Trends in Revenue, Cost, and Contribution Margin for Total Joint Arthroplasty 2011-2021

Regulatory change has created a growing demand to decrease the hospital costs associated with primary total joint arthroplasty (TJA). Concurrently, the removal of lower extremity TJA from the in-patient only list has affected hospital reimbursement. The purpose of this study is to investigate trends in hospital revenue versus costs in primary TJA.

We retrospectively reviewed all patients who underwent primary TJA from June 2011 to May 2021 at our institution. Patient demographics, revenue, total cost, direct cost, and contribution margin were collected. Changes over time as a percentage of 2011 numbers were analyzed. Linear regression analysis was used to determine overall trend significance and develop projection models.

Total knee arthroplasty (TKA) insured by government-managed/Medicaid (GMM) plans showed a significant upward trend (P = .013) in total costs. Direct costs of TKA across all insurance providers (P = .001 and P < .001) and total hip arthroplasty (THA) for Medicare (P = .009) and GMM (P = .001) plans demonstrated significant upward trends. Despite this, 2011-2021 modeling found no significant change in contribution margin for TKA and THA covered under all insurance plans. However, models based on 2018-2021 financial data demonstrated a significant downward trend in contribution margin across Medicare (P < .001) and GMM (P < .001) insurers for both TKA and THA.

Physician-led innovation in cost-saving strategies has maintained contribution margin over the past decade. However, the increase in direct costs seen over the past few years could lead to negative contribution margins over time, if further efficiency and cost-saving measures are not developed.

Retrospective Cohort Study.