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Geographic Variation in Surgical Outcomes and Cost Between the United States and Japan
Michael P. Hurley, MD, MS; Lena Schoemaker, BA; John M. Morton, MD, MPH; Sherry M. Wren, MD; William B. Vogt, PhD; Sachiko Watanabe, RN, MHSA, MAE; Aki Yoshikawa, PhD; and Jay Bhattacharya, MD, PhD
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Geographic Variation in Surgical Outcomes and Cost Between the United States and Japan

Michael P. Hurley, MD, MS; Lena Schoemaker, BA; John M. Morton, MD, MPH; Sherry M. Wren, MD; William B. Vogt, PhD; Sachiko Watanabe, RN, MHSA, MAE; Aki Yoshikawa, PhD; and Jay Bhattacharya, MD, PhD
Compared with Japan, the United States has substantially less geographic variation in surgical outcomes, but it has higher variation in cost.


Objectives: Unwarranted geographic variation in spending has received intense scrutiny in the United States. However, few studies have compared variation in spending and surgical outcomes between the United States healthcare system and those of other nations. In this study, we compare the geographic variation in postsurgical outcomes and cost between the United States and Japan.

Study Design: This retrospective cohort study uses Medicare Part A data from the United States (2010-2011) and similar inpatient data from Japan (2012). Patients 65 years or older undergoing 1 of 5 surgeries (coronary artery bypass graft, abdominal aortic aneurysm repair, colectomy, pancreatectomy, or gastrectomy) were selected in the United States and Japan.

Methods: Reliability- and case-mix–adjusted coefficient of variation (COV) values were calculated using hierarchical modeling and empirical Bayes techniques for the following 5 outcomes: postoperative mortality, the development of a complication, death after complication (failure to rescue), length of stay, and the cost of the hospitalization. Sensitivity analyses were also performed by calculating patient demographic-and case-mix–adjusted COV values for each outcome using weighted age- and sex-standardized values.

Results: The variability of the postsurgical outcomes was uniformly lower in the United States compared with Japan. Cost variation was consistently higher in the United States for all surgeries.

Conclusions: Although the US healthcare system may be more inefficient regarding costs, the presence of higher geographic variation in postoperative care in Japan, relative to the United States, suggests that the observed geographic variation in the United States—both for health expenditures and outcomes—is not a unique manifestation of its structural shortcomings.

Am J Manag Care. 2016;22(9):600-607

Take-Away Points
This investigation compares the amount of observed geographic variation in the United States and Japan for the surgical outcomes and costs of 5 common, higher-risk surgeries. Key findings include:
  • The United States has less variation in surgical outcomes compared with Japan, but it has higher geographic cost variation.
  • The surgical outcome variation in the United States is not unique; it exists even in a country that consistently ranks highly on public health quality measures. This variation is likely the result of unique structural inefficiencies in each healthcare system.
  • There is an opportunity to reduce wasteful spending by standardizing the cost of care in the United States.
Countries around the world are attempting to contain increasing healthcare costs without sacrificing quality of care. Relative to other developed countries, the United States fares poorly on measures of both healthcare expenditure and health outcomes. Although the United States spent $7929 per person (16.4% of gross domestic product [GDP]) in 2010—the most of any Organisation for Economic Co-operation and Development (OECD) country—health outcomes, such as life expectancy, are among the worst in the developed world.1

Much research has focused on small-area geographic variation in healthcare spending as evidence of inefficient healthcare in the United States.2 A recent report released by the Institute of Medicine (IOM) has affirmed that higher healthcare expenditures within a region are not related to better outcomes.3 In principle, the lack of relationship between spending and outcomes suggests that any unwarranted variation is potentially wasteful, and, if eliminated, might decrease costs while maintaining quality. Variations in healthcare expenditure have been identified as a potential area for up to a 30% reduction in waste (approximately $650 billion) in the US healthcare system.4,5

Apart from issues of economic inefficiency, geographic variations in treatments and outcomes have important clinical and health policy implications. Outcome differences across regions are evidence for the presence of inequalities in care across regions, which represent a distinct and important problem in itself. Regional differences in quality of care may indicate opportunities to improve care for patients in places with worse outcomes. Identifying centers that have better outcomes than others and promoting the practice styles of those centers may be a practical way to improve patient outcomes.

Researchers have proposed several reasons for the observed geographic variation in the United States. Studies cite fragmentation of care,6 racial and socioeconomic barriers to care, and the diversity of financing and coverage options as reasons that the United States has unwarranted variation.7 Other studies have also investigated physician peer effects and the ways that social influences can affect medical decisions.8

One premise underlying the interpretation of these findings is that the American healthcare system is unique in its inefficient stewardship of healthcare dollars. This naturally leads to a question: If the United States is so singularly ineffective at controlling costs and ensuring quality relative to other countries, then does it also experience singularly high geographic variation in costs and outcomes relative to other countries?

In this study, we compared the variability in postoperative outcomes and cost of hospitalization for 5 major surgeries in the United States and Japan. There are several key similarities and differences between the 2 countries. Japan is a modern OECD country that has access to technologies and treatments similar to those used in the United States; however, in 2010, Japan spent only $3204 per person (9.5% of GDP) on healthcare while attaining the highest average life expectancy at birth of any OECD country. Its system also provides universal access to care, and it is consistently well-graded from a public health standpoint.9 In other words, it does not have many of the shortcomings of the US healthcare system that potentially lead to unwarranted variation.

Although the prevalence of various surgical procedures has been studied, to our knowledge, there have been only few and limited comparisons of the variability in surgical outcomes among countries.10,11 Surgical outcomes as a quality metric are ideal to examine, given their well-established definitions and close association between the surgical process and the postoperative outcome. If the observed variability in Japan is low, the implication would be that the United States is truly unique. If, however, the variability in Japan is high, that would suggest that variability could be an inherent feature of healthcare systems. Our main aim is to study whether the United States is truly uniquely inefficient or whether geographic variation is part of the natural fabric of modern healthcare delivery.


Data Source

Our analysis uses 2 data sources: a large Japanese administrative database and the Medicare 5% sample standard analytical file. The Japanese administrative database contains anonymous patient and encounter-level information collected over the 9-month period between April 1, 2012, and December 31, 2012. The data were originally collected from hospital forms that were submitted to the Japanese government as part of an ongoing effort to reform the healthcare reimbursement system in Japan.12 Hospitals that participate in this program are designated as Diagnosis Procedure Combination (DPC) hospitals, and together, they account for more than half of all the acute care beds in Japan. The DPC hospitals represent approximately 20% of all hospitals in Japan; they include all major academic medical centers and most of the nation’s larger hospitals. Our sample encompasses 100% of the patients from roughly half of these DPC hospitals. Please see eAppendix Figure A (eAppendices available at for a comparison of our sample with the full set of DPC hospitals. The data contain information on patient status at admission and discharge; cost of admission; and details on surgeries, procedures, and drugs administered during the patient’s stay at the hospital. Medical clerks and licensed information managers generally oversee the collection and reporting of DPC data at individual hospitals to optimize the accuracy of the data. Studies correlating data from electronic health records and DPC data have shown very high compliance.13 In total, our data encompass information for approximately 5 million patients in more than 600 hospitals located across every region of Japan.

Data on patients in the United States were obtained from the Medicare 5% sample from 2010 to 2011. This is a random sampling of 5% of Medicare beneficiaries across all hospitals in the United States and has been used extensively to analyze different outcome measures.14 In our study, we analyze all inpatient claims by hospitals for this 5% sample. The information about each hospitalization includes dates of hospital admission and discharge, discharge status, disease(s) diagnosed, and cost of hospitalization.

Cohort Selection

Patients undergoing any of 5 relatively common, higher-risk surgeries (abdominal aortic aneurysm repair, coronary artery bypass grafting, colectomy, gastrectomy, or pancreatectomy) were included in the analysis. We follow the definitions outlined in the US Agency for Healthcare Research Quality’s Inpatient Quality Indicator guidelines when available.15-17 These surgeries have been previously used in related investigations studying the variability of surgical quality and outcomes.14,18 Japanese patients were selected using a Japan-specific surgery classification scheme (K-codes). K-codes were individually selected and verified to correspond to their International Classification of Diseases, Ninth Revision, Clinical Modification (ICD-9-CM) counterparts for this study; they have similarly been used in other studies to create comparable cohorts.19 Comorbidities were defined using Elixhauser classification definitions for both the US and Japanese cohorts. Prior validation studies have shown that both ICD-9-CM and ICD-10 coding algorithms produce similar estimates of comorbidity prevalence in administrative data.20 Patients were restricted to those 65 years or older.


We investigated 5 outcomes: in-hospital mortality, postsurgical complications, failure to rescue, length of stay, and cost of hospitalization. Postsurgical complications are defined using ICD-9-CM codes in the US Medicare dataset, and corresponding ICD-10 codes for the Japanese dataset. Complications included pulmonary failure, pneumonia, myocardial infarction, deep vein thrombosis/pulmonary embolism, acute renal failure, postoperative hemorrhage, surgical site infection, and gastrointestinal bleeding. The specific ICD-9-CM codes for these complications have been previously validated as having reasonable agreement when comparing administrative data with the medical record.21,22 Failure to rescue is defined as death after any of the previously listed complications. Variations in cost in the United States were calculated using the Medicare Part A reimbursement to hospitals.

We subtracted disproportionate share payments, indirect medical education payments, and payments classified under total prospective payment system capital from United States cost totals, because these represent intended systemic cost variation and would inflate our variation estimates for the United States. Regions of comparison were defined for each country so that they were similar; variability was compared among states in the United States and among prefectures in Japan, graphically depicted in eAppendix Figure B.

Statistical Analysis

In this study, we calculated outcome-specific coefficients of variation (COVs), defined as the sample standard deviation divided by the mean. The COV is a unitless measure that allows for a comparison of variation between a random variable with different means from 2 samples. For example, when used to measure the consistency of an elite athlete’s performance across multiple races, the COV will usually be between 1% and 2%.23

Potential confounders, such as patient characteristics (age and gender for both countries’ cohorts, and additionally race for the US cohort), comorbidities, and urgent versus scheduled admissions, were included in all regression models. We additionally used hierarchical modeling techniques to adjust our COV estimates for reliability.24 Using random effects logistic regression models, we generated empirical Bayes predictions of the outcomes that were used to calculate our final COV values. This technique minimizes the impact of statistical outliers such as those from small-volume hospitals whose estimates can be considered less reliable than those of larger-volume hospitals. By variably shrinking the contribution of small-volume hospital estimates toward the average mortality rate across all hospitals, we are able to better estimate systematic, nonrandom variation as opposed to variation due to chance.

We additionally performed a sensitivity analysis by calculating age- and sex-standardized COV values for both countries to the 2000 US population, weighting all estimates by the number of procedures performed in each state and prefecture. These demographic- and case-mix–adjusted COVs were evaluated by performing multivariate regressions for each outcome of interest. We then calculated the adjusted COV (adjusted for age, gender, race, comorbidities, and urgency of admission) based on these regression estimates.


We assessed the geographic variation of in-hospital mortality, complication rate, failure to rescue rate, length of stay, and the cost of hospitalization for 5 major surgical procedures in the United States and Japan.

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