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Archive July 2018 XIX, No. 7

5 Strategies to Reduce Total Knee Costs

Bundling is coming — here's how to achieve efficiency and control costs.

Joey Gilbride


Knee Surgery
TOTAL KNEE ECONOMICS It's critical to balance the costs that come with the skyrocketing demand for total joint replacements.

All the predictions are coming true. Outpatient total knee replacements are becoming more prevalent as they prove to be a safe and efficient ambulatory procedure. Some say it's only a matter of time before CMS begins reimbursing for outpatient total knees. With experts predicting the demand for total knee replacements will increase by 700% by 2030, there are great opportunities for those facilities that focus on delivering excellent care and reducing the costs associated with this expensive procedure.

In order to develop a total knee program that delivers great patient care with an eye toward economizing and efficiency, it's important to examine where there's wastefulness or redundancy in your facility, both in the OR and the business office. Consider these 5 methods to increase efficiency and trim costs.

1. Negotiate bundled payments

The most profitable way to actually see the money you save is to use a bundled payments system, says David Uba, MBA, CEO of Excelsior Orthopaedics in Amherst, N.Y. To negotiate a price that will set you up for the best profit margin, investigate payers' current pricing for an episode of care in the fee-for-service model.

"You start with the greatest volume payer [in your market]," says Mr. Uba. "Try to figure out what their hospital DRGs are for those cases you want to include in your program." Next, add up the costs of each component of care, which you can do by collecting explanations of benefits from patients. Once you have an evidence-based guess of what the payer is paying for a knee replacement, you have leverage at the negotiating table. For example, you find out an episode of care for an inpatient total knee costs $35,000, while at your surgery center the price is only $9,000. Add in the cost of an implant — around $5,000 — and your facility only needs $14,000 for an episode of care. That's an immediate $9,000 savings.

Then you can decide to pay your surgeon more for the procedure — maybe $2,500 rather than $1,500. Or maybe give your physical therapist a better rate — $150 as opposed to $50. Distribute the savings however you want. As long as you don't exceed the $35,000 cost of an inpatient episode of care, the payer will easily agree to the bundle, says Mr. Uba.

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