Benchmarking Bariatric Surgery Costs for a Center of Excellence (COE) Program

A large national employer engaged us to verify the performance of its surgery center of excellence vendor, specifically focusing on bariatric surgery episodes.

The employer sought an independent total cost of care benchmark to ensure the vendor’s negotiated rates were competitive and transparent across different care settings.

Goals

• Validate COE vendor pricing.
• Benchmark rates against national and regional norms.
• Enable strategic review of COE performance.

Scope of Work

• Identify procedure trigger code and applicable CPT codes related to bariatric surgery.
• Price procedures individually and aggregate them into bundled episode costs.
• Stratify benchmarks by site of service (inpatient, outpatient, ambulatory surgical centers).

Methodology

1. Episode Trigger Codes. To define the bariatric surgery population, we analyzed claims provided by the COE vendor with a primary diagnosis of morbid obesity (E6601). Relevant CPT codes for bariatric procedures were extracted to build the core episode definition. Each CPT code was individually priced to create the overall “bundle” price, allowing flexibility for customization.

2. Site of Service Stratification. Recognizing that surgeries were performed in various settings, we developed separate bundled prices for:

• Inpatient hospitals
• Outpatient hospital departments
• Ambulatory surgical centers (ASCs)

3. Bundle Construction Approach. Rather than using a prepackaged bundle, each CPT code was priced individually and summed to create the full episode cost. This method offers: X Transparency: Clients can see how each component contributes to total costs. X Flexibility: Clients can customize the bundle by adding or removing services based on case needs.

4. Pricing Sources. Benchmark pricing was sourced from publicly available national machine-readable file data, specifically for:

• UnitedHealthcare
• Aetna
• Cigna
• BlueCard network

Two sets of benchmarks were created:

• National pricing averages
• Tennessee-specific pricing, given the employer’s heavy population footprint in that state

Data Limitations and Recommendations

Vendor File Limitations. The COE vendor’s claims file lacked individual case identifiers, making it difficult to link related claims to episodes of care. Without these identifiers, it is challenging to: X Track which services belong to a specific patient’s surgery episode X Accurately validate the full bundle composition

Recommended Improvements. To enhance future benchmarking and validation efforts, we recommended the COE vendor:

• Include a case ID or person ID to link claims at the episode level
• Include billing NPIs to improve provider-level rate accuracy when matching to machine-readable file data

Conclusion

Through a data-driven and flexible benchmarking approach, the employer will gain critical insight into its COE vendor’s pricing structure to validate whether the negotiated rates are truly competitive, identify opportunities for cost optimization, and strengthen accountability for COE program performance.