Drivers of the Variation in Prosthetic Implant Purchase Prices for Total Knee and Total Hip Arthroplasties

Abstract

Background: Previous studies have documented wide variation in health care spending and prices; however, the causes for the variation in supply purchase prices across providers are not well understood. The purpose of this study was to determine the drivers of variation in prosthetic implant purchase prices for primary total knee and hip arthroplasties (TKA and THA, respectively) across providers.

Methods: We obtained retrospective data from 27 hospitals on the average prosthetic implant purchase prices for primary TKAs and THAs over the 12 months ending September 30, 2013, as well as data on a range of independent potential explanatory variables. Each hospital performed at least 200 primary total joint arthroplasties per year. The multivariate seemingly unrelated regression approach was used to evaluate the impact of the variables on purchase price for each type of implant.

Results: The average purchase price at the hospital at the 90th percentile was 2.1 times higher for TKAs and 1.7 times higher for THAs than that at the hospital at the 10th percentile. The use of a hospital-physician committee for implant vendor selection and negotiation was associated with 17% and 23% lower implant purchase prices (P < .05) for TKAs and THAs, respectively, relative to hospitals that did not have this collaborative approach.

Conclusion: The use of a joint hospital-physician committee is a potential strategy for achieving lower average purchase prices for prosthetic implants. Policies to increase hospital-physician collaboration may lead to lower average purchase prices in this market.

Keywords: cost variation; costing; prosthetic implant cost; total hip arthroplasty; total knee arthroplasty.