Going home the same day you get a new hip or knee: Patients like it, but it hits hospital finances
That outpatient trend is not new, but it has accelerated at a time when hospital finances are already under pressure from the coronavirus pandemic and rising labor costs.
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When a Rothman Orthopaedic Institute surgeon replaced Kathryn Patterson’s left hip in May 2021, the North Cape May resident was part of a massive shift in the way joint replacements are done.
The 78-year-old arrived at the AtlantiCare surgery center in Egg Harbor Township at 7 a.m. the day of her surgery and was back home in the middle of the afternoon. Her only rehab, which she completed with the help of her son, consisted of walking for 10 minutes every hour.
“It was a great experience,” Patterson said recently. “I went in with pain, and I came out with no pain. It’s been like that ever since.”
At the Philadelphia-based Rothman Orthopaedic Institute, which is among the largest orthopedic groups in the United States, speedy outpatient joint replacements like Patterson’s are rapidly becoming the norm — replacing the traditional inpatient stays after surgery and adding to the extraordinary financial strain hospitals are under.
In the first half of this year, 73% of Rothman’s hip and knee replacements were outpatient, compared with just 14% outpatient in the first half of 2019. That change comes with significant savings. Between 2019 and last year, the average cost to a private insurer of a total joint replacement at Rothman fell to $25,001 from $36,433, according to Rothman data.
Driving the move to outpatient surgeries, which typically cost 30% to 40% less than the same surgery done on an inpatient basis, have been changes in Medicare rules, the general shift away from hospital-based care — in overdrive during the coronavirus pandemic — and long-developing improvements in medical care.
“It’s a convergence of market forces,” Matthew Bates, managing director at Kaufman Hall, a health-care advisory firm in Chicago, said. “We can do it safely. We can do it cheaper. Patients have a better experience. Doctors, surgeons tend to prefer it. Insurers are encouraging it.”
But what’s good for patients, doctors, and insurers is increasing the financial strain on hospitals. That is especially true for community hospitals that don’t provide the most complex levels of care but are good sources of jobs and often provide a feeling of security to their communities. Even at major academic centers like the University of Pennsylvania Health System, the shift is adding to financial stress.
Financial impact on hospitals
The problem for hospitals is worse than just losing patients to the outpatient realm, said Bates, the Kaufman Hall expert. Private insurers have taken their lead from Medicare and are now pushing more and more joint replacements into ambulatory surgery centers, he said.
“That’s really relevant when you talk about hospital impact because it’s not just lost volume. It’s they are losing the highest-margin volume disproportionately,” Bates said.
According to Moody’s, only 3% of the nation’s roughly 6,000 ambulatory surgery centers are owned by hospitals outright. Physicians own 64% of them. Physician-hospital joint ventures own an additional 24% of them. Corporations own the remaining 8%, either solely or in joint ventures. That means hospitals get relatively little benefit from the growth of surgery centers. Many outpatient joint replacements are done in a hospital operating room but without an inpatient stay, meaning hospitals have lower reimbursement but the same level of costs.
The overall shift to outpatient surgery is having a significant impact on the financial results of the University of Pennsylvania Health System, the organization’s vice president of corporate finance, Thomas Cooper, said at a Sept. 22 university board meeting. He said the profit margin on an inpatient surgery is much higher than for a patient who is in the hospital because of a chronic illness. Penn refers to them as medical patients.
“Previously we’ve been able to backfill this shift from inpatient to outpatient with additional inpatient surgeries, but we’re now seeing that replaced with medical admissions, so this is a big change and a challenge for the health system,” Cooper said.
The health system’s chief executive, Kevin Mahoney, added: “Technology changes are going to continue to push and reimbursement changes are going to continue to push surgeries to the outpatient setting. We need to get our costs down so we can still be profitable that way.”
Executives at Rothman, which has close ties to Jefferson Health, Main Line Health, and AtlantiCare, said they keep the financial health of their hospital partners in mind as the physician-owned firm expands.
“We’re not in business like the private equity firms to just pull all the cases out of the hospital and leave them with no way to support their community mission,” said Rothman CEO Christopher T. Olivia. “We attempt to build up the spine service and the trauma service with our partnered hospitals, so that they can fill those inpatient beds because those services still need acute care settings.”
Patient experience matters
Not all joint replacement patients are in the sort of physical condition that allowed Patterson to go home and recover so quickly, not to mention having a son who could help her.
“One of the challenges is having enough support at home to be able to go home after the procedure,” Olivia said. He said Rothman is urging Medicare to pay for more in-home support. That way patients can go home right after surgery because they are likely to have better outcomes if they do, he said.
Patterson said her doctor, Danielle Ponzio, advised her that she was a good fit for an outpatient hip replacement. “The doctor said as long as I didn’t have any heart issues or any other things going on that I would be a good candidate to have it done in one day, and it was great,” Patterson said.
“It was just like being in Disney. When I went into the operating room, I was introduced to every single person in there, and they seemed to be so happy,” Patterson said.
“The best medical decision I ever made was to do this,” she said.