Total Costs and Cost Savings of Comprehensive Knee Osteoarthritis Management Combined With Total Knee Arthroplasty in an Ambulatory Surgical Center

OBJECTIVES: Concerns over total knee arthroplasty (TKA) appropriateness and costs drive interest in value-based models improving outcomes relative to expenditures. Integrated practice units (IPUs) offer comprehensive knee osteoarthritis (KOA) management through multidisciplinary teams in co-located facilities. Ambulatory surgical centers (ASCs) provide safe, efficient outpatient surgery. While outpatient cost savings of surgical episodes are evident, analyses often overlook the entire care continuum. This study uses time-driven activity-based costing (TDABC) to estimate total costs for IPU-based care with outpatient TKA in an ASC, comparing with simulated traditional care and identifying cost reduction drivers.

METHODS: We employed TDABC to assess costs for IPU-managed KOA with ASC-based TKA. Process maps, resource documentation, and time estimates, obtained through various methods, informed cost calculations. Capacity cost rates and process times determined direct labor costs, combined with non-labor and indirect costs. Traditional inpatient TKA pathway costs were also estimated. Costs for IPU, ASC, and traditional care were calculated from initial visit to 1-year postoperative follow-up. Savings (absolute and percentage) were compared between pathways.

RESULTS: TKA in an ASC after IPU-based KOA care had a total cost of $14,371, compared to $16,169 for traditional inpatient TKA. IPU-based KOA care followed by ASC-based TKA saved $1,798 (11.1%). Key cost reduction drivers included: no inpatient room and board ($563); no inpatient physician and nursing labor costs ($412); personalized virtual and in-person physical therapy protocols ($240); reduced laboratory and pharmacy costs ($187); judicious use of joint injections ($71); and advanced practitioners reviewing patients with surgeons ($70).

CONCLUSIONS: The total costs of value-based KOA care leading to ASC-based TKA are significantly lower than traditional care. These insights benefit stakeholders shaping alternative payment models for improved musculoskeletal outcomes and costs. Identifying potential cost-saving drivers informs service configuration, finance, payment flow, and program pricing, essential for designing financially sustainable specialty care models.