OBJECTIVES: U.S. hospitals have improved their productivity in recent years, but the drivers of these gains are unclear. This study investigates the potential contribution of surgical care, documenting trends in quality, cost and productivity and exploring innovation in treatment among Medicare beneficiaries from 2002 through 2013. 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 outcomes among Medicare beneficiaries receiving these procedures during hospital stays. Outcomes include 30-day survival and the avoidance of unplanned readmissions; outcomes and costs are adjusted for patient severity based on demographics, comorbidities, and community context. Productivity is measured by the ratio of the number of high-quality stays (survival without readmissions) to total hospital costs. Surgical innovations are operationalized as clinically distinctive procedures with nonexistent or limited use in 2002, identified using ICD-9 procedure codes. RESULTS: Preliminary analysis finds significant and positive productivity growth for 5 surgical classes, tracheostomy 4.96% per year), wound debridement (2.09%), small bowel resection (0.77%), excision of lysis peritoneal adhesions (0.49%), and colorectal resection (0.44%). For each of these surgical classes, the rate of 30-day survival without an unplanned readmission increased from 2002 to 2013, while inflation-adjusted treatment costs decreased. Substantial treatment innovation occurred with respect to surgical procedures utilized for colorectal resection. CONCLUSIONS: In 5 out of 11 surgical classes, the quality of surgical care improved while treatment costs declined, thus contributing to improved productivity among U.S. hospitals. However, these trends were associated with measurable innovation in treatment for only 1 surgical class.