Opportunities for control of hospital cost for total knee arthroplasty

The hospital financial records of 120 consecutive patients who underwent unilateral knee replacement surgery at one hospital during 1995 were reviewed to determine opportunities for control of hospital cost for total knee arthroplasty. The average hospital length of stay for these patients was 4.27 days (range, 3-10 days). The average hospital cost was $10,231. All 120 patients were classified under Diagnosis Related Group 209, principle procedure 81.54 primary total knee arthroplasty. Medicare paid for 70% of the patients. All payers were profitable except Medicaid and one managed care organization. When hospital cost for total knee arthroplasty was allocated to hospital service centers, 78% of the cost was attributed to the operating room, nursing units, recovery room, and pharmacy. When hospital cost for total knee arthroplasty was allocated to hospital days, 80% of the hospital cost occurred during the first 48 hours of hospitalization. Hospital reimbursement for total knee arthroplasty is primarily a prospective case price payment system. After initial cost containment efforts reduce the hospital length of stay for total knee arthroplasty to 4 to 6 days, additional control of hospital cost should focus on these areas of opportunity.