Hospital economics of primary THA decreasing reimbursement and increasing cost, 1990 to 2008

Adam J Rana, Richard Iorio, William L Healy
Clinical Orthopaedics and related Research 2011, 469 (2): 355-61

BACKGROUND: The introduction of new technology has increased the hospital cost of THA. Considering the impending epidemic of hip osteoarthritis in the United States, the projections of THA prevalence, and national cost-containment initiatives, we are concerned about the decreasing economic feasibility of hospitals providing THA.

QUESTIONS/PURPOSES: We compared the hospital cost, reimbursement, and profit/loss of THA over the 1990 to 2008 time period.

METHODS: We reviewed the hospital accounting records of 104 patients in 1990 and 269 patients in 2008 who underwent a unilateral primary THA. Hospital revenue, hospital expenses, and hospital profit (loss) for THA were evaluated and compared in 1990, 1995, and 2008.

RESULTS: From 1990 to 2008, hospital payment for primary THA increased 29% in actual dollars, whereas inflation increased 58%. Lahey Clinic converted a $3848 loss per case on Medicare fee for service, primary THA in 1990 to a $2486 profit per case in 1995 to a $2359 profit per case in 2008. This improvement was associated with a decrease in inflation-adjusted revenue from 1995 to 2008 and implementation of cost control programs that reduced hospital expenses. Reduction of length of stay and implant costs were the most important drivers of expense reduction. In addition, the managed Medicare patient subgroup reported a per case profit of only $650 in 2008.

CONCLUSIONS: If hospital revenue for THA decreases to managed Medicare levels, it will be difficult to make a profit on THA. The use of technologic enhancements for THA add to the cost problem in this era of healthcare reform. Hospitals and surgeons should collaborate to deliver THA at a profit so it will be available to all patients. Government healthcare administrators and health insurance payers should provide adequate reimbursement for hospitals and surgeons to continue delivery of high-quality THAs.

LEVEL OF EVIDENCE: Level III, economic and decision analysis. See Guidelines for Authors for a complete description of levels of evidence.

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