Economic evaluation of laparoscopic and open inguinal herniorrhaphies: The effect of cost-containment measures and internal hospital policy decisions on costs and charges

Background: Totally extraperitoneal (TEP) repairs of inguinal hernias, despite having a favorable clinical outcome are often criticized due to higher costs and charges associated with this approach. We, therefore, present a comparison of direct costs and charges between TEP and open tension-free (OPN) repairs, emphasizing the effect of cost-containment measures on the part of surgeons and the hospital’s charging (rate-setting) policies on these measurements. Methods: Itemized direct costs, charges, and reimbursements were determined for 41 TEP and 44 OPN unilateral repairs done between January 1997 and December 1999. Multiple sensitivity analyses were done to evaluate the effect of cost-containment measures and the hospital’s rate-setting policies on the differences in costs and charges between the two procedures. The hospital’s profits were expressed as profit-cost ratios. Results: The mean direct cost for a TEP repair was $128.58 more than the OPN repair ($795.07[±65] vs 666.49 [±52]). However, mean charges and hospital reimbursement were $2,139.80 and $1,679.87, respectively, more for the TEP repairs. The profit-cost ratio was significantly higher in the TEP group (2.85:1 vs 1.07:1, P<.001). We found that 79.8% of the difference in direct costs vs 29% of the difference in charges between the two procedures was sensitive to cost-containment measures. Forty-five percent of the difference in charges was due to the hospital’s nonuniform rate-setting policies. Long-term follow-up (38 months) showed no recurrence for either procedure. Conclusions: The direct cost of TEP repairs with the minimal use of disposable instruments in a high-volume center is comparable to the OPN repair. However, due to differences in the hospital’s charging policies, TEP repair would appear to be an expensive alternative from the payer’s point of view.