Diffusion of Laparoscopic Adjustable Gastric Banding after the Medicare National Coverage Decision for Bariatric Surgery

A regulation intending to improve patient safety by restricting bariatric surgery patients to high-volume "Centers of Excellence" promoted substitution of less effective but quick to perform surgical procedure. Policies restricting insurance coverage of complex, high-cost procedures to larger hospitals may have unintended consequences when the procedures in question have close substitutes. A 2006 National Coverage Decision (NCD) restricted Medicare beneficiaries to receive bariatric surgery at high-volume hospitals designated as “Centers of Excellence”. Medicare also extended coverage to include Laparoscopic Adjustable Gastric Banding (LAP-BAND) surgery, an easy to perform but less effective weight-loss procedure. We compare outcomes and procedure choice among Medicare and non-Medicare patients before and after the NCD to study hospital response to volume-based incentives. 

We used State Inpatient Data from 12 large, geographically diverse states to track diffusion of the LAP-BAND among Medicare patients and spillovers to non-Medicare patients.  The sample includes 315,696 patients undergoing weight-loss surgery for morbid obesity at 522 hospitals between 2003 and 2009.  We find that the NCD caused a 7.7 percentage point increase in the probability of LAP-BAND receipt relative to other bariatric procedures for Medicare beneficiaries.  Use of the LAP-BAND spread most rapidly in hospitals that were just below the Center of Excellence volume threshold at the time of the NCD. Medicare patients induced to receive a LAP-BAND as a result of the NCD were less likely to die and experience a complication. However, these improvements in short-term safety came at the cost of lower probability of long-term success; weight loss was 35% greater with gastric bypass versus LAP-BAND.  We will estimate the effects of this change in procedure mix on long-term health outcomes of bariatric surgery patients. 

Hospitals responded to a volume-based selective referral policy by increasing use of a less effective procedure. Increased use of this lower-skill procedure was associated with improvements in short-term outcomes at the cost of limited weight loss in the long-run.  These potentially unintended consequences of the coverage decision highlight the challenges payers and policymakers face in legislating quality.