Should the Pareto Principle Be Applied as a Cost Savings Method in Hip and Knee Arthroplasty?

Abstract

Background: Understanding the most significant contributions to the cost of completing total hip arthroplasty (THA) and total knee arthroplasty (TKA) is essential to optimize costs and meet funding standards. The objectives of this study are to determine whether cost distribution of THA and TKA follows the Pareto Principle (80/20 rule) and factors predictive of costs that could be modified.

Methods: All inpatient, primary, elective, and unilateral THA and TKA patients from April 2008 to September 2017 were retrospectively reviewed. The Pareto Principle was tested by dividing patients into top 5% cost increments and calculating patient cost category ratio. Relationship between patient-related factors and acute care costs and relationship between cost categories and length of stay (LOS) were examined using multiple regression.

Results: The Pareto Principle does not apply for THA or TKA patients, with the top 20% of costly patients accounting for approximately 30% of total costs. LOS is the strongest independent driver of costs. Operating room services and supplies accounted for over 50% of total costs but with low variability (coefficient of variation < 0.25). Laboratory and allied health costs had high variability (coefficient of variation > 1.5), but their contribution to total costs was low (from 0.76% to 5.68%).

Conclusion: THA and TKA costs do not follow Pareto Principle, concluding that targeting top costly patients is not as effective as focusing on overall patient population. Efforts to decrease overall costs should focus on decreasing the LOS and improving operating room process efficiencies including human resources for supplies and instruments.

Keywords: cost savings; length of stay; pareto principle; total hip arthroplasty; total knee arthroplasty.