Knee and Hip Replacement Costs Vary Greatly by Region -- Why?

Christin L. Melton, ELS


February 26, 2015


Thomas C. Barber, MD, chair of the American Academy of Orthopaedic Surgeons (AAOS) Council on Advocacy and an orthopedic surgeon in Oakland, California, who specializes in total joint replacement, offered his perspective on the study:

"Most importantly, we have to all understand the concept of 'cost.' Blue Cross is measuring the cost to them, not the cost of doing the procedure in the hospital. This is an important distinction, because most of what they are measuring is the effectiveness of their contracting for hospital and physician services, not true cost. The contract for physician services may vary by 30%, depending on the market power and contracting skill of the medical group. Hospital services are even more variable in terms of contracting based on the hospital's participation in a larger hospital organization or its location in an area where few competitors exist. Many hospital contracts from insurers are in a per-diem format, so a day in the hospital for a psychiatric illness can be paid the same as a day for a total hip replacement. This leads to difficulty in estimating cost, because clearly the resource use in surgery for a total hip is far greater than the resource use for psychiatric care."


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