Audits uncover extreme cost variation in hip replacement surgeries
Background
ClaimDOC’ s comprehensive line-by-line auditing of claims uncovers errors that basic claim repricing and auto-adjudication does not catch, leading to greater savings to health plans and beneficiaries. Our audit team analyzes all types of healthcare claims for a variety of potential concerns including excessive usual and customary charges, duplication of claims, correct coding initiative edits, unbundling of services and other issues. Our claims review is not intended to impact care decisions or medical practice.
In this Claims Audit Spotlight, we focus on hospital outpatient surgery services related to coding billing and related charges. Outpatient surgery, also called “same day” or ambulatory surgery, occurs when the patient is not expected to be admitted to the hospital. Outpatient surgery is generally suited best for patients undergoing minor or intermediate procedures. The types and complexity of outpatient surgical procedures have expanded significantly.
Pricing and payments for hospital outpatient surgeries are considered a “packaged” concept, meaning related items/services are bundled together and reimbursement is based on the surgical procedure code(s) reported/billed under an ambulatory payment classification (APC) methodology. In limited circumstances, certain services may be reimbursed separately. Examples of “packaged” surgery items include medical/surgical supplies, ancillary services, diagnostic laboratory tests, intraoperative services, selected drugs and biologicals, recovery, observation services and others.
Total Hip Replacement – Case Scenarios
The case scenarios outlined below provide an overview of two individuals having a total hip replacement procedure (also called total hip arthroplasty) reported/billed by each hospital with CPT code 27130. Typical surgical procedure time is 1-2 hours, where the surgeon removes damaged cartilage/bone and then positions a new metal, plastic, or ceramic implants to restore alignment and function of the hip.
Case One
Member underwent hospital outpatient surgery for a left total hip replacement (CPT procedure code 27130) at a hospital located in San Diego, CA.
The hospital submitted their facility claim to insurance with total charges of $201,072.72.
High dollar charges included:
- Operating room for $96,403
- Implants for $79,466.75
- Anesthesia for $8,273
- Recovery room for $6,312
Below is a summary of the hospital facility charges billed, related ClaimDOC pricing and savings:
- Total hospital billed charges: $201,072.72
- Medicare pricing based on APC 05115 and PT/OT fee schedule – $22,415.37
- ClaimDOC Pricing: $35,614.50
- Based on the cost-to-charge ratio (C-C/R) with markup, less $79.10 for medication (antibiotic) quantity units billed over the maximum units of service a provider would generally provide to a patient on a single date of service.
- Plan Savings: $165,458.22
- Percentage of Savings: 82%
Case Two
Member underwent hospital outpatient surgery for a right total hip replacement (CPT procedure code 27130) at a hospital located in Fort Lauderdale, FL.
The hospital submitted their facility claim to insurance with total charges of $58,765.17
High dollar charges included:
- Operating room for $22,272
- Implants for $18,330
- Recovery room for $9,743
- Anesthesia for $4,622
Below is a summary of the hospital facility charges billed and related ClaimDOC pricing and savings:
- Total hospital billed charges: $58,766.17
- Medicare pricing based on Medicare APC 05115 and PT/OT fee schedule – $11,986.26
- ClaimDOC Pricing: $14,982.83
- Based on Medicare APC and PT/OT fee schedule with markup. (The hospital’s Cost-to-Charge ratio $11,386.27).
- Plan Savings: $43,782.34
- Percentage of Savings: 75%
The Takeaway
Hip replacement costs vary by tens of thousands of dollars depending on a wide range of factors, including the type of facility where surgery is performed, diagnostic tests, implants, geographic location, surgeon, and other considerations. Facility and physician charges can influence the ultimate cost for employers and consumers.
While hospitals may bill any amount they choose for services/procedure(s) performed, unbundling of “packaged” services, egregious fees or incorrect billing can complicate matters for members to understand their bills and payments, impact the collection of patient balances, build a reputation of hospital unbundling services and/or charging high fees, create burdens for patients having no insurance and a host of other issues.
Our goal at ClaimDOC is to use benchmark charges and costs nationally to negotiate fair and ethical payments. Employers turn to us to establish fair reimbursement rates for their plans allowing them to save money and provide richer benefits to their employees. A win-win for everyone.