Total hip arthroplasty (THA) has emerged as one of the most successful interventions in orthopedics and medicine. Many studies have reported clinical success rates, in terms of patient satisfaction, pain reduction, functional improvement, and the absence of further surgery, of greater than 90% at minimum of 10-year follow-up (1). Moreover, THA compares favorably with other healthcare interventions in terms of cost per quality adjusted life year (QALY) gained and other measures of health utility (2,3). Osteoarthritis of the hip and knee are major contributors to disability and economic loss in our society with some estimates putting the cost at over $80 billion per year. According to the Agency for Healthcare Research and Quality, more than 285,000 total hip replacements are performed each year in the United States.

As one of the most common and resource-intensive surgical procedures performed in the United States, THA is a major contributor to the rising cost of health care. Medicare data indicates that more total Medicare dollars are spent on lower extremity total joint arthroplasty (TJA) procedure than on any other procedure. As a result, surgeons, payers, patients, and policymakers have all shown a rising level of interest in economic issues related to TJA surgery. They have begun to pay particular attention to the value of THA. Basic science and clinical research have driven an explosion of new implants and other technologies in TJA (2). However, technologic advances have outpaced our ability to pay for them, calling into question their true value to society—that is, are these new advances and products worth the increased cost, given the current success rates?

As the costs associated with THA continue to escalate and constraints on available healthcare resources increase, clinicians, patients, payers, and healthcare policymakers have all demonstrated increased awareness and interest in economic issues related to THA.

Rising healthcare costs are threatening the long-term sustainability of the US healthcare system. Costs continue to rise at a rate that significantly outpaces inflation. As a result, the percentage of the US gross domestic product spent on health care has increased from 5% in 1965 to 18.1% in December of 2011 (4,5). Furthermore, there is little evidence that higher healthcare spending in the United States correlates with better health outcomes when compared to other developed countries. US businesses are at a competitive disadvantage worldwide as a result of the increased cost associated with providing healthcare benefits to their employees (2).

Osteoarthritis and other arthritic conditions of the hip are significant contributors to disability and economic loss in our society. A recent study by the WHO estimates that the economic impact of arthritis to be over 80 billion dollars per year, including indirect costs such as lost wages and productivity, and direct costs such as hospital care, physician visits, and medications (6). The same study estimated that the prevalence of osteoarthritis of the hip to be 1,200 per 100,000 people in the United States.

The cost of performing a THA has continued to rise sharply over the past two decades. In 1999, the average hospitalization charge for THA was $23,000. By 2010, the mean charge for a THA had almost doubled to $45,023 (8). While hospitalization charges continue to increase, provider reimbursement has not kept pace.

In the United States, Centers for Medicare & Medicaid Services (CMS) is the primary payer for over 60% of THAs performed (9); as such, they have become a major driver in determining reimbursement for this procedure. While hospital reimbursement has increased slightly over the same time period, the hospital costs of performing THA have increased substantially, making the economics of THA increasingly challenging for many hospitals. Furthermore, Medicare professional fee payments for THA have decreased from $2,200 in 1991 to $1,418 in 2010, which correlates to an inflation-adjusted drop in payments per procedure of 60% (10).

Many studies have attempted to quantify the costs of primary THA. The majority of THA costs are related to operating room, hospital room, and medical supply (including
implant) costs (11,12,13). Barber and Healy performed a financial analysis of 391 joint replacement operations in 1996 and determined that 80% of the hospital cost was generated in the operating room, nursing units, recovery room, and pharmacy during the first 48 hours, despite an average length of stay of over 4 days (11). However, Meyers et al. (14) used hospital-based cost-accounting data to quantify the costs of TJA and reported that 76% of cost consisted of implant, anesthesia and operating room, and nursing/hospital room costs, and that length of stay was the best predictor of total cost.

More recently, Rana and Iorio compared the hospital costs of primary THA performed at their institution in 1995 and 2008 (15). In 2008, the cost per THA was $11,688 per case, made up predominately of operating room ($2,267), hospital room ($3,739), and supply/implant ($2,506) costs. They further report that in 1990, their hospital lost $6,339 per case in inflation-adjusted dollars for Medicare patients. However, in 2008, their hospital earned $2,358, $650, and $8,435 per case for Medicare FFS patients, managed Medicare, and privately insured patients, respectively. They attribute the change in profit from 1990 to 2008 partly to a series of cost control measures and strategies that the orthopedic surgeons and hospital administrators developed. One reported means of reducing total cost per THA is to negotiate reduced implant prices with suppliers (15,16).

Revision THA is governed by a different set of clinical and economic principles. It is important to understand these differences because, despite excellent results following primary THA, factors related to implant longevity and an increase in procedures performed on younger, more active patients, have led to an increase in the volume of revision THA. In fact, the American Academy of Orthopaedic Surgeons (AAOS) projects that the number of revision procedures will continue to rise at a rate of 20% to 30% per year over the next three decades (17).

The important distinction between primary and revision procedures is the disproportionate resource utilization: Many studies have shown that revision THA is associated with greater resources, increased surgeon time and effort, longer operative time, and higher complication rates when compared with primary THA (17,18,19).