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The effect of payer type on orthopaedic practice expenses
Mark R Brinker1, Daniel P O'Connor, G William Woods
1Center for Musculokeletal Research and Outcomes Studies, Fondren Orthopedic Group, Texas Orthopedic Hospital, Houston, Texas 77030, USA. brinker@fondren.com
The Journal of Bone and Joint Surgery. American Volume
|October 16, 2002
Summary
Orthopaedic practice expenses vary significantly by payer type, with Workers' Compensation incurring the highest costs. Non-value-added activities drive these differences, highlighting administrative inefficiencies.
Area of Science:
- Orthopaedic surgery
- Healthcare economics
- Health services research
Background:
- Orthopaedic practice expenses encompass costs incurred by physician practices for patient treatment.
- Certain payer types are suspected to increase these expenses through administrative burdens.
- This study investigated variations in orthopaedic practice expenses based on payer type.
Purpose of the Study:
- To test the hypothesis that orthopaedic practice expenses differ significantly across various payer types.
- To quantify the impact of different payers on the overall cost of orthopaedic care.
- To identify which aspects of practice expenses (value-added vs. non-value-added) are most affected by payer type.
Main Methods:
- Activity-based costing was employed to collect data on orthopaedic practice expenses for 518 patients with sports-related knee conditions.
- Employee time spent on 17 specific orthopaedic activities was recorded and categorized as value-added or non-value-added.
- Data collection continued until patient discharge and financial settlement, encompassing all costs per episode of care.
- Expenses were compared across six payer types: self-pay, indemnity, Medicare, HMO/POS, PPO, and Workers' Compensation.
Main Results:
- Significant differences in orthopaedic practice expenses were observed among payer types (p = 0.0000000004).
- Total practice expenses per episode of care ranged from $123 (self-pay) to $299 (Workers' Compensation).
- These variations persisted after controlling for patient age, gender, treatment type, and office visit frequency.
- Non-value-added activity expenses showed greater variation across payer types than value-added expenses.
Conclusions:
- Payer type is a significant determinant of orthopaedic practice expenses.
- Non-value-added activities, often linked to administrative tasks, disproportionately contribute to cost variations among payers.
- Understanding these payer-driven cost differences is crucial for optimizing orthopaedic practice management and financial strategies.