Variation in the cost of care for primary total knee arthroplasties

BACKGROUND: The study examined the cost variation across 29 high-volume US hospitals and their affiliated orthopaedic surgeons for delivering a primary total knee arthroplasty without major complicating conditions. The hospitals had similar patient demographics, and more than 80% of them had statistically-similar Medicare risk-adjusted readmission and complication rates. METHODS: Hospital and physician personnel costs were calculated using time-driven activity-based costing. Consumable supply costs, such as the prosthetic implant, were calculated using purchase prices, and postacute care costs were measured using either internal costs or external claims as reported by each hospital. RESULTS: Despite having similar patient demographics and readmission and complication rates, the average cost of care for total knee arthroplasty across the hospitals varied by a factor of about 2 to 1. Even after adjusting for differences in internal labor cost rates, the hospital at the 90th percentile of cost spent about twice as much as the one at the 10th percentile of cost. CONCLUSIONS: The large variation in costs among sites suggests major and multiple opportunities to transfer knowledge about process and productivity improvements that lower costs while simultaneously maintaining or improving outcomes.