The Journal of Bone & Joint Surgery

The Journal of Bone & Joint Surgery, Volume 86, Issue 11

Scientific Articles | November 01, 2004

In-Hospital Cost of Total Hip Arthroplasty in Canada and the United States

John Antoniou, MD, PhD¹; Paul A. Martineau, MD¹; Kristian B. Filion, BSc²; Seema Haider, MSc³; David J. Zukor, MD¹; Olga L. Huk, MD¹; Louise Pilote, MD, MPH²; Mark J. Eisenberg, MD, MPH²

¹ Division of Orthopaedic Surgery, Jewish General Hospital, McGill University Montreal, 3755 Cote Ste. Catherine Road, Suite E-003, Montreal, QC H3T 1E2, Canada
² Divisions of Cardiology (K.B.F and M.J.E) and Epidemiology (L.P.), Montreal General Hospital, McGill University, 3755 Cote Ste. Catherine Road, Suite A-118, Montreal, QC H3T 1E2, Canada
³ Central Research Division, Pfizer Inc., 558 Eastern Point Road, Groton, CT 06340

View Disclosures and Other Information

In support of their research or preparation of this manuscript, one or more of the authors received grants or outside funding from Pfizer. None of the authors received payments or other benefits or a commitment or agreement to provide such benefits from a commercial entity. No commercial entity paid or directed, or agreed to pay or direct, any benefits to any research fund, foundation, educational institution, or other charitable or nonprofit organization with which the authors are affiliated or associated.

Investigation performed at Jewish General Hospital and Montreal General Hospital, McGill University, Montreal, Quebec, Canada

The Journal of Bone and Joint Surgery, Incorporated

J Bone Joint Surg Am, 2004 Nov 01;86(11):2435-2439

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Abstract

Background: There is little information comparing the costs of specific surgical procedures performed in Canada and those done in the United States. The objective of this study was to compare the in-hospital costs associated with primary total hip arthroplasty performed in the two countries.

Methods: In-hospital costs of 1679 consecutive patients (940 Canadian and 739 American patients) who underwent total hip arthroplasty were extracted from three Canadian and three United States teaching hospitals between 1997 and 2001. Participating hospitals used the same cost accounting system to provide per-patient demographic, clinical, and cost data. Canadian dollar costs were converted to United States dollar costs with use of purchasing power parities.

Results: The baseline clinical characteristics of patients undergoing total hip arthroplasty in Canada and the United States were similar. The American patients were a mean of 4.6 years older than the Canadian patients (mean [and standard deviation], 67.8 ± 12.4 years compared with 63.2 ± 14.9 years). The median cost for the primary arthroplasty was $6080 (mean [and standard error of the mean], $6766 ± $119) at the three Canadian hospitals and $12,846 (mean, $13,339 ± $131) at the United States hospitals (p < 0.0001). The mean length of stay (and standard deviation) was 7.2 ± 4.7 days for the Canadian patients and 4.2 ± 2.0 days for the American patients. Implants at one hospital in the United States were found to be four times more costly than those in a Canadian hospital.

Conclusions: Higher in-hospital costs were found for the American hospitals despite the fact that they had a significantly shorter patient length of stay compared with Canadian centers (p < 0.0001). Canadian hospitals should follow the lead of their counterparts in the United States and implement strategies to decrease the length of stay in the hospital, while institutions in the United States should revisit their ability to better manage the costs related to a primary total hip arthroplasty, particularly by controlling unit costs.

Level of Evidence: Economic and decision analysis, Level II-1 (clinically sensible costs and alternatives; values obtained from limited studies; multiway sensitivity analyses). See Instructions to Authors for a complete description of levels of evidence.

Figures in this Article

The United States and Canada have adopted very different approaches to the funding of health care. The American system consists of privately and publicly financed health insurance, with expenditures controlled at individual hospitals by generating patient-level costs. The Canadian system is predominantly publicly insured and budgeted in a top-down fashion regulated by the government. The government-mandated budgeting of health care in Canada, and the resulting rationing of services, leads to limited postacute-care services and restricted access to these services and may thus contribute to an increased length of stay for Canadian patients^1-6.

The goal of our study was to compare the in-hospital costs of primary total hip arthroplasty in the two countries. Patients who undergo this low risk, mostly elective, procedure represent a relatively homogeneous group. Hence, this group can be used as a paradigm to compare and highlight the differences in cost and resource utilization between the public Canadian health-care system and the mostly privatized American health-care system.

Materials and Methods

Materials and Methods | Results | Discussion | Appendix | References

Patient Population

We obtained data for 1679 consecutive patients (940 patients from three Canadian teaching hospitals and 739 patients from three American teaching hospitals) who underwent primary total hip arthroplasty between March 1997 and March 2001. Study inclusion criteria were based on procedure codes in the International Classification of Diseases, Ninth Revision, Clinical Modification (ICD-9-CM)⁷. Patients with ICD-9-CM code 81.51 (total hip replacement) were identified through the Transition cost-accounting-system databases (Eclipsys Solutions, Boston, Massachusetts) of the participating hospitals. Patients who were less than twenty-one years old or were undergoing revision surgery were excluded from the study.

Hospital Profiles

All six hospitals included in the study used the Transition cost accounting system. They were all public teaching hospitals offering tertiary-care services (Table I). The percentage of patients on Medicare at the three American hospitals was 38%, 59%, and 59%.

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TABLE I Hospital Profile

Hospital	Country	Description	No. of Beds	No. of Patient Records Extracted	Time-Period for Data Extraction (mo/yr)
1	United States	Public, teaching	608	225	12/99-12/00
2	United States	Public, regional medical center, teaching	845	311	09/99-12/00
3	United States	Not-for-profit corporation, teaching	707	203	07/99-09/00
4	Canada	Public, teaching	776	195	08/99-03/00
5	Canada	Public, teaching	585	599	04/98-03/01
6^*	Canada	Public, teaching	500	146	03/98-03/00

The hospital is part of a 920-bed, three-hospital network

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TABLE I Hospital Profile

Hospital	Country	Description	No. of Beds	No. of Patient Records Extracted	Time-Period for Data Extraction (mo/yr)
1	United States	Public, teaching	608	225	12/99-12/00
2	United States	Public, regional medical center, teaching	845	311	09/99-12/00
3	United States	Not-for-profit corporation, teaching	707	203	07/99-09/00
4	Canada	Public, teaching	776	195	08/99-03/00
5	Canada	Public, teaching	585	599	04/98-03/01
6^*	Canada	Public, teaching	500	146	03/98-03/00

The hospital is part of a 920-bed, three-hospital network

Data Collection

The Transition System

All data were extracted from the Transition cost accounting system⁸. The Transition system is a comprehensive database including demographic, clinical, resource utilization, and cost of treatment data for each patient admitted to a hospital. Hospital cost accounting in Canada and the United States is dictated by generally accepted accounting principles and by nationally accepted hospital information system guidelines. In Canada, hospitals are bound by the Management Information System Guidelines, which set national standards for managing financial and statistical data related to the operations of Canadian health services organizations. Similarly in the United States, hospitals using cost accounting systems must follow the American Hospital Association and Medicare guidelines.

ICD-9-CM Indexing System

Hospitals using the Transition system software integrate detailed patient-level data from various hospital sources into a single database. Demographic and clinical data are extracted from the hospital medical records system. These data include information from the patient's discharge summary, such as length of hospital stay, primary and secondary clinical diagnoses (ICD-9-CM codes), and principal and secondary procedures (ICD-9-CM codes)⁷. Resource utilization data are extracted from the specific hospital departments providing services to patients (e.g., the operating room, pharmacy, and laboratory). Unit costs are then associated with individual products and services used in the treatment of a patient, and the aggregate of these costs represents the patient's total cost of treatment within the hospital.

Cost Analysis

The total cost for a given patient's treatment equals the sum of two cost components: direct cost and overhead cost. Direct costs are derived from hospital departments that provide direct treatment or services to patients. These costs may be related either to the actual labor of individual employees within the department (e.g., salaries and fringe benefits of nurses and technicians) or to materials costs that become part of the patient-care process (e.g., pharmaceutical products and supplies). Overhead costs are derived from hospital overhead departments (e.g., administration and housekeeping). We extracted summary cost data, including direct cost, overhead cost, and total treatment cost, for each patient. All reported costs are in United States dollars. Canadian dollar costs were converted to United States dollar costs with use of the purchasing power parities for 1997 through 2001⁹. Costs were not adjusted for inflation.

Statistical Analysis

Continuous data are presented as the median and the mean and standard deviation; dichotomous data are presented as percentages. Continuous variables were examined with use of the Student t test, whereas dichotomous variables were examined with the chi-square test. All statistical tests were two-tailed, and a p value of <0.05 was considered to be significant. Multivariate regression analysis was performed with the SAS statistical software (SAS Institute, Cary, North Carolina) to determine the effect of independent variables on total cost. The models included the following variables: age, country, gender, clinical characteristics, postoperative complications, and death.

Results

Materials and Methods | Results | Discussion | Appendix | References

Baseline Demographic and Clinical Characteristics

American patients were a mean of 4.6 years older than the Canadian patients (mean, 67.8 ± 12.4 years compared with 63.2 ± 14.9 years, respectively) (see Appendix). The rates of baseline comorbid conditions were low for both populations, but there was a slightly higher prevalence of diabetes, hypertension, hypothyroidism, and dyslipidemias in the American patients. There was no difference in postoperative mortality or major postoperative complications between the groups (see Appendix). The Canadian patients had a significantly longer length of stay (7.2 ± 4.7 days compared with 4.2 ± 2.0 days; p < 0.0001).

In-Hospital Costs

Unadjusted cost analyses yielded significant differences in direct, overhead, and total treatment costs between the American and the Canadian patients. The median total cost for total hip arthroplasty was $6080 (mean [and standard error of the mean], $6766 ± $119) in the Canadian hospitals in comparison with a median of $12,846 (mean, $13,339 ± $131) in the American hospitals (p < 0.0001) (Table II). American patients were found to spend a mean of 2.9 fewer days (p < 0.0001) in the hospital than the Canadian patients (mean [and standard deviation], 4.2 ± 2.0 days compared with 7.2 ± 4.7 days; p < 0.0001). In Canada direct costs represented 68.9% of total costs, whereas in the United States direct costs accounted for 62.9% of total costs.

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TABLE II Unadjusted Average Costs of Treatment for Patients Who Had a Total Hip Arthroplasty^*

Cost	Canada	United States
Direct cost
Mean and standard error of the mean	4552 ± 79	8221 ± 83
Median	4191	8081
Overhead cost
Mean and standard error of the mean	2214 ± 42	5118 ± 59
Median	1862	4951
Total cost
Mean and standard error of the mean	6766 ± 119	13,339 ± 131
Median	6080	12,846

Reported costs are in United States dollars. Canadian dollar costs were converted to United States dollar costs with use of the purchasing power parities for 1997 through 2001⁹

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TABLE II Unadjusted Average Costs of Treatment for Patients Who Had a Total Hip Arthroplasty^*

Cost	Canada	United States
Direct cost
Mean and standard error of the mean	4552 ± 79	8221 ± 83
Median	4191	8081
Overhead cost
Mean and standard error of the mean	2214 ± 42	5118 ± 59
Median	1862	4951
Total cost
Mean and standard error of the mean	6766 ± 119	13,339 ± 131
Median	6080	12,846

Reported costs are in United States dollars. Canadian dollar costs were converted to United States dollar costs with use of the purchasing power parities for 1997 through 2001⁹

Regression Analysis

Multivariate regression analysis showed that the country in which the total hip arthroplasty was performed was the major driver of total cost. An uncomplicated total hip arthroplasty performed in the United States has an increase in total cost of 112.3%. When using postoperative complications as an independent variable in our regression model, we found a 36.5% increase in the total cost of performing total hip arthroplasty in Canada and the United States. Age and gender were not identified as significant variables in the regression analysis.

Cost of Implants

The median costs of the total hip arthroplasty implants were available only from one American public teaching hospital (Center 2) and one Canadian public teaching hospital (Center 6). The implant costs were $8017 and $1695, respectively, for these two centers.

Discussion

Materials and Methods | Results | Discussion | Appendix | References

The objective of our study was to determine the drivers of inhospital costs associated with total hip arthroplasty in comparable Canadian and American hospitals. The two patient groups were relatively homogeneous in terms of demographic and clinical characteristics, but, surprisingly, we found that the American patients in the study were a mean of 4.6 years older than the Canadian patients. This finding is contradictory to the notion that rationing of services in the publicly funded Canadian health-care system delays access to care and challenges the assumption that American patients are younger. Alternatively, the finding may be a reflection of the high rate of Medicare patients in the American centers surveyed.

Analysis of the cost data demonstrated lower direct, overhead, and total costs for total hip arthroplasty performed in the Canadian institutions. While we found postoperative complications to be a major driver of total costs in both countries, the major independent variable contributing to increased cost was the country where the procedure was performed. The total cost of a total hip arthroplasty performed in the United States was twice the cost of a total hip arthroplasty performed in Canada. The higher direct costs for the American hospitals could be explained, for the most part, by the large disparity in the implant cost for the two centers from which these data could be obtained. Over the past decade, extensive literature comparing resource utilization patterns in the United States and Canada has emerged, and several studies have found an increased intensity of services in American hospitals, which could also contribute to the higher direct costs found in the American centers^1-6.

The government-budgeted health-care system in Canada results in limited availability of post-acute-care services and, likely, a longer length of stay for the Canadian patients. Most of the cost-containment efforts in the United States in the 1980s were directed at decreasing the length of stay in the hospital¹⁰. However, Boardman et al. reported that decreasing the length of stay did not translate into significant decreases in hospital costs since the volume of services rendered was not reduced by the shorter hospitalization¹¹. Length of stay is, in part, dependent on postoperative complications. Although similar postoperative complication rates were found for both countries, overall lower costs were achieved in Canadian institutions despite a significantly longer length of stay.

Newer cost-containment efforts are directed at controlling the costs of hospital supplies and personnel and especially at controlling the cost of the implants. The price of total hip prostheses has risen by 212% in the United States in the last decade¹⁰. Worldwide, a large variation has been reported in the cost of total hip prostheses, with identical implants from a single manufacturer varying as much as 700%¹². In our study, total hip arthroplasty implants were found to be four times more costly in the one American hospital from which we could obtain these data than in the one Canadian hospital for which these data were available.

The elevated overhead costs in the American hospitals reflect the higher administrative expenses associated with a multipayer insurance system. Complying with insurer requirements, determining patient eligibility, and direct patient billing are all factors contributing to higher overhead costs. Evans et al. reported that Canadians spend less per capita to administer universal comprehensive coverage than Americans spend per capita to administer Medicare and Medicaid alone¹. Universal coverage simplifies the administrative structure and may alleviate hospital overhead cost. Nevertheless, we did not find the difference in overhead costs to have a major effect on the total cost differences between the two countries.

Although several previous studies have examined the cost of total hip arthroplasty in the United States^13-15 or Canada¹⁶ alone, we believe that our series represents the only study directly comparing the cost of primary total hip arthroplasty in Canada and the United States.

Several potential limitations of our study should be noted. First, physician fees were not available from the cost accounting system and therefore were not included in our study. Physician fees, in general, are substantially lower in Canada than in the United States and including these data in our analysis would only contribute to increasing the divergence in cost. Second, our cost analyses captured only in-hospital costs until the time of discharge. Medical resource utilization, orthopaedic follow-up, and rehabilitation after discharge were therefore not included. As this study focused only on the inhospital component of total hip arthroplasty, the data do not reflect potential differences in postdischarge complication rates and outcomes and their possible effect on the total cost for patients when considered over a longer time period. Third, as is common with all large administrative databases, the completeness and accuracy of secondary diagnoses and procedures is a potential limitation. Although major procedures and diagnoses are reliably entered in the Transition cost system, minor procedures and secondary diagnoses may be omitted from the abstracted charts. However, we believe that it is unlikely that these secondary clinical and procedural omissions would change our findings. Finally, although data from the Transition system is generally very reliable and both Canada and the United States have national guidelines for cost accounting, it is important to recognize that there are differences in costing practices between hospitals. These differences are generally found in two areas: (1) the selection and costing of intermediate products (not examined in this paper) and (2) the allocation of direct and overhead costs. While these differences influence the proportion of direct versus overhead costs, they have little effect on the total in-hospital costs, the primary outcome of the study.

In conclusion, the total, direct, and overhead costs associated with primary total hip arthroplasty performed in three American teaching centers were significantly higher than those of three comparable Canadian centers, despite shorter hospital stays in the American institutions. Canadian hospitals should implement strategies to decrease the length of stay in the hospital, while institutions in the United States should revisit their ability to better manage the costs related to primary total hip arthroplasty, particularly by controlling the costs of implants.

Appendix

Materials and Methods | Results | Discussion | Appendix | References

Tables presenting the demographic and clinical characteristics and the hospital course and resource utilization for the two patient groups can be found on our web site at (go to the article citation and click on "Supplementary Material") and on our quarterly CD-ROM (call our subscription department, at 781-449-9780, to order the CD-ROM). ?

References

Materials and Methods | Results | Discussion | Appendix | References

Evans RG, Lomas J, Barer ML, Labelle RJ, Fooks C, Stoddart GL, Anderson GM, Feeny D, Gafni A, Torrance GW, Tholl WG. Controlling health expenditures—the Canadian reality. N Engl J Med.1989;320: 571-7.320571 1989 [PubMed][CrossRef]

Fuchs VR, Hahn JS. How does Canada do it? A comparison of expenditures for physicians' services in the United States and Canada. N Engl J Med.1990;323: 884-90.323884 1990 [PubMed][CrossRef]

Haber SG, Zwanziger J, Anderson GM, Thorpe KE, Newhouse JP. Hospital expenditures in the United States and Canada: do hospital worker wages explain the differences? J Health Econ.1992;11: 453-65.11453 1992 [CrossRef]

Redelmeier DA, Fuchs VR. Hospital expenditures in the United States and Canada. N Engl J Med.1993;328: 772-8.328772 1993 [CrossRef]

Himmelstein DU, Lewontin JP, Woolhandler S. Who administers? Who cares? Medical administrative and clinical employment in the United States and Canada. Am J Public Health.1996;86: 172-8. Erratum in: Am J Public Health. 1996;86:790.86172 1996 [CrossRef]

Bell CM, Crystal M, Detsky AS, Redelmeier DA. Shopping around for hospital services: a comparison of the United States and Canada. JAMA.1998;279: 1015-7.2791015 1998 [PubMed][CrossRef]

US Department of Health and Human Services.Generic ICD-9-CM. Hospital version 2001. Reno, Nevada: Channel Publishing; 2000. 2000

Transition I: a functional overview. Boston: Transition Systems Incorporated; 1989. 1989

Pacific Exchange Rates Services; 2001. . 2001
http://fx.sauder.ubc.ca

Barber TC, Healy WL. The hospital cost of total hip arthroplasty. A comparison between 1981 and 1990. J Bone Joint Surg Am.1993;75: 321-5.75321 1993 [PubMed]

Boardman DL, Lieberman JR, Thomas BJ. Impact of declining reimbursement and rising hospital costs on the feasibility of total hip arthroplasty. J Arthroplasty.1997;12: 526-34.12526 1997 [PubMed][CrossRef]

Metz CM, Freiberg AA. An international comparative study of total hip arthroplasty cost and practice patterns. J Arthroplasty.1998;13: 296-8.13296 1998 [PubMed][CrossRef]

Mushinski M. Average charges for hip replacement surgeries: United States, 1997. Stat Bull Metrop Insur Co.1999;80: 32-40.8032 1999

Mushinski M. Average charges for a total hip arthroplasty: geographic variations, 1995. Stat Bull Metrop Insur Co.1996;77: 21-8.7721 1996

Iorio R, Healy WL, Richards JA. Comparison of the hospital cost of primary and revision total hip arthroplasty after cost containment. Orthopedics. 1999;22: 185-9.22185 1999 [PubMed]

Laupacis A, Bourne R, Rorabeck C, Feeny D, Wong C, Tugwell P, Leslie K, Bullas R. Costs of elective total hip arthroplasty during the first year. Cemented versus noncemented. J Arthroplasty.1994;9: 481-7.9481 1994 [PubMed][CrossRef]

Topics

hip replacement arthroplasty

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John Antoniou, Paul A. Martineau, Kristian B. Filion, Seema Haider, David J. Zukor, Olga L. Huk, Louise Pilote, Mark J. Eisenberg; In-Hospital Cost of Total Hip Arthroplasty in Canada and the United States. The Journal of Bone & Joint Surgery. 2004 Nov;86(11):2435-2439.

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