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The cost effectiveness and advantages of robotic surgery

cost-effectiveness-of-robotic-surgery

Entrepreneur and venture capitalist, Marc Andreesen recently indicated on Twitter that: “consumer costs rising most quickly (education, health care) have least tech innovation and least market competition.” Marc’s former partner in Netscape, the serial entrepreneur Jim Clark, founder of Healtheon (which later merged with and became known as WebMD) has also been scathing about increased costs and poor innovation in health care. Clark’s vision for improving health care through technology innovation is perhaps best documented in the book The New New Thing by Michael Lewis.

Larry Page, co-founder and CEO of Google, spoke at TED about how advances of sharing medical records (anonymously) could potentially save 100,000 lives in the US alone per year. This is something the tech giants are working on. Dr. Eric Horvitz, who is the managing director of Microsoft Research and specializes in applying artificial intelligence in health care settings told Wired magazine: “Electronic health records [are] like large quarries where there’s lots of gold, and we’re just beginning to mine them.”

IBM’s Watson is also making terrific strides in advances of health related applications, and if it is not, it will soon be the world’s foremost diagnostician of cancer related ailments. Watson is being “trained” to sift through and stay up to date with all of the world’s high-quality published medical information; match it against patients’ symptoms, medical histories, and test results; and formulate both a diagnosis and a treatment plan.

Perhaps the area where tech is having the biggest impact in health is robotic surgery – in both innovation and costs, the two areas highlighted by Marc Andreesen.

There are approximately 25 companies providing electro-mechanical, computer driving surgical devices, for what has become known as robotic surgery. The companies ranging from major corporations such as Hitachi, to Hansen Medical Sensei, Mako Surgical, Mazor Robotics and smaller companies like RoboDoc, Endocontrol and Cyberheart, the EU have developed Robocast, or Dr. Robot, the brain surgeon.

Perhaps the leader in robotic surgery is Intuitive Surgical, a NASDAQ listed company, and the manufacturer of the da Vinci Surgical System.

At the end of financial year 2013, Intuitive Surgical had annual revenues of $2,265 Billion and has set its sights on ‘long-term revenue potential for current target procedures as $7.2 billion’ (See 2013 Investor Presentation), broken down as follows:

  • Annual Instrument & Accessory Revenue $4.0 Billion
  • Annual System Revenue $1.9 Billion
  • Annual Service Revenue $1.3 Billion

This represents a whopping increase of almost 3.2 times revenue from year-end 2013. It’s not the purpose of this article to consider whether that is a realistic target or not, but I certainly applaud the Intuitive Surgical management for setting it and for the impressive work they are doing to improve surgical procedures. The point is to show the significant market potential of robotic surgery, and the impressive revenue that Intuitive Surgical is already securing.

In other words, the purpose is to show that robotic surgery is advancing healthcare-technology, saving costs and potentially saving lives.

Robotic surgery

In a 2013 FDA survey, surgeons experienced with the Intuitive Surgical da Vinci system said their patients have less bleeding, fewer complications, much quicker recovery times and less time in the hospital – 24 hours on average. The surgeries were also often completed quicker and cleaner. Another interesting point: those who used the da Vinci robotic system to remove advanced cancer in the tonsil region of the throat said that half of their patients were able to avoid chemotherapy.

Cost-effectiveness of Robotic Surgery

It may initially seem that robotic surgery would be more expensive than open surgery as it requires a large initial investment (in the order of US$1 million to US$2 million) as well as ongoing annual maintenance costs (approximately US$250,000) – costs are not present in open surgery. Additionally, robotic surgery requires disposable or limited-use instruments (eg, shears, needle drivers, graspers, forceps) with an average cost of approximately US$2,000 per instrument, which are replaced every 10 surgeries, versus the mostly reusable instruments in open surgery. However, reports have shown that the overall hospital costs were significantly lower for robotics compared with traditional surgery, and that, in some cases, the hospital could break even on their robotic investment after as few as 90 surgeries.

Not only is robotic surgery already cost-effective for insurance companies and hospitals, and a better option for the patients recovery, but as robotic technology expands and improves, as is the case with most other technologies, costs will further decrease – it is only a matter of time before that is past onto consumers.

Which to me goes a long way to answering Marc Andreesen’s concerns, although I still share his point that more competition is needed.

The following resources are independent articles and studies showing the cost-efficiencies and positive impact of robotic surgery:

General Robotic

• Epstein, A. J. G., P. W.; Harhay, M. O.; Yang, F.; Polsky, D. (2013). “Impact of Minimally Invasive Surgery on Medical Spending and Employee Absenteeism.” JAMA Surg: 1-7.  View Article

Gynecology

• Bell, M. C. T., J.; Seshadri-Kreaden, U.; Suttle, A. W.; Hunt, S. (2008). “Comparison of outcomes and cost for endometrial cancer staging via traditional laparotomy, standard laparoscopy and robotic techniques.” Gynecologic Oncology 111(3): 407-411. View Article

• Halliday, D. L., S.; Vaknin, Z.; Deland, C.; Levental, M.; McNamara, E.; Gotlieb, R.; Kaufer, R.; How, J.; Cohen, E.; Gotlieb, W. H. (2010). “Robotic radical hysterectomy: comparison of outcomes and cost.” Journal of Robotic Surgery: 1-6. 
View Article

• Hoyte, L. R., R.; Mezzich, J.; Bassaly, R.; Downes, K. (2012). “Cost analysis of open versus robotic-assisted sacrocolpopexy.” Female Pelvic Med Reconstr Surg 18(6): 335-339. View Article

• Landeen, L. B. B., M. C.; Hubert, H. B.; Bennis, L. Y.; Knutsen-Larson, S. S.; Seshadri-Kreaden, U. (2011). “Clinical and cost comparisons for hysterectomy via abdominal, standard laparoscopic, vaginal and robot-assisted approaches.” South Dakota Medicine 64(6): 197-199, 201, 203 passim. View Article

• Lau, S. V., Z.; Ramana-Kumar, A. V.; Halliday, D.; Franco, E. L.; Gotlieb, W. H. (2012). “Outcomes and cost comparisons after introducing a robotics program for endometrial cancer surgery.” Obstetrics and Gynecology 119(4): 717-724. 
View Article

• Reynisson, P. P., J. (2013). “Hospital costs for robot-assisted laparoscopic radical hysterectomy and pelvic lymphadenectomy.” Gynecol Oncol. View Article

Thoracic

• Park, B. J. F., R. M. (2008). “Cost Comparison of Robotic, Video-assisted Thoracic Surgery and Thoracotomy Approaches to Pulmonary Lobectomy.” Thoracic Surgery Clinics 18(3): 297-300. View Article

Urology

• Alemozaffar, M. C., S. L.; Kacker, R.; Sun, M.; Dewolff, W. C.; Wagner, A. A. (2012). “Comparing Costs of Robotic, Laparoscopic, and Open Partial Nephrectomy.” J Endourol. View Article

• Cooperberg, M. R. R., N. R.; Duff, S. B.; Hughes, K. E.; Sadownik, S.; Smith, J. A.; Tewari, A. K. (2012). “Primary treatments for clinically localised prostate cancer: a comprehensive lifetime cost-utility analysis.” BJU Int. View Article

• Hohwü, L. B., M.; Ehlers, L.; Venborg Pedersen, K. (2011). “A short-term cost-effectiveness study comparing robot-assisted laparoscopic and open retropubic radical prostatectomy.” Journal of Medical Economics 14(4): 403-409.
View Article

• Martin, A. D. N., R. N.; Castle, E. P. (2011). “Robot-assisted radical cystectomy versus open radical cystectomy: A complete cost analysis.” Urology 77(3): 621-625. View Article

• Morgan, J. A. T., B. A.; Peacock, J. C.; Hollingsworth, K. W.; Smith, C. R.; Oz, M. C.; Argenziano, M. (2005). “Does robotic technology make minimally invasive cardiac surgery too expensive? A hospital cost analysis of robotic and conventional techniques.” J Card Surg 20(3): 246-251. View Article

Picture credit: Intuitive Surgical

 

Colin Lewis is a behavioral economist... read more


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