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This study documents trends in risk-adjusted quality and cost for a variety of surgical procedures, and explores innovation in treatment among Medicare beneficiaries from 2002 through 2011. Methods: We consider 11 classes of surgery, characterized by AHRQ's Clinical Classification System; the surgical classes studied range from tracheostomy to heart valve procedures to colorectal resection to wound debridement. For each surgical class, we assess trends in treatment costs and health outcomes among Medicare beneficiaries receiving these procedures during hospital stays. Quality was defined as rate of 30-day survival with the avoidance of unplanned readmissions, while costs include hospital costs and concurrent physician and ancillary services. Quality and costs are adjusted for patient severity based on demographics, comorbidity, and community context. Surgical innovations are operationalized as clinically distinctive procedures with nonexistent or limited use in 2002, identified using ICD-9 procedure codes. Results: Analysis found significant and positive quality growth for 6 surgical classes: heart valve procedures (3.49%), CABG (2.00%), gastrostomy (5.32%), tracheostomy (5.01%), wound debridement (2.78%), and excision of lysis peritoneal adhesions (1.68%). Preliminary analysis also found significant and negative cost trends for 3 surgical classes: tracheostomy (-15.05%), PTCA (-11.11%) and wound debridement (-9.69%). In addition, significant cost increases were observed for gastrostomy (5.51%), colorectal resection (4.06 %), and exploratory laparotomy (30.72 %). Substantial treatment innovation occurred with respect to surgical procedures utilized for colorectal resection. Conclusions: In 2 out of 11 surgical classes, the quality of surgical care improved while treatment costs declined. Four other surgical classes exhibited either a cost decrease or quality improvement. While cost increased for 3 other surgical classes, only 1 of them was associated with improved quality of care. In the remaining 2 surgical classes, there was no significant change in quality or cost. These trends were associated with measurable innovation in treatment for only one surgical class.

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