Analysis of hospital cost in total knee arthroplasty. Does length of stay matter?

In this study, actual hospital total joint expenditures were analyzed, and the effect of decreased length of stay on these actual costs was determined. Expenditures were stratified per hospital and accounting conventions into fixed and variable costs. Hospital costs associated with 15 index knee arthroplasty procedures from fiscal years 1992, 1993, and 1994 were analyzed. Expenditures were standardized to inflation-controlled 1994 dollars. Average length of stay for knee arthroplasty procedures decreased 30% during this period (range, 8.7-6.1 days). Also, expenditures for total knee arthroplasty decreased only 13% (range, $17,415-$15,200) in inflation-controlled 1994 dollars. Using inflation-controlled dollars, analysis of variable costs revealed a continued rise of $278 during this period. Therefore, essentially all the cost reductions achieved were in the fixed component of cost allocated to each patient. Length of stay reductions, although beneficial, did not reduce hospital variable expenses significantly. Expenditure reductions were most exclusively in fixed costs. However, the overall total fixed hospital costs were largely unchanged. Thus, it is necessary to decrease variable costs (implant and supply costs) to significantly reduce hospital expenditures.