High-volume Arthroplasty Centers Are Associated With Lower Hospital Costs When Performing Primary THA and TKA: A Database Study of 288,909 Medicare Claims for Procedures Performed in 2019

Abstract

BackgroundWith bundled payments and alternative reimbursement models expanding in scope and scale, reimbursements to hospitals are declining in value. As a result, cost reduction at the hospital level is paramount for the sustainability of profitable inpatient arthroplasty practices. Although multiple prior studies have investigated cost variation in arthroplasty surgery, it is unknown whether contemporary inpatient arthroplasty practices benefit from economies of scale after accounting for hospital characteristics and patient selection factors. Quantifying the independent effects of volume-based cost variation may be important for guiding future value-based health reform.Questions/purposesWe performed this study to (1) determine whether the cost incurred by hospitals for performing primary inpatient THA and TKA is independently associated with hospital volume and (2) establish whether length of stay and discharge to home are associated with hospital volume.MethodsThe primary data source for this study was the Medicare Provider Analysis and Review Limited Data Set, which includes claims data for 100% of inpatient Medicare hospitalizations. We included patients undergoing primary elective inpatient THA and TKA in 2019. Exclusion criteria included non–Inpatient Prospective Payment System hospitalizations, nonelective admissions, bilateral procedures, and patients with cancer of the pelvis or lower extremities. A total of 500,658 arthroplasties were performed across 2762 hospitals for 492,262 Medicare beneficiaries during the study period; 59% (288,909 of 492,262) of procedures were analyzed after the exclusion criteria were applied. Most exclusions (37% [182,733 of 492,262]) were because of non–Inpatient Prospective Payment System hospitalizations. Among the study group, 87% (251,996 of 288,909) of procedures were in patients who were 65 to 84 years old, 88% (255,415 of 288,909) were performed in patients who were White, and 63% (180,688 of 288,909) were in patients who were women. Elixhauser comorbidities and van Walraven indices were calculated as measures of patient health status. Hospital costs were estimated by multiplying cost-to-charge ratios obtained from the 2019 Impact File by total hospital charges. This methodology enabled us to use the large Medicare Provider Analysis and Review database, which helped decrease the influence of random cost variation through the law of large numbers. Hospital volumes were calculated by stratifying claims by national provider identification number and counting the number of claims per national provider identification number. The data were then grouped into bins of increasing hospital volume to more easily compare larger-volume and smaller-volume centers. The relationship between hospital costs and volume was analyzed using univariable and multivariable generalized linear models. Results are reported as exponential coefficients, which can be interpreted as relative differences in cost. The impact of surgical volume on length of stay and discharge to home was assesse...

CORR Insights®: High-volume Arthroplasty Centers Are Associated With Lower Hospital Costs When Performing Primary THA and TKA: A Database Study of 288,909 Medicare Claims for Procedures Performed in 2019

“…In this issue of Clinical Orthopaedics and Related Research ® , Blackburn et al [2] addressed this evidence gap by using Medicare 2019 claims data on 288,909 inpatient THAs and TKAs. Blackburn et al’s [2] study is particularly meaningful because it used recent data, aimed to estimate the true cost and not Medicare payments, and adjusted for a variety of potential confounders, including standard patient demographics, other hospital variables (including hospital geographic location, setting, teaching status, and resident-to-bed ratio), and patient comorbidity burden. The authors point out that various mechanisms may underlie cost savings in higher-volume centers, including streamlined care pathways, leading to more efficient care processes; lower cost as a function of fewer complications (and thus shorter length of stay) because of a more favorable volume–outcome relationship; or hospitals’ greater bargaining power in negotiating more favorable implant pricing with vendors, because implant costs represent a significant portion of arthroplasty total costs [3].…”

“…The study by Blackburn et al [2] provides some important initial insights into economies of scale in relation to arthroplasty volume and cost. Based on these findings, hospitals or health systems—especially those at risk of financial losses because of the aforementioned developments—might think of strategies to increase arthroplasty volume through various mechanisms.…”

“…Third, it is prudent to explore the implications of a potentially real volume–cost relationship in arthroplasty care. Blackburn et al [2] specifically noted that smaller-volume hospitals may benefit from increasing surgical volume, and from a policy perspective, may be disproportionately affected by declining reimbursement and require special considerations in bundled payment designs. Studies focusing on specific volume thresholds—other than numerically appealing cutoffs based on units of tens or hundreds—to thoughtfully increase arthroplasty volume, and studies weighing the implications of increased volume in terms of access to care (with, for example, consolidation that could result in longer travel time for patients) against lower arthroplasty costs will be important to further refine this ongoing discussion.…”

“…Fourth, it is currently unclear to what extent participation in bundled payment programs could impact arthroplasty volume–cost relationships. A focus is warranted on the role of volume in discharge destination because savings related to bundled payments have been mainly attributed to reductions in postacute care use [1]; moreover, Blackburn et al [2] describe home discharge rates almost three times as high in the highest-volume as in the lowest-volume hospitals.…”

“…In this example, after a case stratification strategy was implemented, increases in arthroplasty volume coincided with greater efficiency and improved net margins. In addition to these important practical implications, Blackburn et al's study [2] also raises important questions and exciting opportunities for future research that may further elucidate volume-cost mechanisms in this context.…”