Hospitals are eager to restore joint
replacements to pre-COVID levels as quickly as possible.
Dr. Ira Weintraub, a recently retired orthopedic surgeon who
now works at a medical billing consultancy, saw a hip replacement bill for over
$400,000 earlier this year.
“The patient stayed in the hospital 17 days, which is only
17 times normal. The bill got paid,” mused Weintraub, chief medical officer of
Portland, Oregon-based WellRithms,
which helps self-funded employers and workers’ compensation insurers make sense
of large, complex medical bills and ensure they pay the fair amount.
Revenue
losses at hospitals and outpatient surgery centers may have exceeded $5 billion
from canceled knee and hip replacements alone.
Charges like that go a long way toward explaining why
hospitals are eager to restore joint replacements to pre-COVID levels as
quickly as possible — an eagerness tempered only by safety concerns amid a
resurgence of the coronavirus in
some regions of the country. Revenue losses at hospitals and outpatient surgery
centers may have exceeded $5 billion from canceled knee and hip replacements
alone during a roughly two-month hiatus on elective procedures earlier this
year.
The cost of joint replacement surgery varies widely —
though, on average, it is in the tens, not hundreds, of thousands of dollars.
Still, given the high and rapidly growing volume, it’s easy to see why joint
replacement operations have become a vital chunk of revenue at most U.S.
hospitals.
The rate of knee and hip replacements more than doubled from
2000 to 2015, according to inpatient
discharge data from the Agency for Healthcare Research and
Quality. And that growth is likely to continue: Knee
replacements are expected to triple between now and 2040, with
hip replacements not far behind, according to projections published
last year in the Journal of Rheumatology.
Joint procedures are usually not emergencies, and they were
among the first to be scrubbed or delayed when hospitals froze elective
surgeries in March — and again in July in some areas plagued by renewed COVID
outbreaks. Loss of the revenue has hit hospitals hard, and regaining it will be
crucial to their financial convalescence.
“Without orthopedic volumes returning to something near
their pre-pandemic levels, it will make it difficult for health systems to get
back to anywhere near break-even from a bottom-line perspective,” said Stephen
Thome, a principal in health care consulting at Grant Thornton, an advisory,
audit and tax firm.
It’s impossible to know exactly how much knee and hip
replacements are worth to hospitals, because no definitive data on total volume
or price exists.
But using published estimates of volume, extrapolating
average commercial payments from published Medicare rates based on a study,
and making an educated guess of patient coinsurance, Thome helped KHN arrive at
an annual market value for American hospitals and surgery centers of between
$15.5 billion and $21.5 billion for knee replacements alone.
That suggests a revenue loss of $1.3 billion to $1.8 billion
per month for the period the surgeries were shut down. These figures include
ambulatory surgery centers not owned by hospitals, which also suspended most
operations in late March, all of April and into May.
If you add hip replacements, which account for about half
the volume of knees and are paid at similar rates, the total annual value rises
to a range of $23 billion to $32 billion, with monthly revenue losses from $1.9
billion to $2.7 billion.
The American Hospital Association projects total
revenue lost at U.S. hospitals will reach $323 billion by
year’s end, not counting additional losses from surgeries canceled during the
current coronavirus spike. That amount is partially offset by $69 billion in
federal relief dollars hospitals have received so far, according to the
association. The California Hospital Association puts the net revenue loss for hospitals
in that state at about $10.5 billion, said spokesperson Jan Emerson-Shea.
Hospitals resumed joint replacement surgeries in early to
mid-May, with the timing and ramp-up speed varying by region and hospital. Some
hospitals restored volume quickly; others took a more cautious route and
continue to lose revenue. Still others have had to shut down again.
At the NYU Langone Orthopedic Hospital in New York City,
“people are starting to come in and you see the operating rooms full again,”
said Dr. Claudette Lajam, chief orthopedic safety officer.
At St. Jude Medical Center in Fullerton, California, where
the coronavirus is raging, inpatient joint replacements resumed in the second
or third week of May — cautiously at first, but volume is “very close to pre-pandemic
levels at this point,” said Dr. Kevin Khajavi, chairman of the hospital’s
orthopedic surgery department. However, “we are constantly monitoring the
situation to determine if we have to scale back once again,” he said.
In large swaths of
Texas, elective surgeries were once again suspended in July because
of the COVID-19 resurgence. The same is true at many hospitals in
Florida, Alabama, South Carolina and Nevada.
The Mayo Clinic in Phoenix suspended nonemergency joint
replacement surgeries in early July. It resumed outpatient replacement
procedures the week of July 27, but still has not resumed nonemergency
inpatient procedures, said Dr. Mark Spangehl, an orthopedic surgeon there. In
terms of medical urgency, joint replacements are “at the bottom of the totem
pole,” Spangehl said.
In terms of cash flow, however, joint replacements are
decidedly not at the bottom of the totem pole. They have become a cash cow as
the number of patients undergoing them has skyrocketed in recent decades.
The volume is being driven by an aging population, an
epidemic of obesity and a significant rise in the number of younger people
replacing joints worn out by years of sports and exercise.
It’s also being driven by the cash. Once only done in
hospitals, the operations are now increasingly performed at ambulatory surgery
centers — especially on younger, healthier patients who don’t require
hospitalization.
The surgery centers are often physician-owned, but private equity
groups such as Bain Capital and KKR & Co. have
taken an interest in them, drawn by their high growth potential, robust
financial returns and ability to offer competitive prices.
“[G]enerally the savings should be very good — but I do see
a lot of outlier surgery centers where they are charging exorbitant amounts of
money — $100,000 wouldn’t be too much,” said WellRithm’s Weintraub, who
co-owned such a surgery center in Portland.
Fear of catching the coronavirus in a hospital is reinforcing
the outpatient trend. Matthew Davis, a 58-year-old resident of Washington,
D.C., was scheduled for a hip replacement on March 30 but got cold feet because
of COVID-19, and canceled just before all elective surgeries were halted. When
it came time to reschedule in June, he overcame his reservations in large part
because the surgeon planned to perform the procedure at a free-standing surgery
center.
“That was key to me — avoiding an overnight hospital stay to
minimize my exposure,” Davis said. “These joint replacements are almost
industrial-scale. They are cranking out joint replacements 9 to 5. I went in at
6:30 a.m. and I was walking out the door at 11:30.”
Acutely aware of the financial benefits, hospitals and
surgery clinics have been marketing joint replacements for years, competing for
coveted rankings and running ads that show healthy aging people, all smiles,
engaged in vigorous activity.
However, a 2014 study concluded
that one-third of knee replacements were not warranted, mainly because the
symptoms of the patients were not severe enough to justify the procedures.
“The whole marketing of health care is so manipulative to
the consuming public,” said Lisa McGiffert, a longtime consumer advocate and
co-founder of the Patient Safety Action Network. “People might be encouraged to
get a knee replacement, when in reality something less invasive could have
improved their condition.”
McGiffert recounted a conversation with an orthopedic
surgeon in Washington state who told her about a patient who requested a knee
replacement, even though he had not tried any lower-impact treatments to fix
the problem. “I asked the surgeon, ‘You didn’t do it, did you?’ And he said,
‘Of course I did. He would just have gone to somebody else.’”
Kaiser Health News is
a nonprofit news service covering health issues. It is an editorially
independent program of the Kaiser Family Foundation, which is not affiliated
with Kaiser Permanente.
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