Variation in the costs of surgery: seeking value

David J Hillis, David AK Watters, Lawrie Malisano, Nick Bailey and David Rankin
Med J Aust 2017; 206 (4): 153-154. || doi: 10.5694/mja16.01161

Transparency is key to achieving affordability of health care

There is increasing concern about the sustainability of health care in Organisation for Economic Co-operation and Development (OECD) countries. Australia currently spends US$6140 per capita — or 9.1% of its gross domestic product — on health care.1 Moreover, there is evidence that health care costs, including out-of-pocket (OOP) expenses, are rising.2 In Australia, 68% of health care costs are funded through the public health system, with 32% from other sources, including private health insurers and OOP expenses.2 To encourage Australians to take out health insurance, the private health system is subsidised by a private health insurance rebate, which costs the public about $5 billion per year.2 Private health insurers derive their income from premiums, which have risen an average of just under 6% per year since 2012, well above the inflation rate or the consumer price index.3 Individual OOP expenses are also rising at an average rate of 6.2%; they have more than doubled in a decade and accounted for 17.8% of Australia’s $140 billion health care spending in 2013–14.2

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  • David J Hillis1,2
  • David AK Watters3,4
  • Lawrie Malisano5
  • Nick Bailey6
  • David Rankin6

  • 1 Chief Executive's Office, Royal Australasian College of Surgeons, Melbourne, VIC
  • 2 University of Melbourne, Melbourne, VIC
  • 3 Deakin University, Geelong, VIC
  • 4 Barwon Health, Geelong, VIC
  • 5 Brisbane Orthopaedic and Sports Medicine Centre, Brisbane, QLD
  • 6 Provider Networks and Integrated Care Medibank, Melbourne, VIC



We thank the members of the RACS Clinical Variation Working Party for their input towards selecting the data for reporting and their interpretation. We also thank James Aitken, Chair of the Western Australian Audit of Surgical Mortality, for advice on showing the lack of correlation between OOP expenses and length of stay.

Competing interests:

No relevant disclosures.


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access_time 01:49, 6 March 2017
Peter Burke

The article, ‘Variation in the costs of surgery: seeking value’. MJA: 2017: 206(4) 153-154, by Hillis et al., is of perennial interest, both within and without the medical profession.
Browsing through some books left to me by my late medical practitioner father, I came across a small tome entitled, ‘The Doctor Wears Three Faces’.
Written by Mary Bard and published in London by Hammond, Hammond & Co. Ltd in 1949, it appears to have achieved modest success, with a total of three ‘Impressions’ within a year.
The dustjacket remnant provides some ‘Press Opinions’; an example: “This is a delightful book, in which sturdy commonsense and an ether mask are made amusing”.
The frontispiece takes the form of a simple poem with an anonymous author: indeed, it is this poem, which provides the title for the book.
Those sage words are now reproduced for today’s readers, to confirm, as if needed, that some things never change!

Three faces wears the doctor: when first sought
An angel’s; and a god’s the cure half wrought;
But when, the cure complete, he seeks his fee
The devil looks less terrible than he.

Mr. Peter F. Burke.

Competing Interests: No relevant disclosures

Mr Peter Burke
Latrobe Regional Hospital

access_time 10:20, 14 March 2017
john owen

The article, ‘Variation in the costs of surgery: seeking value’. MJA: 2017: 206(4) 153-154, by Hillis et al. is most informative and will no doubt influence reflection on out of pocket (OOP) expenses. However I struggled to find how the authors defined clinical outcomes and quality which "'value" for money means . They report the RACS view that the fee should be reasonable and reflect skill, effort and risks but there is no mention of quality of outcome.
They say there was no correlation between the fee charged and the quality of surgery which was measured by "Length of stay" (LOS) on basis that LOS is a reasonable surrogate for quality. Where is the proof that the shorter time in hospital, the better the operation?
When the DRGs hit Victorian Hospitals, LOS became an 'obsession'. It is possible to discharge patients the day after a major joint replacement. It generally requires a strict protocols, significant hospital resources , selection and education of patients to manage their expectations but what does that have to do with the quality of the surgeons work and therefore the Value of the fee. Of more importance is the observation I heard the President of the BOA make about early discharge of frail patients after major orthopaedic surgery, "I know it is possible , but is it kind?"
The price gouging by multinational companies manufacturing orthopaedic implants is scandalous but some clawback is occurring . That is the biggest single cost of the episode of care for a joint replacement. Almost half of the Orthopaedic surgeons do not charge an OOP. Quality of joint replacements in this country is measured in our Joint registry. The revision rate is falling. That is a good outcome

Competing Interests: No relevant disclosures

Mr john owen
St Vincents east Melbourne

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