It’s Halloween, so today we have a bone to Pic: the falling price of joint replacement procedures. A recent study in the Journal of Orthopaedic Experience & Innovation examined total joint arthroplasty procedures in Medicare from 2013 to 2021, finding a rise in the number of patients and procedures but a drop in average Medicare payments per procedure, adjusted for inflation. Payments fell for shoulder replacements by 51 percent ($1,603 to $784), hip replacements by 44 percent ($1,496 to $839), knee replacements by 51 percent ($1,643 to $881), and ankle replacements by 52 percent ($1,183 to $610).
As the Pic shows, movements in payment amount tend to be correlated across procedures, with a general downward trend aside from some sizable spikes in 2017 and 2020. Two major factors driving this trend are innovation and policy changes. Innovation is allowing more patients to safely get joint replacements without requiring (expensive) inpatient care. Additionally, Medicare payment policy has gradually reflected this change over time by removing rules that limit these procedures to inpatient settings and by permitting them in ambulatory surgical centers (ASCs). Medicare allowed knee replacements to be performed in hospital outpatient departments starting in 2018 and in ASCs in 2020. It then allowed hip replacements in outpatient departments in 2020 and ASCs in 2021, and allowed shoulder and ankle replacements in outpatient departments in 2021.
Innovation in joint replacements, enabled by reduced regulatory obstacles, has been a major treat for patients – and taxpayers. Outpatient procedures are not only more convenient than inpatient admissions, but also less costly. In 2023, the Medicare Trustees highlighted the shift in joint replacements from inpatient to outpatient settings as a factor slowing the program’s cost growth. This trend has caused a fright for some researchers however, who worry that falling payments may make these surgeries less worthwhile and eventually hinder access to care. This is not the first time providers have complained that Medicare payment is too bare bones. But permitting such innovation may be one tool to help slay Medicare’s monstrous fiscal costs, even if it’s not a silver bullet.
