Cost of Doing Orthopedic Surgery

With the advent of the updated CMS 2008 fee schedule, orthopedic surgery now becomes an even more viable option for the ASC. 183 Orthopedic CPTs were added to the list, including a uni-compartment knee replacement (CPT 27446). In addition, ASCs can now realize up to a 92 percent increase in reimbursement from Medicare on average for all orthopedic procedures.

Commercial payors will be taking into consideration the positive reimbursement changes that CMS has made for orthopedics as they recalibrate their reimbursement schedules for ASCs. Going forward — as we negotiate future contracts — we need to educate payors and have in place the best strategy to obtain good reimbursement for our orthopedic cases.

That being said, when looking at the orthopedic service at your ASC or if thinking of adding an orthopedic service, what are the prime financial considerations that need to be addressed? Certainly space, equipment and instrumentation are critical. Certain subspecialties in orthopedics require more equipment, instrumentation and trays than others, such as spine, shoulders and ACL repair.

Space: An assessment of your current work area for decontamination and central sterile processing and storage area is important for instrumentation, equipment and supplies that you will require. You may need a C-arm and will need ORs (especially pertinent for older facilities) that can accommodate a C-arm. If you intend to perform joint replacement procedures, the trays required are numerous and older ORs may be too cramped to accommodate.

Equipment/Instrumentation: Not counting the items you need to purchase to perform orthopedic cases, you will find that a 20 x 20 chamber pre-vacuum autoclave is necessary to process the larger instruments. Usually a washer-disinfector is recommended due to the amount of instrumentation needed for efficient decontamination and cleaning. Also, many are organizations using the Neptune waste system, which requires a docking station.

Video towers can be specialty-specific and you may require a separate tower or, hopefully, can convert a current tower/camera system from another specialty for use in orthopedics. Camera inventory and processing can be an issue and you will need to assess your case mix to determine the number of items necessary to maintain efficient OR turnover. Many organizations use a liquid sterilization processing method or a gas sterilization method for cameras.

Let’s look at financial considerations as far as the anticipated cost of performing orthopedic surgery and how to go about estimating costs:

Total cost of a case - How to estimate or calculate

▪ Overhead per case

1. Take each potential case from patient “in room” to patient “out of room” and estimate OR time in minutes.
2. Multiply that estimated time by $18 - $24, depending upon your ASC’s costs.
3. This will give you an average overhead (all expenses except for disposable medical supplies and implants that are “costed” on the surgeon’s preference card).
4. $18/OR minute is an overhead cost goal to measure against.
5. To obtain your facility’s overhead cost per OR minute, take your total OR minutes in a calendar month and divide into your monthly expenses minus medical supplies and implants on your profit and loss statement (cash basis). That will give you your OR/minute cost.
6. If this is less than $18/minute, you’re doing great.
7. If it is more, you need to look at costs that go into your overhead and try to reduce them.

One final benchmark for the overhead category — which is the largest overhead cost — is payroll and benefits. If you are primarily performing orthopedic cases, the range of payroll and benefits per case is $280-$400. Orthopedics is more labor intensive if you are performing a mix of the subspecialties. If you are performing just hand or just knee arthroscopy cases, you will find your total employee costs at the lower end of the range. If going full blown across all sub-specialties, including spine, you will be at the high end of the total employee cost range. Labor is also marketplace-dependent and changes annually.

▪ Disposable medical supplies and implants, prosthetics and tissues:

1. This is the cost that you calculate from your surgeon’s preference card. This can be as simple as OR costs or as full-blown as every disposable medical supply, including pharmaceuticals, used for the patient from preop, to anesthesia, to OR, to PACU.
2. You decide how detailed you wish to be. Just remember that the more-detailed the preference card, the more labor dollars you will spend to obtain the information and to keep it accurate.
3. Be sure you need that level of detail before you implement the process by asking yourself how this data improve your bottom line.
4. Implants, prosthetics and tissues: Make sure to also track this on your preference card.
5. The benchmark to measure against for disposable medical supplies and implants, prosthetics and tissues is an average of $265-$360/case with a typical mix of orthopedic cases. If you perform a lot of shoulder, foot and ankle, pinning and plating, ACL and joint replacement procedures, then your costs will be much higher.

-- Susan Kizirian is COO of Ambulatory Surgical Centers of America. Contact her at skizirian@ascoa.com.