Hospitals know what they pay for spinal implants. What they may not know is how much it costs to get those implants into the operating room.
Behind every spine procedure is an extensive network of sterile processing technicians, equipment handlers, couriers and logistical operations that most surgeons rarely encounter. Those expenses are essential to delivering surgical care, yet they can remain largely invisible in traditional hospital accounting.
Ahilan Sivaganesan, MD, director of minimally invasive spine surgery at Penn Medicine in Philadelphia, calls it the “invisible factory” behind surgery. He believes understanding its true cost could become critical as reimbursement tightens and more complex procedures move to ASCs.
“In the past, hospitals could afford not to know the true cost of this invisible factory because their margins were good enough,” Dr. Sivaganesan told Becker’s. “But I think that’s going away.”
Now, he is launching an investigator-initiated, industry-sponsored study at Penn to determine the true production costs of common spine procedures and investigate whether rethinking surgical infrastructure could make care more financially sustainable.
The expense hiding in plain sight
For years, hospitals have focused cost-reduction efforts on some of surgery’s most visible expenses, particularly implants and disposable supplies. But negotiating a lower price for a spinal implant does little to reveal what an organization spends preparing, sterilizing, transporting and managing the equipment required for the procedure.
Dr. Sivaganesan compares it to calculating the cost of a restaurant meal by adding up the ingredients while ignoring the kitchen, cooks and everything required to get the food onto the plate.
His research draws on time-driven, activity-based costing, a methodology that maps each step of a clinical process and calculates costs according to the personnel, equipment and time involved.
Unlike traditional accounting methods that distribute overhead across procedures, the approach seeks to identify the resources consumed by an individual case.
At Becker’s recent 32nd Annual: The Business and Operations of ASCs conference in Chicago, Dr. Sivaganesan raised the issue with a panel of experienced surgery center operators. Even among sophisticated outpatient organizations, he found that the accounting methods described relied on broad overhead allocations rather than detailed assessments of the resources required to prepare each surgery.
“I think this invisible factory remains largely overlooked,” he said. The distinction matters because two procedures with similar operating room expenses may place very different demands on the infrastructure supporting them.
What Penn hopes to uncover
Dr. Sivaganesan’s study will examine lumbar decompression and lumbar fusion, tracing the personnel, equipment and logistical steps required to deliver each procedure. His team has begun visiting off-site sterile processing facilities and meeting the employees responsible for preparing and transporting surgical instruments.
“The folks at sterile processing departments, they’re not used to seeing surgeons down there,” he said.
The research was partly inspired by a company offering sterile-ready, single-use instrumentation for spinal fusion. On the surface, disposable instruments may appear less economical than reusable equipment. Hospitals have already invested in sterilization infrastructure, making it tempting to assume that continuing to reuse instruments is the less expensive option. But that calculation may change when labor, transportation, decontamination, equipment handling and other supporting expenses are included.
“If it’s a lot higher than we realize, then perhaps single-use, sterile-ready spine surgery may actually be more financially favorable than we think,” he said.
The study will establish a baseline against which alternative approaches can be evaluated. Dr. Sivaganesan also hopes to identify opportunities to improve efficiency without introducing new products, including reconsidering how tasks are assigned across personnel.
His interest in the question deepened after reviewing a small Japanese study of total knee replacement. According to Dr. Sivaganesan, researchers found that more than nine minutes of personnel time were spent preparing for surgery for every minute of operating room time. Preoperative personnel costs were approximately 80% of intraoperative personnel costs.
Although the findings came from a single setting and cannot be assumed to apply to spine surgery, they suggest the work performed before a procedure can represent a substantial expense.
Why the ASC shift raises the stakes
The financial consequences of overlooking those costs could become more pronounced as health systems expand their outpatient surgery operations.
Decisions about whether to centralize sterile processing, invest in robotic technology or introduce new instrumentation require more than a comparison of purchase prices.
A robot acquired through a favorable implant agreement, for example, may still require considerable resources to transport, maintain and prepare for use. An alternative technology with fewer capabilities might prove more economical if it reduces those operational demands.
Dr. Sivaganesan believes health systems need the ability to compare those trade-offs using actual case-level data. He envisions testing new technologies over a defined number of procedures, then measuring whether their adoption meaningfully changes the cost of delivering care.
That analysis should also account for delays, cancellations and lost operating room productivity, which may not be fully captured in conventional financial reports. For health systems pursuing ASC joint ventures, the findings could help determine whether supporting infrastructure should remain centralized or move closer to the point of care.
Spine surgery’s ‘just-in-case’ problem
Dr. Sivaganesan believes the industry may also need to rethink what makes a surgical technology valuable. Historically, hospitals and surgeons have evaluated new equipment largely by what it adds: better visualization, greater precision, improved outcomes or easier execution.
He wants them to consider what it removes. “What technologies can we adopt to reduce or eliminate our dependence on the infrastructure required to perform surgery?” he said.
He describes those dependencies as a procedure’s “infrastructure intensity” or “operational heat,” encompassing the personnel, equipment and logistical complexity required to make it possible.
In other industries, lean manufacturing has encouraged organizations to minimize unnecessary inventory and deliver resources when they are needed. Spine surgery, he joked, has often taken the opposite approach.
“It’s just-in-case, right? The surgeon might need this. The surgeon might need that,” he said.
Additional instrument sets, backup equipment and supplies for unexpected changes in surgical plans may be necessary in some circumstances. But each also creates demands on the system, even when it ultimately goes unused.
As more procedures migrate to ASCs, Dr. Sivaganesan believes those longstanding habits deserve greater scrutiny. He sees a parallel in the computing industry’s shift toward mobile devices. Technologies designed around lower energy consumption and fewer infrastructure requirements became more valuable when portability emerged as a priority.
Outpatient surgery, he argues, could produce a similar shift in the technologies hospitals choose to adopt. Rather than automatically favoring the most sophisticated equipment, organizations may increasingly prioritize solutions that deliver the necessary clinical capabilities with fewer operational dependencies.
“What was passable in the inpatient world is not really going to be passable anymore,” he said.
For spine surgery, the next major advance may not be a device that allows surgeons to do more. It may be a system that allows them to accomplish the same goals with less.
At the Becker’s 32nd Annual Meeting: The Business and Operations of ASCs, taking place October 29-31 in Chicago, ASC leaders, surgeons and healthcare executives will explore strategies to drive growth, enhance operational performance, navigate reimbursement challenges and prepare for the future of ambulatory surgery. Apply for complimentary registration now.
