Comparing Open Surgery to Laparoscopic- The Business Case -

Minimally Invasive Procedures

Kimberly MunroAug 24, 2010

School Employees Health Care Board

DSL#10-0209

Worlds largest diversified healthcare company

Corporate reputation Second Best in America **

More than 200 separate operating companies in 57 countries

53.3 billion dollars in sales– 44% Pharmaceuticals– 38% Medical Devices – Worlds Largest– 18% Consumer Products

Major provider of health benefits for– 122,000 employees world wide– 50,000 US based employees - 75,000 dependents

Ethicon Endo-Surgery, Inc.

Develops and markets advanced medical devices for minimally invasive and open surgical

procedures

Focuses on procedure-enabling devices for the

interventional diagnosis and treatment of conditions in:

General surgery

Bariatric/Obesity surgery

Gastrointestinal health

Gynecology and

Surgical oncology

Provides state-of-the-art surgeon & allied health

training for our products & procedures

ESI offers a variety of courses, as well as

distance learning and online courses, designed

to provide each participant with an

educational experience focused on emerging technologies and new surgical procedures.

Minimally Invasive Procedures: Defined

Surgery performed through small incisions or the natural orifice using video cameras and specialized instrumentation

This approach is often referred to as Laparoscopic

Tomson (Solucient). New Procedure Volumes 2006

Scope of Procedures

Procedure Rate of Open Surgery

Hemorrhoidectomy 92%

Colectomy 69%

Hysterectomy 54%

Breast Biopsy 38%

Appendectomy 36%

Reflux Surgery 13%

Bariatric Surgery 12%

Cholecystectomy 3%

Medstat – MarketScan 3Q06-2Q07

Open Surgery versus MIP

Direct Medical Costs

• Less post-procedure pain• Less Rx• Less Physical Therapy

• Opportunity to shift from Inpatient to Outpatient setting

2

• Reduction in Readmission Rates3

• Reduction in Nosocomial Infection Rates

3

• Lower LOS1

Indirect Costs

• Quicker Return to Work1

• Quicker Return to Normal Activities

1

• Reduced Absenteeism• Improved Presenteeism

• Leading to increased productivity

ROI is Immediate and Sustainable2Minimally invasive: minimally reimbursed? An Examination of Six Laparoscopic Surgical Procedures. Roumm A, Pizzi L, Belsky A, et al. Surgical Innovation, Vol. 12, No 3 (September), 2005:261-2872Fullum et al. 3Brill A, et al.

Clinical and Economic of MIP

0

1

2

3

4

5

6

7

8

9

10

25 19 8 7 14 37 9

Range of reduction in days when comparing MIP to open procedures

Studies Reviewed

Minimally invasive: minimally reimbursed? An Examination of Six Laparoscopic Surgical Procedures. Roumm A, Pizzi L, Belsky A, et al. Surgical Innovation, Vol. 12, No 3 (September), 2005:261-287

† 5 of the 37 studies for Appendectomy showed an increase ranging from 0.2 to 0.7 days

MIP Impact on Hospital Length of Stay (LOS)

Colectomy

Lap. H

ysterecto

my vs.

Total Abdominal

Vaginal Hyst

erectomy v

s. Total A

bdominal

Esophagogastr

ic Fundoplasty

Cholecystecto

my

Appendectomy†

Ventral H

ernia Repair0

5

10

15

20

25

30

35

2 4 1 4 8 10 1

Range of reduction in days when comparing MIP to open procedures

Studies Reviewed

Minimally invasive: minimally reimbursed? An Examination of Six Laparoscopic Surgical Procedures. Roumm A, Pizzi L, Belsky A, et al. Surgical Innovation, Vol. 12, No 3 (September), 2005:261-287

† 2 of the 10 studies for Appendectomy showed no reduction

MIP Impact on Return to Work (RTW)

Colectomy

Lap. H

ysterecto

my vs.

Total Abdominal

Vaginal Hyst

erectomy v

s. Total A

bdominal

Cholecystecto

my

Appendectomy†

Ventral H

ernia Repair05

101520253035404550

2 1 1 2 14 1

Range of reduction in days when comparing MIP to open procedures

Studies Reviewed

Minimally invasive: minimally reimbursed? An Examination of Six Laparoscopic Surgical Procedures. Roumm A, Pizzi L, Belsky A, et al. Surgical Innovation, Vol. 12, No 3 (September), 2005:261-287

† 2 of the 14 studies for Appendectomy showed an increase ranging from 1-6 days

MIP Impact on Return to Normal Activity (RTNA)

Comparing Open to MIP Using “Real World” Database of Claims Data1, 2

Reduction in infection

rates

Reduction in incidence of

sepsis3

Reduction in overall

complications

Reduction in Length of Stay

Colectomy† 37% 64% 31% 4.2 days

Appendectomy† 20% 55% 34% .64 days

LH versus TAH‡ 17% 50% 41% 1.1 days

VH versus TAH‡ 22% 50% 17% .96 days

†Fullum et al. Comparison of the clinical and economic outcomes between open and minimally invasive appendectomy and colectomy: evidence from a large commercial payer database. Surg Endosc 2009.‡Warren L et al. Open abdominal versus laparoscopic and vaginal hysterectomy: analysis of a large United States payer measuring quality and cost of care. Journal of Minimally Invasive Gynecology, Vol 16, No 5, September/October 2009

1p<.052When comparing open versus laparoscopic approached and controlling for the following factors: age, gender, type of insurance, case mix index and complexity of disease.3 An infection in the blood

LH = Laparoscopic HysterectomyVH = Vaginal HysterectomyTAH = Total Abdominal Hysterectomy

MIP Reduces Risk of Complications

Minimally Invasive Surgery Overview

The CDC estimates that 2 Million patients acquire nosocomial infections each year, resulting in over $4.5 Billion Dollars in cost to the US healthcare system. 1

Laparoscopic surgery reduced the risk of nosocomial infections by more than 50 percent when compared to open surgery, across hysterectomies, cholecystectomies (gallbladder) and appendectomies

Gallbladder—66% reductionHysterectomy—52% reductionAppendectomies—Lower, but not statistically significant

Reduction In Odds Of Acquiring Infection By Type:Respiratory Tract—80% reductionBloodstream—69% reductionWound—59% reductionUrinary Tract—39% reductionOthers—48% reduction

Hospital re-admissions associated with infection—65% reduction 2

Minimally Invasive Surgery Significantly Reduces Nosocomial Infections

DSL#08-0168

Sources: 1 Centers for Disease Control Prevention. Nosocomial infection update. Emerging Infectious Diseases. 1998; 43: 416-4202 “The effects of Laparoscopic Cholecystectomy, Appendectomy, and Hysterectomy on nosocomial infection risks.” Andrew Brill, MD, FACS, Kathakali Ghosh, MS, Candace L. Gunnarsson, Ed.D., John Rizzo, PhD, Terrance Fullum, MD, FACS, Craig A. Maxey, MBA, Stephen E. Brossette, MD, PhD, Surgical Endoscopy, February, 2008

Gunnarsson C et al. The effects of laparoscopic surgery and nosocomial infections on the cost of care. Value in Health 2008 July; Vol 12, Issue 1

Estimated Incremental Effects on the Cost of Care

per NI2

Incremental Length of Stay due to NI2

Cholecystectomy $ 4,794 4.29

Hysterectomy $ 4,528 2.52

Appendectomy $ 6,108 2.90

Average $ 5,182 3.16

2 Statistically significant at the 1% level, two tailed test

The Effects of Nosocomial Infections (NI) on Cost of Care to Payer

28 28

42

56

70

42 42

56

70

84

0

10

20

30

40

50

60

70

80

90

Sedentary Light Medium Heavy Very Heavy

Du

rati

on

in d

ays

Job classification

HYSTERECTOMYOptimum Length of Disability

Laparoscopic Open

COLON RESECTIONOptimum Length of Disability

14 14

21

35

42

28 28

35

42 42

0

5

10

15

20

25

30

35

40

45

Sedentary Light Medium Heavy Very Heavy

Job classification

Du

rati

on

in

day

s

Laparoscopic Open

CHOLECYSTECTOMYOptimum Length of Disability

7 7

14

21 21

14 14

21

28

42

0

5

10

15

20

25

30

35

40

45

Sedentary Light Medium Heavy Very Heavy

Job classification

Du

rati

on

in

day

s

Laparoscopic Open

APPENDECTOMYOptimum Length of Disability

21

14

7

33

2828

21

77

0

5

10

15

20

25

30

Sedentary Light Medium Heavy Very Heavy

Job classification

Du

rati

on

in

day

s

Laparoscopic Open

Source: MDA Internet Duration Guidelines, The Reed Group - Medical Disability Advisor (http://www.mdainternet.com; accessed on 08/06/2006)

DSL#06-1212 2006 Ethicon Endo-Surgery Inc.

Short Term Disability Guidelines

MIP versus Open Difference in Cost of Episode of Care

Colectomy† $15,1811,2

Cholecystectomy‡ $3,2991,4

Appendectomy†‡ $700-1,0321,3

Hysterectomy ‡ $1,2181,4

†Fullum et al. Comparison of the clinical and economic outcomes between open and minimally invasive appendectomy and colectomy: evidence from a large commercial payer database. Surg Endosc 2009.‡Gunnarsson C et al. The effects of laparoscopic surgery and nosocomial infections on the cost of care. Value in Health 2008 July; Vol 12, Issue 1

1 Risk Adjusted2p<.053 p<.0014 p<.01

MIP Impact on Overall Costs

Hysterectomy$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000 $8,882

$11,176

Outpatient Inpatient

†

† Warren L et al. Open abdominal versus laparoscopic and vaginal hysterectomy: analysis of a large United States payer measuring quality and cost of care. Journal of Minimally Invasive Gynecology, Vol 16, No 5, September/October 2009 ††HCUP Facts and Figures: Statistics on Hospital-Based Care in the United States, 2007

Reduction in spending of $2294 per procedure

1, 2

1 Adjusted for surgery type, patient age at index date, gender, Charlson Morbidity Index, geographic region, and medical degree specialty2p<.05

Hysterectomy is the 5th most common surgical procedure for females. ††

Comparing Expenditures by Inpatient & Outpatient Care Setting

An Employer’s Perspective

Realizing the Value of Minimally Invasive Surgery

Colorado Spring School District 11

• Core K-12 district• 30,000 students• 60 schools• Self-funded medical plan:

• 2,600 employees; 6,400 lives• Medical budget is $28 million

• 70% women and high incidence of chronic diseases

D11 - Background

Setting of Care Incentive

Inpatient $400Outpatient $200

Phase 1 (7/07) Phase 2 (7/08)

Cholecystectomy Bariatric Surgery

Hysterectomy Appendectomy

Colectomy

D11 – Copayment Incentives

Procedure2007

MIP Adoption Rates2009

MIP Adoption Rates

Hysterectomy 28% 81%

Cholecystectomy 93% 100%

Colectomy 33% 100%

Bariatric Surgery 93% 100%

Two-year savings of $1 Million

“Every extra dollar spent on healthcare is a dollar that doesn’t get to the classroom.”- Ken Detweiler

D11 – Two-Year Outcomes

Questions?