Marked variations in medical provider and out-of-pocket costs for radical prostatectomy procedures in Australia

Study design and sample

A retrospective cohort study using Medibank Private claims data for surgeries conducted in Australian hospitals between 1 January 2015 and 31 December 2020 was undertaken. De-identified information on patient characteristics, treatment and claims were obtained from Medibank Private administrative claims data that were provided from hospitals and specialists for hospital-based treatment delivered to Medibank Private members.

Surgical procedure identification

RP procedures were identified through the following Medicare benefits schedule (MBS) item numbers: 37210, 37211, 37213 and 37214. Item numbers 37213 and 37214 were designated as complex procedures, reflecting prior or additional treatments involved. However, all procedures within our dataset were non-complex, falling under items 37210 and 37211.

Hospital cost, medical provider cost and out-of-pocket costs

The total hospital charge amount was calculated by summing all hospital related charges for each claim and included costs for intensive care unit (ICU), theatre, accommodation and prostheses. The total amount charged by medical providers (e.g. principal surgeon or other providers such as anaesthetists) refers to the total cost charged by the provider for each procedure and included the benefit paid by Medibank Private, benefit paid by Medicare, principal surgeon out-of-pocket (OOP) charges and any other OOP charges paid by the patient. OOP charges denote expenses directly borne by patients or their families for these claims. The demographic details of the sample are reported in Supplementary Table S1.

Analysis

The 10th and 90th percentiles of the hospital costs, medical provider costs and OOP costs were calculated and are discussed here to show the cost distribution and spread with any outliers removed by jurisdiction. This approach has been used previously in healthcare cost studies (R. Walsan, et al., unpubl. data).^9,10 The 10th and the 90th percentile imply that only 10% data values lie below the 10th percentile and only 10% lie above 90th percentile. All costs are provided in Australian dollars (AUD).

Ethics

Ethical approval for the study was provided by Macquarie University Human Research Ethics Committee (reference: 520211045634157).

Potential factors contributing to cost disparities

Various factors may contribute to the observed disparities in costs between medical providers and OOP expenses for RP procedures in Australia. Some of these variations could be associated with the expenses related to robotic surgery, as medical providers often factor in additional costs for training, insurance and liabilities when charging patients. However, it is important to highlight that robotic RP is the predominant approach in Australia, with over 80% of RP procedures completed utilising robotic techniques.¹¹ Operational factors, including fee structures, patient case mix, operation room equipment and the technical proficiency of surgeons, can collectively influence surgical costs.¹⁰ Nevertheless, these factors should not disproportionately govern the overall variations in costs, particularly in light of the fact that hospital charges for RP procedures demonstrated a notable degree of consistency across Australia.

The observed variations in medical provider and OOP costs might fundamentally stem from market dynamics as reported previously.¹² A distinctive characteristic of the Australian healthcare system is the autonomy of medical providers to set their own fees and generate profits, a practice influenced by demand and the consumers’ willingness to pay for services. In a market where there is a greater demand and greater willingness to pay, the fees charged tend to be higher. Previous research has also shown that in an unregulated fee setting environment, medical providers engage in price discrimination mainly based on the income status of the patients.¹³ Moreover, variations in market demand and supply dynamics may play a role, as elevated costs could arise from a shortage of medical providers. In such instances, limited competition due to scarcity may allow certain practitioners to charge well above the standard rates for these services.¹² Additionally, there is an issue with information asymmetry,¹⁴ where providers possess more information on procedure costs than patients. Patients have limited access to price information before referrals, and the lack of transparency in the cost of procedures hampers potential competition, ultimately leading to market failure in price setting. Further research is needed to delineate the causal effects of cost disparities and to determine the price setting behaviours of medical providers in Australia. The reasons for variations in costs between jurisdictions are not clear and warrant further investigation. Higher fees charged by many consultant physician specialities in the ACT have been previously reported and could reflect the economic status of the region.¹⁵ Moreover, it remains uncertain whether certain states encounter a higher prevalence of complex patient cases. In addition, patient selection and risk factors may be important considerations warranting further investigation. This study, utilising available data, indicated that individuals who were charged higher fees were predominantly older adults (≥65 years), urban residents, individuals residing in the most advantaged neighbourhoods and those in the ACT (Supplementary Table S1). However, understanding the impact of cancer stage and complexity on cost variations necessitates additional investigation.

Addressing cost disparities in RP and enhancing healthcare affordability

The cost variations associated with RP procedures may pose significant challenges for patients, especially those in socioeconomically disadvantaged communities. Despite the public healthcare sector being free for Australians, prolonged waiting times often drive many patients to opt for private care, seeking faster access to treatment. However, it is noteworthy that most patients also bear OOP costs when receiving care in the private sector and when treated as a private patient in public healthcare. In the realm of prostate cancer, disparities in medical provider and OOP costs charged add extra layers of complexity to the decision-making process regarding the treatment options.

A pivotal initial step in addressing the variations in costs involves enhancing transparency regarding individual providers’ charges. Currently, patients have limited information about the value offered by different providers and treatments. The Australian Government’s Medical Cost Finder website, which lists the median costs for various specialties, services and regions, represents a commendable stride in the right direction.⁸ However, expanding the website to include individual surgeon data including costs, outcomes and complexity of patients seen could significantly augment transparency. This move will improve the opportunity for healthcare consumers to make well-informed decisions regarding their care and providers. Such an approach may also stimulate healthy competition among healthcare providers and encourage consumers to seek value in their care. In the United Kingdom, surgeons funded by the government have their performance details including surgical outcomes publicly available on the National Health Service (NHS) website.¹⁶ Additionally, general practitioners are mandated by law to provide patients with a selection of specialists to choose from.¹⁷ Likewise, the hospital price transparency policy in the United States mandates hospitals to transparently disclose negotiated rates specific to each provider for all items and services in an easily understandable format for consumers.¹⁸

Although enhancing cost transparency has the potential to enhance overall healthcare delivery and disparities to some extent, it falls short of directly controlling costs and may inadvertently result in unintended consequences, such as an overall increase in fees to align with the highest price point.¹⁹ Cost transparency also does not effectively attend to the disparities in resources between affluent and less privileged patients, or the ability of patients to make optimal use of price information to advocate for their interests.²⁰ Moreover, in situations where there is a shortage of medical providers, the absence of competition may lead to practices such as price gouging, price fixing or the formation of oligopolies, where prices are heavily influenced by a select few providers.^21–23 Hence, supplementing these efforts with regulations to achieve more disciplined pricing and billing practices on the part of providers, to promote efficiency, and to safeguard socioeconomically disadvantaged patients is important. Direct regulation of medical fees by the government may spark considerable debate among healthcare providers. Nonetheless, developing the appropriate strategies using a collaborative approach is essential to ensure equitable access to cost effective care.

Limitations

Use of data from Medibank Private members, who constitute just over one-quarter of Australia’s private health insurance clients, may limit the generalisability of the study findings to a broader population. Certain relevant characteristics, such as cancer stage, complexity and comorbidities, were not able to be incorporated, due to the lack of reliable information. Additionally, this study could not explore the differences between privately insured patients and uninsured patients.