Abstract
Background:
Total joint arthroplasty (TJA) accounts for more Medicare expenditure than any other inpatient procedure. The Comprehensive Care for Joint Replacement model was introduced to decrease cost and improve quality in TJA. The largest portion of episode-of-care costs occurs after discharge. This study sought to quantify the cost variation of primary total hip arthroplasty (THA) according to discharge disposition.
Methods:
The Medicare and Humana claims databases were used to extract charges and reimbursements to compare day-of-surgery and 91-day postoperative costs simulating episode-of-care reimbursements. Of the patients who underwent primary THA, 257,120 were identified (204,912 from Medicare and 52,208 from Humana). Patients were stratified by discharge disposition: home with home health, skilled nursing facility, or inpatient rehabilitation facility.
Results:
There is a significant difference in the episode-of-care costs according to discharge disposition, with discharge to an inpatient rehabilitation facility the most costly and discharge to home the least costly.
Conclusion:
Postdischarge costs represent a sizeable portion of the overall expense in THA, and optimizing patients to allow safe discharge to home may help reduce the cost of THA.
Keywords: total hip arthroplasty, postdischarge cost, cost-effectiveness, inpatient rehabilitation facility, skilled nursing facility, home health
Total hip arthroplasty (THA) is one of the most frequently performed procedures in the United States, and the incidence is projected to rise exponentially over the next 2 decades [1]. Despite being a cost-effective [2–4] and reliable option for regaining motion and improving lifestyle [5], the marked increase in the number of THAs performed annually will have an enormous economic impact on the health care system, which currently accounts for more Medicare expense than any other inpatient procedure [6]. The Comprehensive Care for Joint Replacement (CJR) model was developed to improve the value of total joint arthroplasty (TJA), seeking to decrease cost and improve quality of care. Previous studies have evaluated aspects of care that influence cost [1,7,8], introducing novel reduction strategies including the following: decreasing lengths-of-stay, same-day discharge with additional home physical therapy visits [9,10], quicker recovery strategies [11], multimodal pain management, and more frequent outpatient visits to help reduce the risk of readmission [12–17]. Postdischarge costs after primary THA have been frequently ignored despite being a considerable portion of the total episode payment and having significant variation between patients and procedures [18,19]. This study sought to analyze and quantify the cost variation after primary THA according to discharge disposition to either home with home health, a skilled nursing facility (SNF), or an inpatient rehabilitation facility (IRF) using both the Medicare patient record database and a private payer (Humana) claims database. We hypothesize that the episode-of-care costs for patients discharged to home after primary THA are significantly less than for those patients discharged to an SNF or IRF.
Methods
We conducted a retrospective case-control study, level of evidence III, by analyzing the Standard Analytical Files from Medicare and the Humana private payer insurance database. The Medicare Standard Analytical Files contain 100% of Medicare patients’ records. Study subjects were identified through the International Classification of Diseases, Ninth Revision, codes. We excluded hemiarthroplasties and revision surgeries as the cost of these has been reported to vary widely compared with primary THA [20]. Patients were stratified into 3 groups according to discharge disposition: (1) home with home health, (2) SNF, or (3) IRF. Medicare database coding was only performed for the years 2011 and 2012, as prior years did not have the discharge coding of interest. Patient demographics were extracted and compared. Cost analysis was performed based on both charges and reimbursements. Reimbursements were available for both Medicare and Humana. However, charges were only available for Medicare patients. Examining the Humana database and comparing it with Medicare allows for a more accurate assessment of what hospitals are being reimbursed from private payers after THA. Moreover, the added benefit of including the Humana database is not only in having the ability to compare the difference in reimbursements between Medicare and a private payer, but also in having a greater sample size which increases the overall power of the study.
Independent analyses were performed to examine both day-of-surgery cost as well as the entire episode-of-care cost (ie, day of surgery + 90 days postoperatively) to simulate an entire episode-of-care payment as put forth by the CJR model. A reimbursement-to-charge ratio was also calculated based on charges data from the Medicare database only, while reimbursements were available from both data sets. We hypothesized that beneficiaries incur in the same amount of charges regardless of insurance provider (Medicare or private insurance). Statistical analysis was conducted through a 1-way analysis of variance for normally distributed data. A P value <.05 was considered statistically significant. Post hoc analysis was also performed between the groups with the Tukey test. The software SPSS, version 20, (IBM, Armonk, NY) was used for statistical analysis.
Results
A cohort representative of 204,912 patients who underwent THA between 2011 and 2012 was identified within the Medicare database. An additional 52,208 patients who underwent primary THA were identified through the Humana data set between 2007 and 2015 (Table 1).
Table 1.
Demographic Description of Patients.
| Humana Demographics | SNF | Home | In-Patient Rehab |
|---|---|---|---|
| 25–29 | 0 | 29 | 0 |
| 30–34 | 0 | 77 | 0 |
| 35–39 | 14 | 130 | 12 |
| 40–44 | 48 | 271 | 27 |
| 45–49 | 135 | 673 | 50 |
| 50–54 | 364 | 1408 | 115 |
| 55–59 | 721 | 2164 | 175 |
| 60–64 | 1215 | 2759 | 288 |
| 65–69 | 3380 | 6311 | 611 |
| 70–74 | 4385 | 5950 | 696 |
| 75–79 | 4491 | 3861 | 626 |
| 80–84 | 3665 | 1854 | 486 |
| 85–89 | 1287 | 372 | 115 |
| 90 | 1388 | 235 | 261 |
| Midwest | 6887 | 6224 | 657 |
| Northeast | 542 | 748 | 122 |
| South | 11,473 | 16,156 | 2353 |
| West | 1876 | 2561 | 325 |
| Total | 20,778 | 25,689 | 3457 |
| Medicare Demographics | SNF | Home | In-Patient Rehab |
| <65 | 7280 | 11,350 | 3276 |
| 65–69 | 14,208 | 28,750 | 4962 |
| 70–74 | 16,221 | 22,015 | 5431 |
| 75–79 | 18,181 | 14,820 | 5894 |
| 80–84 | 17,479 | 7558 | 5483 |
| 85 | 12,534 | 2467 | 4698 |
| Midwest | 25,477 | 18,076 | 5344 |
| Northeast | 18,860 | 15,350 | 8716 |
| South | 27,142 | 37,050 | 12,414 |
| West | 14,176 | 16,225 | 3205 |
| Female | 60,159 | 47,603 | 20,122 |
| Male | 25,485 | 39,075 | 9557 |
| 2011 | 42,567 | 42,309 | 15,388 |
| 2012 | 44,249 | 45,811 | 14,588 |
| Total patients | 86,816 | 88,120 | 29,976 |
Rehab, rehabilitation; SNF, skilled nursing facility.
Medicare Charges
For Medicare patients, the mean day-of-surgery charges varied significantly (P < .001) between the 3 discharge disposition locations: $55,246 for patients discharged to home, $58,702 for patients discharged to an SNF, and $63,636 for patients discharged to an IRF. Comparably, the episode-of-care charges showed a similar trend: $61,972 for discharge to home, $70,163 to SNF, and $99,627 to IRF (Table 2).
Table 2.
Comparison Between Day-of-surgery and Episode-of-care Charges to Medicare Following Primary THA per Discharge Disposition.
| SNF | Home | IRF | |
|---|---|---|---|
| Day of surgery charges to Medicare ($) | |||
| Average charge | 58,702 | 55,246 | 63,636 |
| Median charge | 49,961 | 48,495 | 54,796 |
| Episode-of-care charges to Medicare ($) | |||
| Average charge | 70,163 | 61,972 | 99,627 |
| Median charge | 55,294 | 51,894 | 82,177 |
IRF, inpatient rehabilitation facility; SNF, skilled nursing facility.
Medicare Reimbursements
Among Medicare patients, average day-of-surgery reimbursement varied significantly (P < .01) when compared between discharge dispositions (Table 3). Patients discharge to home had a reimbursement mean of $10,171 (standard deviation [SD], $25), which was significantly less than either discharge to an SNF $11,855 (SD, $46) or to an IRF $12,293 (SD, $7; P < .05). Discharge to an SNF was also significantly less costly than discharge to an IRF (P < .05). Episode-of-care reimbursements (day of surgery + 90 days post-operatively) varied significantly as well (P < .001) between the different discharge dispositions (Table 3). Discharge to home was reimbursed at a mean of $11,592 (SD, $33), $14,544 (SD, $215) to an SNF, and $25,284 (SD, $524) to an IRF. Post hoc analysis demonstrated that discharge to home was significantly less costly than discharge to an SNF or IRF (P < .05 for both), and that SNF remained significantly less costly than IRF (P < .05).
Table 3.
Comparison Between Day-of-surgery and Episode-of-care Reimbursements by Medicare Following Primary THA per Discharge Disposition.
| SNF | Home | IRF | |
|---|---|---|---|
| Mean day-of-surgery reimbursements by Medicare ($) | |||
| 2011 | 11,822 | 10,189 | 12,288 |
| 2012 | 11,887 | 10,153 | 12,298 |
| Mean | 11,855 | 10,171 | 12,293 |
| SD | 46 | 25 | 7 |
| Mean episode-of-care reimbursements (day of surgery + 90 d postoperatively) by Medicare ($) | |||
| 2011 | 14,393 | 11,569 | 24,914 |
| 2012 | 14,696 | 11,615 | 25,655 |
| Mean | 14,545 | 11,592 | 25,284 |
| SD | 215 | 33 | 524 |
IRF, inpatient rehabilitation facility; SD, standard deviation; SNF, skilled nursing facility
Private Payer Insurance (Humana) Reimbursements
Among the private payer data set, the mean day-of-surgery reimbursement for patients discharged to home was $15,848 (SD, $760), which was not significantly different than those discharged to an SNF $15,218 (SD, $1063; P = .29). In contrast, the mean day-of-surgery reimbursement for patients discharged to an IRF was $17,889 (SD, $1670), which was significantly higher than discharge to either home or an SNF (P < .05 for both). Episode-of-care reimbursements (day of surgery + 90 days postoperatively) also varied significantly between the 3 groups (Table 4). The mean reimbursement for patients discharged to home was $20,838 (SD, $746), which was significantly less than those discharged to an SNF $26,643 (SD, $1080; P < .01), or those discharged to an IRF $31,483 (SD, $2263; P < .01). Post hoc analysis also demonstrated that patients discharged to an SNF had significantly lower reimbursements overall compared with patients discharged to an IRF (P < .01).
Table 4.
Humana Reimbursements
| Mean Day-of-Surgery Reimbursements by Humana | |||
|---|---|---|---|
| Mean Per Surgery | SNF ($) | Home ($) | IRF ($) |
| Total reimbursement | 322,182,642 | 415,878,420 | 62,036,144 |
| 2007 | 16,329 | 17,253 | 19,584 |
| 2008 | 16,707 | 16,066 | 19,403 |
| 2009 | 16,212 | 15,923 | 18,644 |
| 2010 | 15,711 | 15,922 | 17,145 |
| 2011 | 14,850 | 15,403 | 16,830 |
| 2012 | 14,687 | 15,217 | 16,869 |
| 2013 | 14,525 | 15,386 | 18,017 |
| 2014 | 14,396 | 15,611 | 16,623 |
| 2015 | 13,548 | 14,455 | 14,177 |
| Mean | 15,218 | 15,848 | 17,889 |
| SD | 1063 | 760 | 1670 |
| Mean Episode-of-Care Reimbursements by Humana | |||
| Mean Per Surgery | SNF ($) | Home ($) | In-Patient Rehab ($) |
| Total reimbursement | 576,191,630 | 554,466,826 | 111,517,838 |
| 2007 | 25,083 | 22,361 | 31,144 |
| 2008 | 27,310 | 20,947 | 31,294 |
| 2009 | 27,233 | 21,327 | 33,643 |
| 2010 | 27,643 | 21,197 | 33,340 |
| 2011 | 27,324 | 20,412 | 33,556 |
| 2012 | 27,045 | 20,440 | 32,296 |
| 2013 | 26,853 | 20,254 | 32,054 |
| 2014 | 26,752 | 20,799 | 29,303 |
| 2015 | 24,541 | 19,806 | 26,721 |
| Mean | 26,643 | 20,838 | 31,483 |
| SD | 1080 | 746 | 2263 |
Total reimbursement is subject to differences in sample size between the 3 groups. IRF, inpatient rehabilitation facility; Rehab, rehabilitation; SD, standard deviation; SNF, skilled nursing facility.
Reimbursements-to-Charge Ratio
Within the Medicare data set, the reimbursement-to-charge ratio for day-of-surgery was 49% for patients discharged to home, 44% for patients discharged to an SNF, and 39% for patients discharged to an IRF. The reimbursement-to-charge ratio for day-of-surgery in the Humana database was 76% for patients discharged to home, and 57% for both SNF and IRF. The reimbursement-to-charge ratio for the episode of care (day of surgery + 90 days postoperatively) among Medicare patients was 19% for patients discharged to home, 21% for patients discharged to an SNF, and 25% for those discharged to an IRF. The reimbursement-to-charge ratio for the episode of care in the Humana data set, was 32% for patients discharged to an IRF, 34% for patients discharged to home, and 38% for patients discharged to an SNF (Table 5).
Table 5.
Reimbursement-to-Charge Ratios.
| THA Episode-of-Care Cost | SNF | Home | IRF |
|---|---|---|---|
| Mean charges for primary THA ($) | 70,163 | 61,972 | 99,627 |
| Mean reimbursements from Medicare ($) | 14,545 | 11,592 | 25,284 |
| Mean reimbursements from Humana ($) | 26,643 | 20,838 | 31,483 |
| Percentage reimbursed from Medicare | 21 | 19 | 25 |
Mean charges and reimbursements data include day of surgery + 91-d postoperative global period.
IRF, inpatient rehabilitation facility; SNF, skilled nursing facility; THA, total hip arthroplasty
Discussion
The number of THAs performed annually is predicted to increase exponentially over the next 2 decades [1]. Although THA is a cost-effective procedure, it represents a sizable portion of overall health care expenditure in the United States [6]. Efforts to contain cost without compromising quality by the Center for Medicare and Medicaid Services include the Bundled Payment for Care Improvement initiative and the CJR model [21,22]. Lavernia et al [23] demonstrated that cost associated with THA can be divided into 4 categories: preoperative, intraoperative, immediate post-operative, and postdischarge. Examples of cost in the preoperative phase include time lost from work, physician visits, medical optimization, physical therapy sessions, and imaging costs [24]. Intraoperatively, cost-effectiveness studies have focused on improving surgical techniques, decreasing duration of surgery, and reducing implant cost [25–28]. Postoperative cost analyses have mainly focused on the cost of complications requiring emergency room visits, medical workup, readmissions, and revision surgery [17,29,30].
Within the postdischarge costs, the cost associated with various discharge dispositions after primary THA has received limited attention [31,32], despite being a large portion of the overall bundle. The results of this study demonstrate a significant difference in the day-of-surgery and the entire episode-of-care (day of surgery + 90 days postoperative) costs between different discharge dispositions. There is a significant increase in both day of surgery and 90-day postoperative cost when patients are discharged to an IRF or an SNF, compared with discharge to home, with discharge to an IRF being the most costly. This study found the 90-day global period reimbursements among patients discharged to an IRF were 151% (mean, $31,483) of those who were discharged home (mean, $20,838), and 118% of those who were discharged to an SNF (mean, $26,643). Our cost findings are similar to data published by Bozic et al [33], who reported THA cost an average of $24,170.
Appreciating the financial impact of postoperative cost, Slover et al [34] performed a cost analysis study to evaluate strategies for minimizing after-care costs after TJA and concluded that the cost of additional acute care hospital days was relatively small compared with an extended postacute IRF stay. By keeping patients in the hospital a few extra days and then discharging them directly to home, they decreased overall costs when compared with discharge after a shorter hospital stay to an expensive postacute care facility. There is a fine balance in the optimal duration of stay; however, as the same group also published an article identifying length of stay >4 days was a significant risk factor for unplanned readmission within 90 days in a Medicare population [35]. Although the ideal inpatient length of stay remains unclear, the cost savings associated with discharge to home, as opposed to an IRF or SNF are clear, and some studies suggest that there is no impact on patient outcomes [36].
This study sought to identify the influence of discharge disposition on 90-day costs after primary THA. We did not assess the influence of discharge disposition specifically on postoperative outcomes or complications, which should be the subject of future studies. Perhaps the most relevant of these postoperative outcomes, in terms of financial impact and impact on the patient, is readmission. Prior studies have evaluated this topic and found that discharge to a higher level of care is associated with a higher rate of readmissions [37]. Along this line, readmissions are a huge cost driver, with medical- and procedural-related readmissions costing an average of $11,682 and $27,979, respectively [29] A study by Kurtz et al [38] also identified readmission as a primary cost driver and concluded that nearly half of the total annual economic burden in the United States for readmissions after TJA was for a medical reason and unrelated to the joint arthroplasty procedure. Preoperatively identifying variables associated with increased cost can improve care pathways and perioperative optimization, particularly in the era of bundled payments. Using the results of this study, hospital systems may justify expenditures on more aggressive preoperative optimization of high-cost comorbidities, which has the potential of reducing the overall cost and risk of postoperative complications.
Another strategy to reduce cost may be outpatient primary THA. Goyal et al [39], demonstrated that there was no significant difference in complication rates after outpatient primary THA compared with conventional THA, suggesting that the procedure can be performed safely in well-selected patients with reduced cost. Similarly, Iorio et al [40] suggested that perioperative optimization and selection of ideal outpatient candidates can result in economic savings in a bundle payment model. Slover [41], directed the attention to including postdischarge costs in the bundle as it is a considerable portion of the costs after THA and further demonstrated the value of the 90-day cost studies. Although this topic remains controversial, our findings offer additional data to help improve such cost-effectiveness studies [41–44]. The results of this study also demonstrate that reimbursement-to-charge ratios vary significantly by payer. Reimbursements for Medicare patients discharged to an IRF were 25% of the charges, while the reimbursements for patients with a private payer insurance were 32% of the charges. Similarly, reimbursements for Medicare patients discharged to an SNF were 21% of the charges, while the reimbursements for patients with a private insurance were 38%. These differences confirm the notion that there is a significant discrepancy in the reimbursement patterns. Although there is paucity of information in the literature discussing the discrepancy between charges and reimbursements [45], our analysis does not provide sufficient evidence to make any meaningful conclusions on this highly controversial topic. However, we hope that these preliminary data encourage future investigation of this topic.
Despite the strengths of using large, national databases for epidemiologic research [46], our study has several limitations. Like all large databases, the data used in this study are subject to coding error or error in data entry [47]. Certain patient factors, such as comorbidities, were not analyzed, which have been shown to impact the cost of THA [19]. Nonetheless, the comprehensive analysis of the most common payer for THA (Medicare) and a nationwide payer (Humana) provide the literature with a large sample size with concomitant data on costs that are currently of limited availability in the literature.
In conclusion, this study elucidates the postdischarge cost variation among patients undergoing primary THA based on discharge disposition. Patients who are discharged to IRFs incur significantly higher costs than patients discharged to home. Furthermore, reimbursements remain considerably lower than charges, and reimbursements from a private payer are higher than that of Medicare.
Footnotes
Investigation was performed at the Department of Orthopaedics and Rehabilitation, University of Miami, Miami, FL.
One or more of the authors of this paper have disclosed potential or pertinent conflicts of interest, which may include receipt of payment, either direct or indirect, institutional support, or association with an entity in the biomedical field which may be perceived to have potential conflict of interest with this work. For full disclosure statements refer to http://dx.doi.org/10.1016/j.arth.2017.04.062.
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