1203 The First Commandment of Surgical Economics: You Cannot Survive on Government Reimbursement Alone

INTRODUCTION: Medicare reimbursement is used as a baseline value in health economics, and Medicare proponents insist Medicare’s low reimbursement, compared to commercial insurance, does not destabilize the health system. These core assertions are difficult to assess without comparing Medicare reimbursement against the actual cost of surgical care (not charges). The Medicare Inpatient Prospective Payment System (IPPS) reimburses each payment in DRG-based bundled formats and represents an ideal methodology to compare surgical care costs with expected federal reimbursement. METHODS: The total cost (not charges) of surgical/hospital care for 86 consecutive elective, inpatient, open, single-level TLIFs was inflation adjusted to 2024 dollars and compared to the same institution’s specific DRG 460 Medicare reimbursement rate. The cost of care was also inflation-adjusted over time and compared to DRG 460 reimbursement over the same period (earliest available) to ascertain whether Medicare reimbursement was falling or rising compared to the median cost of care. RESULTS: Medicare inpatient reimbursement was significantly lower than the cost of single-level inpatient TLIFs, and only reimbursed 73 cents/dollar of cost. Out of 86 inpatient TLIFs, 72 (84%) lost money compared to expected Medicare reimbursement and the hospital lost $997,402 total (mean $11,598/case, median $12,484/case). Inflation-adjusted median TLIF costs have increased against flat reimbursement to the point where the median loss/case has increased 77% from $7,047 in 2020 to $12,484 in 2024. CONCLUSIONS: Medicare inpatient reimbursement for uncomplicated thoracic and lumbar fusions is significantly lower than the cost of even elective, single-level TLIFs, and is worsening due to flat reimbursement and high inflation. This study sheds significant doubt about whether hospitals can offer spine surgery without commercial reimbursement, and whether unadjusted Medicare reimbursement should be used as a proxy for cost in health-economic research.