High-volume Arthroplasty Centers Are Associated With Lower Hospital Costs When Performing Primary THA and TKA: A Database Study of 288,909 Medicare Claims for Procedures Performed in 2019

BACKGROUND: With bundled payments and alternative reimbursement models expanding in scope and scale, reimbursements to hospitals are declining in value. As a result, cost reduction at the hospital level is paramount for the sustainability of profitable inpatient arthroplasty practices. Although multiple prior studies have investigated cost variation in arthroplasty surgery, it is unknown whether contemporary inpatient arthroplasty practices benefit from economies of scale after accounting for hospital characteristics and patient selection factors. Quantifying the independent effects of volume-based cost variation may be important for guiding future value-based health reform. QUESTIONS/PURPOSES: We performed this study to (1) determine whether the cost incurred by hospitals for performing primary inpatient THA and TKA is independently associated with hospital volume and (2) establish whether length of stay and discharge to home are associated with hospital volume. METHODS: The primary data source for this study was the Medicare Provider Analysis and Review Limited Data Set, which includes claims data for 100% of inpatient Medicare hospitalizations. We included patients undergoing primary elective inpatient THA and TKA in 2019. Exclusion criteria included non-Inpatient Prospective Payment System hospitalizations, nonelective admissions, bilateral procedures, and patients with cancer of the pelvis or lower extremities. A total of 500,658 arthroplasties were performed across 2762 hospitals for 492,262 Medicare beneficiaries during the study period; 59% (288,909 of 492,262) of procedures were analyzed after the exclusion criteria were applied. Most exclusions (37% 182,733 of 492,262) were because of non-Inpatient Prospective Payment System hospitalizations. Among the study group, 87% (251,996 of 288,909) of procedures were in patients who were 65 to 84 years old, 88% (255,415 of 288,909) were performed in patients who were White, and 63% (180,688 of 288,909) were in patients who were women. Elixhauser comorbidities and van Walraven indices were calculated as measures of patient health status. Hospital costs were estimated by multiplying cost-to-charge ratios obtained from the 2019 Impact File by total hospital charges. This methodology enabled us to use the large Medicare Provider Analysis and Review database, which helped decrease the influence of random cost variation through the law of large numbers. Hospital volumes were calculated by stratifying claims by national provider identification number and counting the number of claims per national provider identification number. The data were then grouped into bins of increasing hospital volume to more easily compare larger-volume and smaller-volume centers. The relationship between hospital costs and volume was analyzed using univariable and multivariable generalized linear models. Results are reported as exponential coefficients, which can be interpreted as relative differences in cost. The impact of surgical volume on length of stay and discharge to home was assessed using binary logistic regression, considering the nested structure of the data, and results are reported as odds ratios (OR). RESULTS: Hospital cost and mean length of stay decreased, while rates of discharge to home increased with increasing hospital volume. After controlling for potential confounding variables such as patient demographics, health status, and geographic location, we found that inpatient arthroplasty costs at hospitals with 10 or fewer, 11 to 100, and 101 to 200 procedures annually were 1.32 (95% confidence interval CI 1.30 to 1.34; p < 0.001), 1.17 (95% CI 1.17 to 1.17; p < 0.001), and 1.10 (95% CI 1.10 to 1.10; p < 0.001) times greater than those of hospitals with 201 or more inpatient procedures annually. In addition, patients treated at smaller-volume hospitals had increased odds of experiencing a length of stay longer than 2 days (OR 1.25 to 3.44 95% CI 1.10 to 4.03; p < 0.001) and decreased odds of being discharged to home (OR 0.34 to 0.78 95% CI 0.29 to 0.86; p < 0.001). CONCLUSION: Higher-volume hospitals incur lower costs, shorter lengths of stay, and higher rates of discharge to home than lower-volume hospitals when performing inpatient THA and TKA. These findings suggest that small and medium-sized regional hospitals are disproportionately impacted by declining reimbursement and may necessitate special treatment to remain viable as bundled payment models continue to erode hospital payments. Further research is also warranted to identify the key drivers of this volume-based cost variation, which may facilitate quality improvement initiatives at the hospital and policy levels.