Observational Study 1 Medicine ® Retrospective cohort study comparing surgical inpatient charges, total costs, and variable costs as hospital cost savings measures Jeongsoo Kim, PhD a , Michael A. Jacobs, MS a , Susanne Schmidt, PhD b , Bradley B. Brimhall, MD, MPH c,d , Camerino I. Salazar, MS d , Chen-Pin Wang, PhD b,e , Zhu Wang, PhD b,e , Laura S. Manuel, BS b , Paul Damien, PhD f , Paula K. Shireman, MD, MS, MBA a,d,e,g, * Abstract We analyzed differences (charges, total, and variable costs) in estimating cost savings of quality improvement projects using reduction of serious/life-threatening complications (Clavien-Dindo Level IV) and insurance type (Private, Medicare, and Medicaid/ Uninsured) to evaluate the cost measures. Multiple measures are used to analyze hospital costs and compare cost outcomes across health systems with differing patient compositions. We used National Surgical Quality Improvement Program inpatient (2013–2019) with charge and cost data in a hospital serving diverse socioeconomic status patients. Simulation was used to estimate variable costs and total costs at 3 proportions of fixed costs (FC). Cases (Private 1517; Medicare 1224; Medicaid/ Uninsured 3648) with patient mean age 52.3 years (Standard Deviation = 14.7) and 47.3% male. Medicare (adjusted odds ratio = 1.55, 95% confidence interval = 1.16–2.09, P = .003) and Medicaid/Uninsured (adjusted odds ratio = 1.41, 95% confidence interval = 1.10–1.82, P = .008) had higher odds of complications versus Private. Medicaid/Uninsured had higher relative charges versus Private, while Medicaid/Uninsured and Medicare had higher relative variable and total costs versus Private. Targeting a 15% reduction in serious complications for robust patients undergoing moderate-stress procedures estimated variable cost savings of $286,392. Total cost saving estimates progressively increased with increasing proportions of FC; $443,943 (35% FC), $577,495 (50% FC), and $1184,403 (75% FC). In conclusion, charges did not identify increased costs for Medicare versus Private patients. Complications were associated with > 200% change in costs. Surgical hospitalizations for Medicare and Medicaid/ Uninsured patients cost more than Private patients. Variable costs should be used to avoid overestimating potential cost savings of quality improvement interventions, as total costs include fixed costs that are difficult to change in the short term. Abbreviations: CDIV = Clavien-Dindo IV, CPT = current procedural terminology, EHR = electronic health records, FC = fixed costs, NSQIP = National Surgical Quality Improvement Program, OSS = operative stress score, RAI = risk analysis index, SNH = safety-net hospitals. Keywords: hospital costs, surgical hospitalizations, variable costs JK and MAJ contributed equally to this work. This research was supported by grant U01TR002393 (Kim, Jacobs, CP Wang, Brimhall, Schmidt, Manuel, Damien, and Shireman), from the National Center for Advancing Translational Sciences and the Office of the Director, NIH, Clinical Translational Science Awards UL1TR002645 (Wang, Brimhall, Schmidt, Manuel, and Shireman) from the National Center for Advancing Translational Sciences, and P30AG044271 from the National Institute on Aging, NIH (Shireman and Brimhall). The funding sources had no role in the design and conduct of the study; collection, management, analysis, and interpretation of the data; preparation, review, or approval of the manuscript; and decision to submit the manuscript for publication. The opinions expressed here are those of the authors and do not necessarily reflect the position of the United States government. Dr. Shireman reported receiving grants from the National Institutes of Health and Veterans Health Administration and salary support from Texas A&M University School of Medicine, South Texas Veterans Health Care System and the University of Texas Health San Antonio during the conduct of the study. Dr. Schmidt reported receiving grants from the National Institutes of Health. No other disclosures were reported. The data that support the findings of this study are available from a third party, but restrictions apply to the availability of these data, which were used under license for the current study, and so are not publicly available. Data are available from the authors upon reasonable request and with permission of the third party. Supplemental Digital Content is available for this article. a Department of Surgery, University of Texas Health San Antonio, San Antonio, TX, USA, b Department of Population Health Sciences, University of Texas Health San Antonio, San Antonio, TX, USA, c Department of Pathology and Laboratory Medicine, University of Texas Health San Antonio, San Antonio, TX, USA, d University Health, San Antonio, TX, USA, e South Texas Veterans Health Care System, San Antonio, TX, USA, f Department of Information, Risk, and Operations Management, Red McCombs School of Business, University of Texas, Austin, TX, USA, g Departments of Primary Care and Rural Medicine and Medical Physiology, School of Medicine, Texas A&M Health, Bryan, TX, USA. * Correspondence: Paula K. Shireman, Office of the Dean, School of Medicine, Texas A&M Health, 8447 Riverside Parkway, Bryan TX 77807, USA (e-mail: Shireman@tamu.edu). Copyright © 2022 the Author(s). Published by Wolters Kluwer Health, Inc. This is an open-access article distributed under the terms of the Creative Commons Attribution-Non Commercial License 4.0 (CCBY-NC), where it is permissible to download, share, remix, transform, and buildup the work provided it is properly cited. The work cannot be used commercially without permission from the journal. How to cite this article: Kim J, Jacobs MA, Schmidt S, Brimhall BB, Salazar CI, Wang C-P, Wang Z, Manuel LS, Damien P, Shireman PK. Retrospective cohort study comparing surgical inpatient charges, total costs, and variable costs as hospital cost savings measures. Medicine 2022;101:50(e32037). Received: 10 August 2022 / Received in final form: 4 November 2022 / Accepted: 7 November 2022 http://dx.doi.org/10.1097/MD.0000000000032037