Amount of CMS Reduction in Facility Reimbursement Following Removal of Total Hip Arthroplasty From the Inpatient-Only List Far Exceeds Reduction in Actual Care Cost

Starting in 2020, Centers for Medicare and Medicaid Services (CMS) removed total hip arthroplasty (THA) from the inpatient-only list, resulting in an average of $1637 per case reduction in facility reimbursement. The purpose of this study is to determine whether the reduction in reimbursement is justified by comparing the difference in true facility costs between inpatient and outpatient THA.

We identified a consecutive series of 5271 primary THA procedures from 2015 to 2019. Itemized procedural costs were calculated using a time-driven activity-based costing algorithm. Outpatient procedures were defined as those with less than a 24-hour length of stay. We compared patient demographics, comorbidities, and itemized costs between inpatient and outpatient procedures. A multivariate analysis was performed to determine the independent effect of outpatient status on true facility costs.

There were 783 (14.9%) outpatient THA procedures. The outpatient THA procedures incurred lower mean personnel ($1428 vs $2226, P < .001), supply ($4713 vs $4739, P < .001), and overall facility costs ($6141 vs $6595, P < .001) when compared with the same THA procedures done inpatient. When controlling for confounding variables, outpatient status was associated with a reduction in total facility costs of $825 (95% confidence interval, $734-$916, P < .001).

The reduction in CMS reimbursement far exceeds the $825 per-patient cost savings that can be achieved by a facility by performing THA as an outpatient. CMS should reconsider the Outpatient Prospective Payment System classification of THA to better incentivize surgeons to perform THA as a lower-cost outpatient procedure when safe and appropriate.