Medicare’s Reimbursement System Equates Outpatient TKA with Outpatient UKA

    Reimbursement under the Outpatient Prospective Payment System fails to account for the higher level of complexity in performing total knee arthroplasty compared with unicompartmental knee arthroplasty – which could be quite costly for facilities, according to a study from The Rothman Institute.

    Removing total knee arthroplasty (TKA) from the Centers for Medicare & Medicaid Services’ (CMS) Inpatient-Only List not only changed where Medicare-insured patients might undergo the procedure, but it also changed how facilities would be reimbursed: Outpatient TKA would fall under the Outpatient Prospective Payment System – and it would be reimbursed at the same rate as unicompartmental knee arthroplasty (UKA).

    Which begs the question: Are facility costs actually the same for outpatient TKA as for outpatient UKA?

    No, they are not – at least not according to a study from The Rothman Institute recently presented at the 2020 annual meeting of the American Association of Hip & Knee Surgeons and published in The Journal of Arthroplasty.

    “The removal of TKA from the CMS Inpatient-Only List in 2018 has caused much confusion among patients, surgeons, and hospitals,” said P. Maxwell Courtney, MD, a study author. He specializes in hip and knee arthroplasty with The Rothman Institute.

    “Although the majority of Medicare patients should be considered inpatients, CMS did not provide guidance as to which patient factors would justify an inpatient stay. Many hospitals are fearful of an audit and have defaulted to classify Medicare TKA procedures as an outpatient, which is paid at the same rate as UKA.  

    “We hypothesized that, despite being reimbursed at the same rate, the cost to the hospital for TKA is higher than for UKA.”

    To test this hypothesis, Dr. Courtney and his colleagues reviewed data on 2310 outpatient TKAs and 231 outpatient UKAs performed between 2015 and 2019 by 31 surgeons at 2 hospitals within The Rothman Institute. Patients whose hospital stays were fewer than 2 nights qualified as outpatients. Facility costs were determined by comparing implant costs, supplies, medications, and personnel costs for TKAs and UKAs using a time-driven, activity-based costing algorithm.

    The researchers found that compared with outpatient UKA, outpatient TKA resulted in:

    • Higher mean implant costs: $3403 for TKA vs $3081 for UKA
    • Higher overall hospital costs: $6350 for TKA vs. $5594 for UKA
    • Longer length of stay (LOS): 1.2 days for TKA vs 0.5 days for UKA
    • Higher postoperative personnel costs: $783 for TKA vs $166 for UKA

    After controlling for comorbidities, the researchers found that overall, outpatient TKA costs a facility $803 than an outpatient UKA (95% CI: $641-$966; P<0.001).

    That difference can quickly add up to a significant budget shortfall – and with implant costs dependent on how well a facility can negotiate with a supplier, the shortfall could be even larger.

    “Facilities are being financially penalized by CMS for providing high-quality care to safely discharge Medicare TKA patients home within 2 midnights as they face shrinking margins for TKA,” Dr. Courtney said. “A TKA surgery is much more complex than UKA, with a higher risk of complications and longer LOS, and CMS should consider appropriately reimbursing facilities for the increased cost.”

    All surgeons strive to provide high-quality care at the lowest possible cost, Dr. Courtney said, but at some point, it is a race to the bottom.

    “With continued reimbursement cuts as more and more TKA procedures shift to outpatient centers, Medicare patients may face difficulties with access to arthroplasty care,” he said.  


    Chisari E, Yayac M, Krueger CA, Lonner JH, Courtney PM. Despite Equivalent Medicare Reimbursement, Facility Costs for Outpatient TKA Are Higher than UKA (Paper 2). Presented at the 30th AAHKS Annual Meeting, November 5-8, 2020, Dallas, Texas.

    Theosmy E, Yayac M, Krueger CA, Courtney PM. Is the new outpatient prospective payment system classification for outpatient total knee arthroplasty appropriate? J Arthroplasty. 2021 Jan;36(1):42-46. doi: 10.1016/j.arth.2020.07.051. Epub 2020 Jul 29.