your health benefits package and/or providing virtual nutrition programs, employers can facilitate convenient access to conservative treatment that may help avoid surgical care down the line.

3. Partner with a value-based centers of excellence program

Collaborating with a value-based centers of excellence program that prioritizes health outcomes over volume can yield significant cost savings. These programs form strong partnerships with high-quality providers and leverage alternative payment models, such as bundled payments, to incentivize efficiency and effectiveness.

Carrum Health, which leverages a bundled payment model, redirected 30% of members referred to surgical care to less invasive treatment and reduced readmissions for those who did get surgery by 80% relative to the national average.

By tapping into such networks, employers can ensure their employees receive high quality healthcare while containing surgical expenses.

The path to containing surgical care costs

Healthcare costs show no signs of slowing in the near future, so it is imperative for employers to adopt a multi-faceted approach that addresses excessive surgical care spending.

By emphasizing preventive care, expanding access to conservative treatments, and leveraging value-based partnerships with center of excellence programs, employers can navigate the complex healthcare landscape while safeguarding both their financial interests and the well-being of their employees. Through prioritizing value over volume, employers can pave the way for a more sustainable and efficient employee experience.

The information contained on this page is for informational purposes only. No material is intended to be a substitute for professional medical advice, diagnosis, or treatment.