| | The Effects of a Prospective Case Payment System on Hospital Charges for Total Hip Arthroplasty in TaiwanReceived 22 July 2005; accepted 2 December 2005. Abstract We evaluate the effects of instituting prospective case payment system (PPS) system on total hip arthroplasty (THA) charges and compare our university hospital THA cost structure with comparable health care institutions in the United States. The study consisted of 5009 patients who received a primary THA in 24 hospitals between 1995 and 2001. After adjusting for inflation, the average total charge of THA for pre-PPS was US$4762 and US$4054 for post-PPS. The average cost for prostheses accounted for 61% of total costs at our hospital, as compared with the US studies ranging from 27% to 34%. As United States, PPS achieved the purpose of cost containment and changed practice patterns of orthopedic surgeons and hospital resource use in Taiwan. In 1995, Taiwan established a compulsory national health insurance (NHI) program that provides comprehensive health services to all eligible residents. The program covers preventive medicine, acute inpatient and outpatient care, prescribed drugs, dental care, and Chinese herbal medicine. More than 96% of health care providers have contracts with the NHI and all residents are free to select health care providers, ranging from primary care physicians to large medical university hospitals. The NHI payment system originally reimbursed providers on a fee-for-service basis. However, to control increasing health care expenditures in Taiwan, the NHI introduced a prospective case payment system (PPS) for 23 selected surgical procedures at the end of 1997 and expanded the list to 53 procedures by the end of 2002 [1]. The PPS was begun for total hip arthroplasty (THA) in 1997. The PPS in Taiwan is a simplified version of the Diagnostic Related Groups (DRGs) implemented in the US by the centers of Medicaid and Medicare Services [2] to reimburse hospitals at a fixed rate for various diagnoses and procedures. Neither the PPS in Taiwan nor the DRG 209, a category that includes major lower extremity arthroplasty in the United States, is adjusted for patient age, sex, diagnosis, complications, or comorbidities. Most physicians in Taiwan are the employees of hospitals and they can only practice in these hospitals. Thus, Taiwanese hospitals can influence physicians' practice patterns. The most common method adopted by Taiwanese hospitals to influence physician behavior has been through financial incentive programs. Physicians can obtain extra pay if their patients' total charges are lower than the fixed insurance payment. On the other hand, they are penalized financially if the total hospital charges exceed the reimbursement. Previous studies in the United States documented that a PPS could control the growth of health expenditures when compared with a fee-for-service system 3, 4, 5. Although most of the studies on the effects of PPS have focused on overall cost containment, very few studies have systematically evaluated the impacts of PPS on the use of service resources or resource allocations from the perspective of health care providers [6]. In this study, we first analyze the effects of PPS on hospital charge for THA because THA is a representative of surgical procedures with high cost and high volume as defined by the NHI in Taiwan. Furthermore, we compared THA cost structure of our university hospital with that of 3 comparable US hospitals. Materials and Methods  Data Sources and Subjects Our first data source was the administrative claims data from the NHI. Because the NHI is the single payor in Taiwan, the NHI data set was assumed to be the most comprehensive and reliable data sources for the study. The study population included all patients who received a unilateral primary THA (International Classification of Diseases, Ninth Revision, Clinical Modification procedure code of 8151) between March 1995 and December 2001 in southern Taiwan. Patients were excluded from the study if they had had a revision THA, bilateral THA, or an accident. Among 24 acute care hospitals in southern Taiwan, a total of 5009 THA subjects were eligible for the study. Patients who underwent THA before October 1997 were classified as the pre-PPS group, whereas those who underwent THA after October 1997 were classified as the post-PPS group. During the study period, no major technological innovation to THA was introduced. The application of cementless prostheses had been widely adopted by orthopedic surgeons in Taiwan since 1995. The second data source was derived from our university hospital for a comparison of THA cost structures to those who have been in either university hospitals or university-affiliated teaching hospitals in the United States. We selected published studies from 3 US institutions that are similar to ours 7, 8, 9. All 3 US studies focused on hospital costs rather than charges. Measurement of THA Charges and Costs Measurement of THA Charge In our article, hospital charges for THA represented the price of services billed to the payer (NHI). Before PPS, the hospital claim charges for THA were fully reimbursed by the NHI; after PPS, the payment made by the NHI was a fixed amount of $US 4410. The hospital made a surplus if its total charges were less than the fixed amount. Each hospital claim file to the NHI included 4 areas of information: (1) provider information, (2) patient demographics and admission information, (3) patient disease information, and (4) 14 itemized charges for care or services used during the hospital stay. The 14 areas of detailed billing were assigned to 10 cost centers: (1) surgeon fee, (2) anesthesia fee, (3) cost of prosthesis, (4) hospital room, (5) operating room, (6) pharmacy, (7) laboratory, (8) physical therapy, (9) radiology, and (10) miscellaneous services. The surgeon fee included both surgical fee and the daily physician visit charge during the hospitalization. Operating room charge included all surgical supplies except for prosthesis. Hospital room charge covered patient's room and nursing care charges. Pharmacy charge covered drug and dispensing fees. Miscellaneous charges covered blood/plasma, therapeutic procedure, hemodialysis, injection, tube feeding, and psychiatric treatment fees. To reflect the real dollar value, all dollar terms at the end of each year were first adjusted for 2001 Taiwanese currency value; and then all charges in Taiwan dollars were converted to US using an exchange rate of 30.5:1 as a 7-year average (1995-2001). Measurement of THA Cost For the comparison of cost distribution between the US and Taiwan, we used our university hospital's cost data for the year of 2000. During that year, there were 136 THAs performed in our university hospital. We obtained the cost records for each patient from the purchasing department or from 7 specific cost centers. The cost of an implant was the purchase price paid by the purchasing department to the vendor. For each cost center, we used the ratio of cost to charge to convert charge data into cost data at department level. The cost centers were the operation room, hospital room, pharmacy, laboratory, physical therapy, and radiology. Miscellaneous charges were converted into costs based on the ratio of cost to charge at overall hospital level. We did not include surgeon fee and anesthesia fee in the analyses because these 2 components were not available in the 3 US studies. Statistical Analysis A descriptive analysis was performed to display the changing trend of THA hospital charges from 1995 to 2001 by service area. Average charge of the 7 years and its SD were generated for each cost center; the difference in hospital resources allocation between pre-PPS and post-PPS was presented by the percentage of change in average charge for each service area. Furthermore, coefficient of variation (CV) was used to compare practice variations in performing THA before and after PPS. Results Changing Trends in THA Charges The analysis on changing trends in THA charges was based on a total sample of 5009 patients who underwent primary THA in southern Taiwan. The study subjects were divided into 2 groups: the pre-PPS group consisted of 1676 patients and the post-PPS group consisted of 3333 patients. The THA patients after PPS were younger, with higher proportions of male patients, and a higher prevalence of avascular necrosis. The changing trends in average total charge, prosthesis, surgeon fee, and operating room are shown in Fig. 1 by fiscal year. The total charge significantly decreased from $4997 in 1995 to $3969 in 2001. The charge for the prosthesis accounted for the major part of total charge, followed by average surgeon fee and operating room fee. The average charge for prosthesis was $2837 in 1995 but $2019 in 2001. The overtime difference in prosthesis average charge was significant (P < .001). The most striking decrease occurred in total charges and the charge for prosthesis in the year of 1998 after case payment was implemented (Fig. 1). The statistics of SD and significant level were not shown in Fig. 1, Fig. 2. The changing trends in average charge for hospital room, pharmacy, anesthetist, laboratory, radiology, and physical therapy are shown in Fig. 2. Except for a slight increase for anesthesia and physical therapy, all other charges significantly decreased. The average fee for anesthesia was $138 in 1995, reached the highest level in 1997, but returned to $143 in 2001. Hospital room charge significantly decreased from $278 to $241. The significant decreasing trends were also found in the charges for pharmacy, laboratory and radiology. The savings in these centers has been continuing to occur as surgeons and hospitals became adjusted to the PPS system. Charge Differences in THA Before and After PPS A comparison of charge differences between the pre-PPS and post-PPS groups is presented in Table 1. The total charge for each THA patient was $4762 for the pre-PPS group and $4054 for the post-PPS group, a decline of 14.87%. The prosthesis charge significantly declined (22.27%), from $2645 before PPS to $2056 after PPS. For radiology charge, the average charge was $37 pre-PPS but decreased to $25 after case payment, with a decreasing rate of 32.43%. Moreover, a significant decreasing trend in the average length of stay was also found in the post-PPS groups. For the pre-PPS group, the average length of stay was 12.47 days, whereas it was 8.82 days for post-PPS group. On the other hand, surgeon fee, operating room, and physical therapy were 3 areas of services with increasing average charges. For the pre-PPS group, the average surgeon fee was $720, whereas it was $738 for the post-PPS group. The difference in surgeon fee was significantly different between the 2 groups (P < .001). The average charge for operating room was $435 before PPS and increased significantly to $441 after PPS (P < .001), with an increasing rate of 1.38%. Comparison of Cost Structures Between the United States and Taiwan Table 3 demonstrates the comparison of THA cost structures between our university hospital and 3 US hospitals 7, 8, 9. Based on a total of 136 THA patients at our university hospital in 2000, the average cost for prosthesis accounted for 61% of total costs, as compared with a range from 27% to 34% in the United States. On the other hand, the average cost for hospital room in the present study only amounted to 10% of the total costs, which was lower than the proportions of selected US findings (17%-24%), although the present study had a longer average length of stay. The proportion of operating room in our study was also lower than the other reports 7, 8, 9. In this study, the operating room cost accounted for 15% of the total cost of THA, although it contributed to 20% to 25% of total costs in the United States. There were only slight differences in the distributions of costs for pharmacy, laboratory, and radiology. One interesting difference was found in the distribution of physical therapy cost. As compared with 5% to 6% of physical therapy costs to total costs in the United States, there was only 1% of total costs spent on physical therapy at our university hospital. Discussion The prospective case payment system is a cost containment strategy that has been used by the Bureau of National Health Insurance in Taiwan since 1997. Previous PPS studies had controversial findings in its effects on reducing health expenditures 3, 10, 11. However, the impacts of case payment on hospital resource use may vary by the type of surgical procedure. The current findings support the hypothesis that hospitals changed their behaviors and strategies to control hospital THA charges after PPS. During the study period, 1995 to 2001, most of the service charges for THA decreased after PPS, which may be contributed to the effectiveness of clinical pathway. The most popular strategy to respond to PPS has been the application of clinical pathway in Taiwan 12, 13. Previous studies indicated that clinical management successfully reduced hospital days and costs without compromise in patient outcomes 14, 15, 16. As we found in the present study, THA charges for most cost centers declined significantly after PPS. In terms of the magnitude of mean change, radiology, pharmacy, and implant had higher percentages of charge reduction. As an example, for radiology, fewer x-rays were performed through a standardized protocol of practice. Shorter hospital stay was another outcome of instituting clinical pathway 14, 15, 17. As with a shorter length of stay for THA patients, lower incremental charges for medications (such as daily IV or oral antibiotics) or hospital room occurred and, correspondingly, the significantly decreasing charges for pharmacy and radiology. Clinical pathway also reduced wide variations in resource use for THA. The CV values for pharmacy and radiology were most significantly reduced after PPS. We may conclude that management of clinical pathway did have effects on daily incremental savings. In our study sample for charge analysis, prosthesis comprised more than 50% of total THA charge either before or after PPS. After PPS, a decreasing total THA charge was mainly derived from the reduction in implant charges. Out of the total THA charge reduction (ie, $708), prosthesis reduction alone contributed to 83% of the total (ie, $589). Before PPS, hospitals and physicians used different brands of prosthesis with varying costs. In responding to the need for cost containment of PPS, the 1-brand policy of hip implant was also applied to THA management by many hospitals. Through the 1-brand policy on hip implant, competitive bid purchasing of hip implants has become feasible. Hospital cost containment of THA might be achieved more effectively by controlling cost of implants 9, 18, 19. However, it should be noted that cost saving in implants in Taiwan were mainly derived from a higher volume of single-brand implants, rather than the selection of cemented or cementless implants in the United States 19, 20. More than 90% of THA in Taiwan used cementless implants 21, 22. As previous studies indicated 19, 20, 23, the price differences between cemented and cementless prosthesis ranged from US $1533 to $3375 in the United States. The extensive use of cementless implants in Taiwan resulted in a much higher proportion of charges for THA prosthesis in Taiwan than the United States. Although a lower-priced hip implant, so-called DRG stem, was used for the old-old population in the United States [23], the average cost of implants was increasing in the United States [24]. Taiwan had a longer average length of stay for THA, as compared with the United States. However, hospital room only accounted for 10% of total THA costs at our university hospital, as compared with 17% to 24% of hospital room costs in the United States. Selected studies indicated that the average cost for a THA hospital room was $2808 in 1993 [8] and $1638 in 1996 [9]. For daily charge for hospital room, it ranged from $273 ($1638/6.0 days) to $379.5 ($2808/7.4 days), which was 8 to 11 times of the hospital room charge in Taiwan. Although higher room charges may reflect higher labor costs and different skill care mix, the exceptional high cost of inpatient care may partially explain why the United States spent 13% of gross domestic product (GDP) on health care, as compared with 5.2% of GDP in Taiwan or other nations that spent 6% to 8% GDP on health care 25, 26. Surgeon fee was 1 of 3 areas with increasing charges after instituting the PPS in Taiwan. The increasing phenomenon in surgeon fees was reversed with those of the United States in about the same period. According to Medicare payment history for representative surgical services, the national average surgeon payment decreased from $1889 to $1574 between 1992 and 2001, which indicated a 16.68% charge reduction in 9 years 27, 28. However, the average surgeon fee in Taiwan was still less than the United States either before or after PPS. The gap in surgeon fees might be due to the difference in physician payment schemes and overall physician income levels between the 2 nations. According to the comparison of physical therapy costs between our university hospital and the US institutes, our hospital used only 1% of total costs on physical therapy as, compared with 5% to 6% of physical therapy costs in the United States. The differences in the proportions of physical therapy costs may be derived from practice pattern variations or culture factors. Most THA patients are mobilized sooner to reduce the likelihood of deep venous thrombosis and prevent hip stiffness [29]. In Taiwan, however, most physicians did not order physical therapists to provide necessary physical therapy postoperatively; instead, physical therapy services were usually rendered by station nurses to perform a continuous passive motion. In conclusion, the study confirmed that a prospective case payment method achieved the purpose of cost containment and changed practice patterns of orthopedic surgeons and hospital resource use in Taiwan. Hospitals and physicians are compensated differently with different models of practice in the United States so that the generalization of cross-national comparison may be limited. For both systems, implant cost reduction is crucial to cost containment of THA. The extensive use of cementless implants in Taiwan and its long-term outcome need further exploration. Acknowledgments The authors thank Dr William L. Healy for his helpful comments on an early version of this manuscript. 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⁎ Graduate Institute of Health Care Administration, Kaohsiung Medical University, Kaohsiung, Taiwan † School of Medicine, Kaohsiung Medical University, Kaohsiung, Taiwan  Reprint requests: Gwo-Jaw Wang, MD, Kaohsiung Medical University, 100 Shih-Chun 1st Road, Kaohsiung 807, Taiwan.
No benefits or funds were received in support of the study. PII: S0883-5403(05)00693-5 doi:10.1016/j.arth.2005.12.003 © 2007 Elsevier Inc. All rights reserved. | |
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