Use of Observation Status Versus Readmission in Elective Total Knee and Hip Arthroplasty Returns to Hospital: A Single-Institution Perspective

The Affordable Care Act’s Readmission Reduction Program (RRP) and ongoing transparency efforts to promote consumer-driven competition place significant institutional focus on improving 30-day readmission rates. It remains unclear whether the reduction in readmission rates subsequent to the RRP occurred due to improved quality and/or partly due to increased use of observation status in conditions that may have been classified as readmissions prior to the RRP. We hypothesize that a significant percentage of our institution’s 30-day readmissions after elective total knee and hip arthroplasty (TKA/THA) overestimate the needs, duration, and complexity of the hospital-based intervention and inaccurately reflect the quality of service provided.

We performed a retrospective review of prospectively collected quality control data for 30-day returns to hospital after elective TKA/THA at our institution over a 2-year period. After stratification of the readmissions to under 48-hour and over 48-hour length of stay, we calculated the financial implications to our institution if the under 48-hour length of stay admissions were reclassified as an observation by applying discharge-weighted and payment-weighted analyses to the 2017 RRP report. We then calculated the out-of-pocket expenses for the under 48-hour Medicare subpopulation.

We found that 16.7% of the 30-day readmissions after elective TKA/THA required a length of stay under 48 hours. If the short length of stay TKA/THA readmissions were reclassified as observations, our institution’s 2018 RRP penalty would have been reduced to 39% or $334,512.28. However, this reclassification would result in an increase in out-of-pocket expenses by $540.25 (range $291.56-$1105.08) per patient.

A subpopulation of 30-day readmissions does not require a level of care consistent with inpatient admission services. Classification of this short length of stay subpopulation as an observation vs an admission per Centers for Medicare and Medicaid Services guidelines would have removed our institution from the TKA/THA-specific RRP penalty. However, this would result in the unintended consequence of shifting costs, particularly self-administered drug costs, to patients.