The Economics of Anterior Cruciate Ligament Reconstruction

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Chapter 9 The Economics of Anterior Cruciate Ligament Reconstruction

Chadwick C. Prodromos, Julie Rogowski, Brian T. Joyce

Background

With more than 100,000 anterior cruciate ligament reconstructions (ACLRs) now performed yearly in the United States, total ACLR costs exceed half a billion dollars annually. In this chapter the major component costs of ACLR will be analyzed along with institutional reimbursement levels. Finally, the effect of current trends and emerging technology as they affect ACLR cost will be discussed.

Purpose

The purpose of this chapter is to help surgeons understand the economic implications of their choices for resource utilization in ACLR. All of the relevant cost variables discussed in this chapter are under surgeon control. These choices are always made to maximize patient outcomes. However, it is also useful to understand the economic impact of these choices. Limited resources coupled with increased demand and increasingly expensive technology may force the surgeon to make increasingly difficult decisions in the future in this regard.

Whose Costs are being Considered?

ACLR costs can be considered from both macro- and microeconomic perspectives. The macroeconomic perspective deals with how many societal dollars are being spent by patients and third-party payers on ACLR. From this perspective the goal is to spend the minimal amount consistent with high-quality care out of the finite healthcare dollars available. The microeconomic perspective in this context deals with the institution (the hospital or surgicenter) where the surgery is performed. The goal from this perspective is to balance costs with payments so that losses are avoided. Excessive macroeconomic costs can lead to lower institutional reimbursements and disallowal of charges (e.g., as have recently happened with refusals to pay for mechanized cold units after ACLR). It can also lead to reduced surgeon reimbursements to both save money and attempt to provide a disincentive to surgeons performing the procedure. Excessive microeconomic institutional costs relative to payments can also lead to controls on choices by surgical facilities to reduce those costs. The answer to both macro- and microeconomic cost containment is for utilization choices to be soundly grounded in patient outcomes. Thus, by constraining excessive costs, the procedure is less likely to become a target for cost cuts. Furthermore, if cuts in necessary services are proposed, the surgeon, as the patient advocate, is better able to justify the necessity of the provided service.

Sources of Cost Information

The information presented here was obtained by personal communication between the authors and various institutions and companies. The numbers are only approximations and are skewed toward the Chicago area and the U.S. healthcare system. Some of the information was provided only on condition of confidentiality. Specific companies or devices have not been listed partially for this reason and partially because the numbers are subject to great variation by region. Readers should make inquiries specific to their practice environment and area to acquire comparative data for their personal use.

Third-Party Payer Payments

Some payers pay a percent of billed charges. Currently, however, third-party payers typically pay the hospital or surgicenter a flat fee from which all their expenses must be subtracted. Typically surgicenters are reimbursed at lower rates than hospitals. For outpatient ACLR in the Chicago area, these rates vary from a low of $1100 for Medicaid to between $1800 and $3000 for private payers and Medicare. Hospital admission for 1 night will typically actually decrease the reimbursement rate by causing the hospital to be paid its per-diem rate for 1 night instead of the outpatient surgery cost. For institutions performing high volumes of ACLR, “carve outs” become extremely important. These remove the ACLR from the fixed surgery reimbursement prepayment mode and substitute a percentage of charges or a higher reimbursement payment level. This is a matter of individual negotiation between the institution and the payer. Most payers also reimburse implant invoices, although some do not. These invoice reimbursements often will occur only above a certain threshold: for example, at the $1000 level. Risk contracts, in which institutions are paid globally for all care for a given number of lives, are still reasonably prevalent. They are of special concern to the institution when typical surgical costs are exceeded frequently.

Institutional Fixed Costs

These costs are a combination of time charges, which reflect fixed costs of operation such as rent, utilities, and staffing, and additional costs associated with the given procedure.^1,² In 1996, Novak et al² published rates of $12,040 for hospital ACLR with admission, $8815 for hospital ACLR with same-day discharge, and $3853 for surgicenter ACLR. A representative survey of Chicago-area hospitals and surgicenters indicates that current total charges typically vary from $5000 to $12,000 for ACLR. In the following discussion, we will break down the component costs that are additive to the basic institutional time costs.

Anterior Cruciate Ligament Reconstruction–Specific Additive Costs

Allografts

Allografts are increasing rapidly in popularity. A survey of the largest U.S. tissue banks discloses a price range for various ACL allografts of $1400 to more than $3000, with a mean of about $2000 per case. A recently published study ³ using patient data from 1996 to 1998 showed allografts at that time to substantially reduce costs by decreasing the likelihood of admission and decreasing surgical time. However, today virtually all ACLR procedures may be performed as outpatient with the use of femoral blocks (see later), so there is little further potential cost savings in this regard from the use of allografts. Even without the use of femoral blocks, ACLR can usually be performed easily on an outpatient basis.

Allograft use will produce slightly decreased costs from reduced operating time due to the absence of a surgical harvest. Experienced surgeons will generally accomplish the harvest in about 10 minutes, but the time may be substantially higher for surgeons who perform the procedure only occasionally. In either case the reduced time will not significantly offset the high cost of the allograft; in addition, there is some diversion of assistant or surgeon time involved in opening, thawing, and washing the allograft. The other potential benefit of allograft use is avoidance of harvest morbidity. This may be significant regarding kneeling pain after bone–patellar tendon–bone (BPTB) harvest. The morbidity for hamstring harvest has been shown to be negligible. Disadvantages with allograft versus autograft use may include lower stability rates ⁴ (see Chapter 69) as well as the small but definite risk of disease transmission.

The cost implications of widespread allograft use are staggering. Macroeconomically, $2000 per allograft multiplied by an estimated 110,000 predicted ACLRs yields a cost differential of more than $200 million between no use of allografts and complete use of allografts nationwide. Microeconomically, if allografts are not separately reimbursed above the basic cost of the procedure, their use will virtually always cause the procedure to be performed at a net loss to the institution. Because most contracts do reimburse for allografts, this is often not an issue, but it is important to be aware of contract provisions at the given institution for the specific payer involved.

Fixation Implants

We have surveyed the costs of the fixation implants produced by the major manufacturers of such devices. The cost range of these devices is summarized in Table 9-1

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