EXPECTED HOSPITAL COSTS OF KNEE REPLACEMENT FOR RURAL RESIDENTS BY LOCATION OF SERVICE

This article assesses the relative cost of providing a specific proced ure, knee replacement (KR) surgery, to rural residents in rural commun ity-based hospitals rather than in urban hospitals. Costs are predicte d using regression analysis with readily available data from Health Ca re Financing Administration's Medicare Provider Analysis and Review. T he specification incorporates the effect of referral patterns on volum e and the subsequent impact on costs in the different settings. The pr edicted cost per case was found to be lower in rural rather than urban hospitals across all patient types. Findings indicate scale economies exist for KR surgery in both the urban and rural hospital settings. R esults also suggest the total cost of a hospitalization associated wit h KR surgery in rural hospitals is more sensitive to changes in proced ure volume than in urban hospitals, providing preliminary support for increased regionalization of KR surgery in rural hospitals. While long -term outcome measures associated with successful KR surgery (improved function, reduced pain, etc.,) are not available, mortality rates and perisurgical complication rates were not significantly different betw een rural patients who received KR surgery in rural hospitals and thos e who received KR surgery in urban hospitals. Among rural hospitals, h owever, complication rates were significantly correlated with procedur e volume (complication rates were significantly lower in rural hospita ls that performed more than nine KR surgeries a year). Our results sug gest KR surgery can be delivered efficiently in rural community-based settings and support the case for regionalization of this procedure.