Framework for estimating the financial contribution of a benign foregut practice: What general thoracic surgeons need to know

Objective: The study objective was to estimate payor-specific reimbursements for foregut surgery and determine the relative contribution compared with pulmonary procedures. Methods: Medical records of patients undergoing foregut surgery, identified by Diagnosis-Related Group codes 326, 327, and 328, by thoracic surgeons from January 2018 to December 2019 were reviewed. Esophagectomies and primary neoplasm diagnoses were excluded. Volume of surgeries, preoperative and postoperative studies, and clinic visits were measured. Reimbursements were estimated using Current Procedural Terminology and Diagnosis-Related Group Medicare data, cost-to-charge ratios, and Private:Medicare/Medicaid:Medicare payment ratios. Average payments for foregut and equivalent complexity pulmonary Diagnosis-Related Group codes were compared to calculate relative contribution. Results: A total of 72 patients met inclusion criteria and underwent 73 operations (hiatal hernia in 62 [85%] and esophageal diverticulectomy or myotomy in 11 [15%]), 538 studies, and 284 clinic visits. This volume equated to $12.7M in charges and $2.0M in Medicare reimbursement. Adjusting for a 59% Private, 32% Medicare, and 9% Medicaid payor mix, total reimbursement was $3.7M. Average reimbursement per surgery was $60k for Private, $35k for Medicare, and $28k for Medicaid. Total costs and operating income were $3.2M and $503k (ie, 14% operating margin), respectively. Compared with pulmonary procedures, foregut averaged greater reimbursement for the highest complexity cohort but less reimbursement for lower complexity cases (P ≤ .02). Conclusions: This framework can estimate payor-specific reimbursements, costs, and operating margins for both foregut and pulmonary surgeries. There are no financial disadvantages to having a diverse practice model. Balance of payor mix, case complexity, and a focus on reduced perioperative cost and increased care efficiency can improve margins and throughput.