Facility Cost Analysis in Outpatient Plastic Surgery: Implications for the Academic Health Center

Abstract

BACKGROUND: The authors examined the economic patterns of outpatient aesthetic and reconstructive plastic surgical procedures performed within an academic health center. METHODS: For fiscal years 2003 and 2004, the University of Michigan Health System's accounting database was queried to identify all outpatient plastic surgery cases (aesthetic and reconstructive) from four surgical facilities. Total facility charges, cost, revenue, and margin were calculated for each case. Contribution margin (total revenue minus variable direct cost) was compared with total case time to determine average contribution margin per operating suite case minute for subsets of aesthetic and reconstructive procedures. RESULTS: A total of 3603 cases (3457 reconstructive and 146 aesthetic) were identified. Payer mix included Blue Cross (36.7 percent), health maintenance organization (28.7 percent), other commercial payers (17.4 percent), Medicare/Medicaid (13.5 percent), and self-pay (3.7 percent). The most profitable cases were reconstructive laser procedures ($66.20; n = 361), scar revision ($36.01; n = 25), and facial trauma ($32.17; n = 64). The least profitable were hand arthroplasty ($13.93; n = 35), arthroscopy ($17.25; n = 15), and breast reduction ($17.46; n = 210). Aesthetic procedures (n = 144) yielded a significantly higher contribution margin per case minute ($24.21) compared with reconstructive procedures ($22.28; n = 3093) (p = 0.01). Plastic surgical cases performed at dedicated ambulatory surgery centers ($28.60; n = 1477) yielded significantly higher contribution margin per case minute compared with those performed at hospital-based facilities ($25.58; n = 2123) (p < 0.01). CONCLUSIONS: Use of standardized accounting (contribution margin per case minute) can be a strategically effective method for determining the most profitable and appropriate case mix. Within academic health centers, aesthetic surgery can be a profitable enterprise; dedicated ambulatory surgery centers yield higher profitability.