Cost-effectiveness of upper extremity arthroplasties at orthopedic specialty hospitals

Background: Major joint/limb reattachment procedures of upper extremities (Diagnosis-related group 483, DRG-483) are increasingly utilized, while average costs have increased yearly. This study seeks to determine the influence of volume, neighborhood demographics, and orthopedic specialization on the cost of DRG-483. Methods: Utilization and cost data for DRG-483 was extracted from Centers for Medicare and Medicaid Services (CMS) inpatient charge data from 2014-2018. Neighborhood demographic data was queried as USDA Rural-Urban Commuting Area codes (RUCA) from the United States 2010 census and Esri's ArcMap software. Orthopedic specialization ratios for each hospital (OSR = Musculoskeletal discharges/Total Discharges) was utilized to compare Orthopedic Specialty Hospitals (OSH) = OSR>0.99 and Nonspecialty Hospitals (NSH) = OSR <= 0.99. The cost of DRG-483 procedures and the influence of volume, hospital demographics, and orthopedic specialization was analyzed using linear regression models. Results: OSH performed DRG-483 procedures at lower average Medicare payments (AMP) than NSH in all years studied (P<0.001), averaging 15% saved per surgery. DRG-483 volume was weakly negatively correlated with AMP, averaging $2.95 saved per discharge. Finally, population density of hospital location was inversely proportional to DRG-483 AMP with metropolitan centers performing the procedure at the lowest cost to the CMS. Conclusions: CMS payments are optimized at urban orthopedic specialty hospitals. Eliminating the AMP difference for the 222,519 DRG-483 performed at NSH would have saved CMS over 480 million dollars between 2014-2018.