Reference Pricing Reduces Total Knee Implant Costs

Abstract

BackgroundReference pricing establishes a set price a hospital is willing to pay for total knee arthroplasty (TKA) components regardless of vendor. The hospital contracts with vendors that sell implants to the hospital at the hospital-dictated prices. Orthopedic surgeons are free to utilize any implant system that has met the reference price using their best clinical judgment. Our hypothesis is that vendors will meet the set price and selection of different vendors and technologies will not change. MethodsWe retrospectively analyzed the 12 months prior (May 2017-2018) and the most recent 12 months after (March 2019-2020) implementing reference pricing at our institution. We investigated differences in average prices for total implant and component costs. We evaluated cost of implants with respect to surgeon volume, assessed the rate of cementless TKAs used, and number of companies purchased from before and after reference pricing. ResultsIn total, 7148 TKAs were included in the study with 3790 arthroplasties before and 3358 after implementation of reference pricing. Overall implant costs decreased by 16.7% (P < .0001). All individual knee component costs decreased by at least 11% (P = .0003). No difference in prices were found among surgeons (P = .9758). Cementless knee use increased by 9% (P < .0001; odds ratio 1.94, 95% confidence interval = 1.69-2.24). No vendor business was lost. ConclusionThe strategy of reference pricing significantly reduced costs for TKA implants at our institution. The reduction in implant costs was regardless of surgeon volume. Newer technologies were utilized more often after reference pricing. This strategy represents a significant cost-savings approach for other hospitals.