Costing total hip arthroplasty in a South African state tertiary hospital

Abstract

Background:
Most South Africans depend on the public sector for health services. There is an increasing demand for arthroplasty in the public sector, but a paucity of academic data regarding its cost.

Objectives:
To: (i) identify the factors that determine the cost of an uncomplicated primary hip arthroplasty; and (ii) make recommendations on cost optimisation.

Methods:
This was a cross-sectional study. Patients who met the inclusion criteria had their hospital financial records reviewed from October 2015 to March 2017. Six cost centres were utilised: inpatient admission, theatre and anaesthesia, ambulatory, prosthesis, physiotherapy and blood bank. The data were statistically analysed.

Results:
Fifty-five patients met the study inclusion criteria. Data were stratified into categories. Analysis of variance (ANOVA) was used to test the data, and significant differences were found in the prosthesis, inpatient admission and ambulatory cost centres at a 95% significance level. The least significant difference was used to test the ANOVA results that paired significant categories. No cost centre showed significance over the other categories. Data for the six cost centres were compared with the current literature and industry best practice. Eight recommendations are made.

Conclusions:
The study showed that clinicians need to be aware of procedural costing in the current financial climate. There are still opportunities to optimise cost containment in the state sector.

Full text

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Total hip arthroplasty (THA) has proved to be a life-improving
procedure since its inception in the 1970s.[1] It is among the most
cost-effective interventions in medicine in terms of cost per quality-
adjusted life-years gained.[2] According to the 2016 South African
National Joint Registry Annual Report,[3] 47.6% of all entries from
December 2012 to December 2015 were primary THAs.[3] In South
Africa (SA), the ageing population has increased the demand for
arthroplasty services in keeping with global trends referred to as
an impending epidemic.[1,4-7] The public sector, which provides
healthcare to 84% of the SA population, is under the spotlight with
regard to arthroplasty waiting lists.[8] In light of the current budgetary
constraints, there is a substantial economic burden associated with
arthroplasty.[1,5,9]
Arthroplasty costs vary according to frequency of the procedure,
varied inpatient services, availability of medical supplies, other
treatment modalities utilised, and patient diversity.[10] Meyers et al.[10]
found that the major cost drivers were the prosthesis, anaesthesia/
operating room and nursing/hospital costs. They concluded that
standardisation alongside development of critical pathways will
reduce case-to-case variation and result in a substantial decrease in
costs. Rana and William[6] showed that the above three factors made
up 66% of total cost. The strongest correlation with total cost was
hospital length of stay (LoS). However, they felt that this cost cannot
be reduced further without compromising the quality of care.
Locally, the Gauteng Department of Health has developed initiatives
to address surgical backlogs, particularly arthroplasty, by introducing
a week-long blitz where arthroplasty patients are operated on
during dedicated periods.[11,12] This week-long blitz, termed Move
and Walk week, was launched at Helen Joseph Hospital (HJH) in
October 2015, ushering in the first documented implementation of
standardised procedures for arthroplasty in the public sector. This
initiative, supported by development of a critical pathway through
a multidisciplinary approach for perioperative management of these
patients, entailed doing 25 - 30 operations in a week.[13]
Clinicians are generally not familiar with costs of patient care.
An SA study showed that providing information to clinicians on
laboratory test costs led to a significant drop in numbers of tests
requested and associated cost, saving as much as 36% per day.[14]
Treating clinical teams’ awareness of cost drivers in THA has been
shown to improve cost-containment measures.[15]
Objectives
To determine the cost of an uncomplicated primary THA in a public
hospital, to identify its cost factors, and to make recommendations
on cost optimisation.
Methods
We conducted a cross-sectional study at HJH. The study population
consisted of patients aged >18 years who underwent total primary
hip arthroplasty during the Move and Walk weeks from October
2015 to March 2017. Patients who were operated on outside the Move
and Walk weeks and those who had revision THA were excluded.
The study was approved by the Human Research Ethics Committee
of the University of the Witwatersrand (ref. no. M161147). Data
were collected from hospital records and the Move and Walk weeks
financial records.
Costs associated with THA were divided into six cost centres:
inpatient admission, theatre and anaesthesia, ambulatory, prosthesis,
physiotherapy and blood bank. These centres were derived from the
financial audit of the Move and Walk weeks at HJH. The inpatient
This open-access article is distributed under
Creative Commons licence CC-BY-NC 4.0.
Costing total hip arthroplasty in a South African
state tertiary hospital
A R Sekeitto, MB ChB, PDM, FC Orth (SA), MMed (Orth); A A Aden, MD, FCS (SA) Orth
Division of Orthopaedic Surgery, Faculty of Health Sciences, University of the Witwatersrand, Johannesburg, South Africa
Corresponding author: A R Sekeitto(sekeitto@yahoo.com)
Background. Most South Africans depend on the public sector for health services. There is an increasing demand for arthroplasty in the
public sector, but a paucity of academic data regarding its cost.
Objectives. To: (i) identify the factors that determine the cost of an uncomplicated primary hip arthroplasty; and (ii) make recommendations
on cost optimisation.
Methods. This was a cross-sectional study. Patients who met the inclusion criteria had their hospital financial records reviewed from October
2015 to March 2017. Six cost centres were utilised: inpatient admission, theatre and anaesthesia, ambulatory, prosthesis, physiotherapy and
blood bank. The data were statistically analysed.
Results. Fifty-five patients met the study inclusion criteria. Data were stratified into categories. Analysis of variance (ANOVA) was used to
test the data, and significant differences were found in the prosthesis, inpatient admission and ambulatory cost centres at a 95% significance
level. The least significant difference was used to test the ANOVA results that paired significant categories. No cost centre showed
significance over the other categories. Data for the six cost centres were compared with the current literature and industry best practice.
Eight recommendations are made.
Conclusions. The study showed that clinicians need to be aware of procedural costing in the current financial climate. There are still
opportunities to optimise cost containment in the state sector.
S Afr Med J 2021;111(3):250-254. https://doi.org/10.7196/SAMJ.2021.v111i3.14931

251 March 2021, Vol. 111, No. 3
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cost was calculated from the daily admission rate multiplied by the
number of admission days. The laboratory cost was calculated from
the National Health Laboratory Service invoice of each patient. The
prosthesis cost was determined from the invoice submitted by the
respective implant companies. The blood bank service cost, which
comprised type and screen fee, after-hours levy and cost of blood
products issued, was derived from the invoice incurred by the patient.
The theatre and anaesthesia cost, which covered the expenditure
incurred during the perioperative period in theatre, was provided by
the HJH finance department.
Data were analysed using descriptive statistics for the demographic
data and cost variables. The cost of each cost centre was evaluated in
ZAR. The statistical analysis of continuous variables was presented
using means and standard deviations (SDs). Since the total cost is
the sum of all the cost centres, the quantiles were used to classify
cost variables into categories of high, medium and low for all cost
centres. Quantiles represent a statistical categorisation of continuous
variables based on the representation from the sample. These
categories were then used to evaluate whether there were significant
differences between the patients within these cost centres. Analysis of
variance (ANOVA) was used to test whether there was any significant
difference between the means of more than two independent
groups. The results of the F-statistics and their corresponding 95%
significance levels were displayed in tables. If a significant difference
was found, the least significant difference (LSD), calculated from
the results of the ANOVA, was used to test, at an overall 5% level of
significance. The LSD tests which pairs of categories are significantly
different from each other, when there are more than two categories.
Results
Fifty-five patients met the inclusion criteria. There were 14 males
(25.6%) and 41 females (74.6%), with an age range of 42 - 82 years
(mean (SD) 62.9 (10.7) years). The side of the procedure was left in
20 cases (36.4%), and right in 35 (63.6%).
The mean (SD) LoS was 7.5 (2.4) days, with preoperative and
postoperative LoS of 2.8 (1.8) days and 4.8 (2.0) days, respectively.
The mean (SD) inpatient cost was ZAR13 721.24 (4 340.72), with
a minimum and maximum of ZAR7 124.00 and ZAR28 496.00,
respectively (Table 1).
The mean (SD) prosthesis cost was ZAR40 305.16 (9 501.11), with
a minimum and maximum of ZAR30 000.00 and ZAR72 761.22,
respectively. The variation in cost is explained by certain companies
having predetermined set pricing agreements with the hospital while
others did not. The theatre and anaesthesia cost was a predetermined
amount of ZAR17 243.00, and it remained unchanged during the
study period. No statistical analysis was performed on this cost
centre. The ambulatory cost was inclusive of costs of X-rays,
electrocardiograms (ECGs), consulting, laboratory investigations
and intravenous fluids. The HJH finance department calculated a
fixed amount of ZAR1141.00 to cover the first three items. The mean
(SD) laboratory cost was ZAR1 391.54 (248.89), with a minimum
and maximum of ZAR1 156.60 and ZAR2 837.33, respectively. The
physiotherapy cost was billed per session at ZAR105.00. Patients
received a single session preoperatively, and two sessions per day from
day 1 postoperatively until discharge. Table 1 illustrates that the mean
(SD) cost was ZAR798.00 (9 269.30) with a minimum and maximum
of ZAR420.00 and ZAR1 890.00, respectively. The blood bank mean
(SD) cost was ZAR726.32 (1 164.85), with a minimum and maximum
of ZAR320.31 and ZAR7 396.35, respectively (Table 1).
The total cost for primary THA was calculated from the sum
of all the cost centres. The mean (SD) cost was ZAR74 185.25
(10 792.83), with a minimum and maximum of ZAR60 414.04
and ZAR110 598.62, respectively (Table 1). Fig. 1 illustrates the
percentage contribution of each cost centre to the total cost.
Table 2 shows the cost centres in quantiles. Quantiles were used
to classify all cost centres into high, medium and low categories,
as shown in Table 3. These categories were then used to evaluate
whether there were significant differences between patients.
ANOVA was used to test whether there was any significant
difference between the three levels. The results of the F-statistics
and their corresponding 95% significance levels are displayed in
Table 4. Type I SS is the sum of square associated with rejecting
Table 1. Descriptive statistics of the respective cost centres
Cost (ZAR)
Cost centre Mean (SD) Minimum Maximum
Prosthesis 40 305.16 (9 501.11) 30 000.00 72 761.22
Inpatient admission 13 721.24 (4 340.72) 7 124.00 28 496.00
Ambulatory 1 391.54 (248.89) 1 156.60 2 837.33
Theatre and anaesthesia 17 243.00 (-) 17 243.00 17 243.00
Physiotherapy 798.00 (269.30) 420.00 1 890.00
Blood bank 726.32 (1 164.85) 320.31 7 396.35
Overall total cost 74 185.25 (10 792.83) 60 414.04 110 598.62
SD = standard deviation.
23.7
1.9
18.5
53.9
0.95
1.07
Prosthesis Inpatient admission
Ambulatory Theatre and anaesthesia
Physiotherapy Blood bank
Fig. 1. Contribution (%) of the six cost centres to the total cost of primary
hip arthroplasty.

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a true null hypothesis. The null hypothesis is that there is no
significant difference between the categories of the cost centres. The
overall model is significant, and it was found that there were some
significant differences between the categories of prothesis cost centre,
inpatient admission cost centre and ambulatory cost centre at a 95%
significance level (p<0.05).
The LSD (Table 5), calculated from the results of the ANOVA,
was used to test at an overall 5% level of significance, which
pairs categories that differ significantly. The inpatient admission,
prosthesis, ambulatory and physiotherapy cost centres showed
significant differences between high and low, and between high
and medium, categories, while there was no significant difference
between low and medium categories. The blood bank cost centre
showed a significant difference between high and low categories,
and no significant differences between the low and medium, and
high and medium, categories. However, the ambulatory cost centre
demonstrated no significant differences between the categories.
Discussion
The mean age of the patients was comparable to the reported
age in the literature, as was mean LoS in hospital, despite the
preoperative mean (SD) of 2.8 (1.8) days in our study.[16] The latter
was required because of logistical constraints in the state sector,
caused by the burden of trauma, to ensure availability of beds for these
patients. Batsis et al.[17] have shown that LoS is a key determinant of
resource utilisation,[17] hence the suggestion of proper postoperative
streamlining of patients to reduce LoS. In fact, outpatient THA in
appropriately selected patients has shown financial benefits when
supported by clear perioperative protocols, with no increase in
readmission or complications.[18-21] However, we are of the opinion
that the SA public health system and patient population are currently
not ready for outpatient THA.
The average prosthesis cost was ZAR40 305.20. However, since
surgeons were allowed to use their preferred implant company, and
some of the companies had no pre-set pricing with the hospital, this
cost varied. This programme started before the Gauteng Province
orthopaedic tender came into effect in 2017. Barber and Healy[22]
found that the cost of the prosthesis amounted to 24% of the total
inpatient cost, compared with 53.9% in our study. In the past decade,
the price of a total hip prosthesis has risen by 212% in the USA,
and variation of as much as 700% has been reported.[9,16] This trend
does not follow the usual economies-of-scale principles, according
to which the cost of the prosthesis should decline with increased
numbers of procedures[22,23] – hence the need for standardisation
recommended in many studies.[6,22,23] The theatre and anaesthesia
cost was a fixed set amount during this study, and was therefore
excluded from the statistical analysis. The ambulatory cost centre,
which included investigations such as laboratory investigations,
imaging and ECGs, as well as intravenous fluids, has already been
standardised. The physiotherapy cost centre was not shown to be
statistically significant, and we therefore offer no cost-containment
recommendation. In the blood bank cost centre, our study showed
that 25% of the patients (n=14) incurred an after-hours levy. We
consider that this figure is too high, given the reported increased rate
of allogenic blood transfusions after THA.[24]
In 2017, the private sector in SA implemented fixed global
fee products to remunerate participating entities within total
joint arthroplasty. Professional societies are opposed to this
Table 2. Quantiles of the cost centres
Cost (ZAR)
Cost centre Maximum Q3 Q1 Minimum
Prosthesis 72 761.20 42 829.80 34000.00 30000.00
Inpatient admission 28496.00 15104.00 11328.00 7124.00
Ambulatory 2 837.33 1 373.96 1 297.14 1 156.60
Physiotherapy 1890.00 840.00 630.00 420.00
Blood bank 7 396.35 709.01 320.31 320.31
Q = quantile.
Table 3. Categories according to frequency
Cost centre High, n (%) Medium, n (%) Low, n (%)
Prosthesis 14 (25.5) 27 (49.1) 14 (25.5)
Inpatient 14 (25.5) 21 (38.2) 20 (36.4)
Ambulatory 14 (25.5) 27 (49.1) 14 (25.5)
Physiotherapy 17 (30.9) 19 (34.6) 19 (34.6)
Blood bank 14 (25.5) 27 (49.1) 14 (25.5)
Table 4. F-statistics of the cost centres
Cost centre df Type I SS Mean square F-value Pr(>F)
Prosthesis 2 3 887 318 824 1 943 659 412 86.93 0.0001*
Inpatient admission 21 232 716 448 616 358 224 27.57 0.0001*
Ambulatory 2153 004 074 76 502 037 3.42 0.0416*
Physiotherapy 2 5 674 515 2 837 258 0.13 0.8812
Blood bank 227 654 007 13 827 004 0.62 0.5434
df = degrees of freedom; Type 1 SS = sum of square associated with rejecting a true null hypothesis.
*Significant at the <0.05 level.

253 March 2021, Vol. 111, No. 3
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implementation, as it potentially leads to unethical conduct and a
power imbalance driven by funders and facilities, and contravenes
Health Professions Council of South Africa guidelines. The greatest
risks to patients are underservicing and additional costs due to
co-payments (Discovery Health, Advisory on global fee arrangement
participation (press release), 2016 – unpublished).
In our study, the mean total cost of primary THA, which was
ZAR74 185.25 with a minimum and maximum of ZAR60 414.04
and ZAR110 598.62, respectively, compares favourably with the cost
in the private sector. Although our study did not calculate the cost
of the surgical team and the anaesthetist, this figure is substantially
lower than the cost in both the bundle-fee model and the fixed-fee
model of the Discovery Health joint arthroplasty network, which
were both ZAR133 262.00 in 2018 (Discovery Health, Elective hip
and knee network agreement, 2017, and Joint arthroplasty agreement,
2018 – both unpublished). An interesting observation is the cost of
the prosthesis in the private sector being limited to ZAR35 000.00
because of strong bargaining with implant companies, which was
not the established protocol in our hospital. Moreover, the maximum
physiotherapy cost in our study compares favourably with the private
physiotherapy cost.
Study limitations
Our study was limited by the small number of patients in comparison
with other studies. It did not explore the relationship between
indication for THA and impact on cost, which was shown to be a
cost factor. We relied on the availability and adequacy of the financial
data linked to patients undergoing THA, and we excluded the cost of
chronic medication and overhead facility costs. Most of all, while our
study collection ran over 3 years, no declaration was made about any
inflationary adjustment.
Recommendations
We recommend:
• Collective bargaining with implant companies to fix prosthesis
cost.
• Reserving dedicated elective beds for rolling scheduled admissions
for elective cases.
• Developing postoperative protocols in keeping with studies
advocating for standardisation.
• Subdividing the theatre and anaesthesia cost centre into variables
to obtain accurate figures.
• Respecting physicians’ clinical autonomy regarding investigations
to safeguard patient safety.
• Doing blood typing and screens the day before or on the morning
of the procedure to avoid incurring an after-hours levy.
• Pro-rata estimation of the cost of the time spent by the surgical
and anaesthetic teams to obtain comprehensive costing of THA in
the public sector.
• Costing of all cost-driven procedures within orthopaedics.
Conclusions
The demand for THA in SA is increasing in keeping with the global
trend. The cost of healthcare services is coming under scrutiny
owing to constrained budgets in the current financial climate. The
private sector, however controversial, has been the forerunner in the
Table 5. Least squares means for the cost centres
Cost centre
Difference between
means
95% CL for LSMean(i) -
LSMean(j)
Pr>|t| for H0: LSMean(i) =
LSMean(j)
Prosthesis
Category combination
High - low 19 974 14818 - 25 130 0.0001*
High - medium 18 911 14418 - 23 403 0.0001*
Low - medium –1 063.413968 –5 555.846272 - 3 429 0.6368
Inpatient admission
Category combination
High - low 13 457 6 769.492089 - 20 145 0.0002*
High - medium 9 719.479048 3 097.653853 - 16 341 0.0048*
Low - medium –3 737.728667 –9 734.046412 - 22 58.6 0.2166
Ambulatory
Category combination
High - low 8 107.377857 157.682782 - 16 057 0.0458*
High - medium 6 972.997196 45.991906 - 13 900 0.0486*
Low - medium –1 134.380661 –8 061.385951 - 5 792.6 0.7438
Physiotherapy
Category combination
High - low 11 557 4 989.587194 - 18 124 0.0009*
High - medium 8 858.847678 2 291.626668 - 15 426 0.0092*
Low - medium –2 697.960526 –9 080.152158 - 3 684.2 0.4002
Blood bank
Category combination
High - low 8 941.309286 980.150623 - 16 902 0.0285*
High - medium 4 757.814233 –2 179.17991 - 11 695 0.1746
Low - medium –4 183.495053 –11120 - 2 753.5 0.2317
CL = confidence limits; LSMean = least squares mean.
*Significant at the <0.05 level.

254 March 2021, Vol. 111, No. 3
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attempt to contain costs, and claims to have had success. Our study
reviewed the literature and studied a cohort of arthroplasty patients
in a local setting as well as the prevailing local industry practice. We
analysed the six cost centres and provide eight recommendations for
cost-containment measures on THA performed in the public sector.
Declaration. e research for this study was done in partial fullment of
the requirements for ARS’s MMed (Orthopaedic Surgery) degree at the
University of the Witwatersrand.
Acknowledgements. We thank Virginia Gcaki, Dr Warren Meier, Lucia
Mabuto, Stetson Hauku and the Division of Orthopaedic Surgery for
their support in completing this study.
Author contributions. ARS: substantial contributions to the conception
and design of the work, and the acquisition, analysis and interpretation of
data for the work; draing the work and revising it critically for important
intellectual content. AAA: substantial contributions to the conception
and design of the work, and the acquisition, analysis and interpretation of
data for the work; draing the work and revising it critically for important
intellectual content.
Funding.None.
Conicts of interest.None.
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Accepted 15 October 2020.