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What are the Financial Returns from a Vascular Surgery Line?

Analysis  |  By Jack O'Brien  
   April 15, 2021

The section chief of vascular surgery at Dartmouth-Hitchcock Medical Center underscores the financial opportunities for health systems related to the vascular surgery line.

Editor's note: This conversation is a transcript from an episode of the HealthLeaders Finance Podcast.

Even before the COVID-19 pandemic began last year, hospital and health system executives were looking for new service lines to generate reliable revenues.  

According to a recent report released by the Society for Vascular Surgery (SVS), vascular surgeons could provide both necessary care for patients as well as a significant boost to a provider organization's bottom line.

Richard Powell, MD, section chief of vascular surgery at Dartmouth-Hitchcock Medical Center in Lebanon, New Hampshire, underscores the financial opportunities for health systems related to the vascular surgery line.

HealthLeaders: Dr. Powell, can you walk me through this new report on the vascular surgery line? What investments are associated with standing up an operation like this?

Powell: [Vascular surgery] is a relatively small specialty, so some physicians and healthcare administrators may not be completely familiar with the breadth and scope of vascular surgery practice. There are many attributes of vascular surgery that have a positive impact on the financial wellbeing of a healthcare system, yet are not initially obvious to hospital administrators or CFOs.

This research defines the scope of vascular surgery as operating on blood vessels outside of the heart, so we take care of arteries that get blocked in your neck and can cause strokes, as well as taking care of patients who have weakened arteries that can form aneurysms.

In order to do this, we do need some infrastructure needs; probably the 'big ticket item' in order to pre-service is a hybrid operating room, which has advanced imaging, as well as [the ability to] do open operative procedures.

These rooms will typically run between about $1.5 million to $2.5 million. Also, there'll be personnel needs such as advanced practice providers and other sorts of infrastructure needs, but the return on investment is quite substantial. Typically, this can be covered within two years' time.

HL: What are the financial implications of this surgery line? What would you tell our audience of hospital and health system CFOs about the revenue opportunities?

Powell: I developed an interest in this because vascular surgery is technology-driven.

Many of our procedures don't necessarily reimburse that well because our payer mix is predominantly government payers: about 70% of our patients are Medicare patients. Yet, the technology, such as stent-grafts, are quite expensive and we're focused on trying to drive down costs for our procedures in order to maintain quality. We are interested in the value proposition. As we did this, we were able to carefully define what the average contribution margin score was.

The nuanced and interesting finding we came across was that there are things vascular surgeons do that fly under the radar but drive revenue and may not be that apparent. It falls into three buckets: patient safety, the ability for vascular surgery to enable other service lines, and the idea that vascular patients are sick and have a kind of high case-mix index, which is going to have a positive impact on driving revenue for Medicare patients.

Related: Dartmouth-Hitchcock Shares Plans to Distribute Coronavirus Vaccine

HL: The SVS Valuation Work Group found the financial impact of having vascular surgeons to be "significant," producing $1.6 million per full-time employee. What advice would you pass along to provider administrators about employing vascular surgeons and retaining them within the organization?

Powell: It's certainly tricky because if you're trying to recruit a vascular surgeon, and you know that about one-third of the hospitals in the United States are currently trying to do the same thing, then you obviously have to have some differentiating factors that will attract the vascular surgeon [to your organization.]

The infrastructure need is important, while also providing access for the vascular surgeon to things like catheterization and laboratories. Vascular surgeons frequently will run the non-invasive vascular lab, which is a substantial revenue-generating enterprise.

[However,] one of the significant problems facing vascular surgeons is if they're in their office seeing patients or they have an elective OR schedule, and then they're called to the OR for an emergency, then they will wind up abruptly canceling their office hours or rescheduling their elective surgery. These things need to be addressed to acknowledge that they're a problem, and to make the quality of life of your surgeon at least bearable.

The call schedule is important and that's the differentiator between a large academic medical center or regional medical center where they may have three or four vascular surgeons, so they can share calls, as opposed to the problem that we face in New Hampshire where moderate to smaller hospitals need a vascular surgeon on-site. You want to have two or three vascular surgeons so they can share calls, but you may only have enough daytime work for one.

That's where I think hospital administrators need to be innovative in working with their partners in the region. In New Hampshire, [Dartmouth-Hitchcock] covers the emergency rooms for smaller hospitals, but there needs to be some sort of innovative way of call-sharing because not every hospital needs three vascular surgeons. But on the other hand, you don't want to have your vascular surgeons taking calls every night, and that's sort of the big hurdle I think for some of the smaller rural hospitals.

HL: Are there other areas in cardiology or surgery that you think have potential as financially viable service lines for hospitals? If so, which ones?

Powell: The big [area] is the development of office-based labs, that includes physicians who will have a vascular lab, but also diagnostic angiography, vein, or ambulatory procedures that may reimburse quite well. There's a significant tension there between the development of these office-based labs and the impact it has on the healthcare system overall.

The negative impacts are that you're pulling lucrative procedures out of the hospital system and they're being done in the office. But on the other hand, you're also pulling patients out of the hospital with low-case mix indices, and so if anything, you'll probably drive your case mix index up, which could potentially compensate for the loss of revenue. These are difficult questions that require relatively sophisticated analysis in order to see what the return on investment looks like.

Related: Coronavirus and How Dartmouth-Hitchcock Is Reopening Paused Services

Jack O'Brien is the Content Team Lead and Finance Editor at HealthLeaders, an HCPro brand.


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