Journal of Orthopaedic Trauma
Author: Stephen D. Cook, Samantha L Salkeld, Mark R. Brinker, Micheal W. Wolfe, and David C. Rueger
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Background:
Orthopaedic practice expenses are the costs associated with providing treatment that are incurred
by a physician's practice. Certain payer types are thought to increase orthopaedic practice expenses by
increasing paperwork and other administrative activities. Our study investigated the hypothesis that orthopaedic
practice expenses would vary significantly by payer type.
Methods:
With use of the method of activity-based costing, data on the orthopaedic practice expenses for 518
consecutive patients (286 men and 232 women) who had a sports-related knee condition were collected. For
each patient enrolled in the study, all employees recorded the actual amount of time that they spent on each of
seventeen specific activities previously shown to be associated with orthopaedic practice. The seventeen activities
were categorized as either a value-added activity, which adds value to the services provided to the patient,
or a nonvalue-added activity, which does not add value. The total orthopaedic practice expense was the sum of
the value-added and nonvalue-added activity expenses. To capture all practice expenses associated with a particular
episode of care, data collection continued until the patient was discharged and the financial account had
been settled. We evaluated the differences in orthopaedic practice expenses among six payer types: self-pay,
indemnity plan, Medicare, health maintenance organization/point-of-service plan (HMO/POS), preferred provider
organization (PPO), and Workers' Compensation.
Results:
The differences among payer types with respect to orthopaedic practice expenses were significant (p =
0.0000000004). The total orthopaedic practice expense per episode of care was $123 for self-pay, $195 for
an indemnity plan, $148 for Medicare, $178 for PPO, $208 for HMO/POS, and $299 for Workers' Compensation.
These differences among payer types persisted even after accounting for patient age, gender, treatment
type (nonoperative versus operative), and number of office visits. Nonvalue-added activity expenses differed to
a greater degree among the payer types than did value-added activity expenses.
Conclusions:
The payer type was found to be an important factor affecting orthopaedic practice expenses, particularly
with respect to nonvalue-added activity expenses.
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