LESLEY RUSSELL. How knee replacement surgery highlights issues of access, affordability and best practice in Australia’s two-tiered healthcare system – Part 1

Oct 30, 2017

 PART 1 – Access and affordability

As the population ages, total knee replacement surgery is becoming commonplace.  It is one of the most expensive surgical procedures. Most replacements are performed as elective surgery in private hospitals. Those patients who must rely on the public system are waiting longer than ever.  

Knee replacement is now the most common joint replacement surgery in Australia.  In 2016 there were 33,049 such procedure performed in private hospitals and billed to Medicare.  Of these, 92% were first-time knee replacements (MBS items 49518 – 49524); and the remainder were mostly revisions of previous procedures (MBS items 49527 – 49533). The cost to Medicare was $35.84 million.

Procedures have increased by 100% between 2006 and 2016, and the cost to Medicare has increased by 144%. The total cost to the healthcare system of this procedure is much higher; the Independent Hospital Pricing Authority estimated that knee replacements cost $1.2 billion overall in 2012-2013, so by now it must be close to $2 billion.

This rapid growth is not necessarily a bad thing if it is an indication that more Australians are getting appropriate and affordable access to surgery that will help keep them mobile and thus engaged in the economy and the community. Regrettably however, it appears that access to knee replacement surgery is increasingly based on ability to pay rather than need.

Here’s a back-of-the-envelope calculation to help make this point. In 2015, 70.7% of knee replacements reported to the National Joint Replacement Registry (NJRR) were undertaken in private hospitals. The median age for people having this surgery was 69 years.

Assuming 50% of older people have and use private health insurance (PHI) (Private Healthcare Australia estimates 50.1% of the over-65 population has PHI), the rate of knee surgery for patients with PHI is more than twice that of patients receiving care in the public system. Small wonder then that the waiting times for knee surgery in public hospitals are some of the longest for elective surgery.

Wait on – you’re a public patient!

A report from the Australian Institute of Health and Welfare found that in 2015-16, half of patients in the public system waited more than 188 days for their surgery and 7.5% waited over a year.  People living outside major cities, the less economically advantaged and Indigenous Australians wait longer. Yet based on the prevalence of osteoarthritis (the main reason for knee replacement surgery), the need for this surgery is at least as high in the population groups who wait longer as for those who get it quickly.

The Second Australian Atlas of Healthcare Variation documents wide variations in the rates of knee replacement surgery in both the public and private sectors in all Australian  states and territories. In West Australia the rate was 284 procedures /100,000 population, it was 155/100,000 in the Northern Territory.  The rates vary wildly within the states and territories, too, from 128/100,000 to 507/100,000.  To some extent this variation reflects differences in the rates of risk factors such as osteoarthritis and obesity, the levels of PHI and access to private hospitals . Other factors include variable access to early and effective treatments that can reduce the severity of symptoms and the level of associated disability, the costs of allied health services such as physiotherapy, the practices of local surgeons, and patients’ perceptions of the benefits of surgery over other treatment options.

Queue- jumping with a bad knee

So while some Australians are missing out on timely joint replacement surgery, others can jump the queue. Increasingly the evidence indicates there is a very high likelihood that many of these queue-jumpers are getting this surgery inappropriately, before other options have been tried. That could explain why Australia has one of the highest rates of knee replacement in the OECD.

There is no clear agreement on the timing for and prioritisation of people needing elective joint replacement surgery. Arthritis Australia has recommended the establishment of multidisciplinary clinics for people with osteoarthritis that would provide both conservative management and triage to help reduce and better manage the need for joint replacement.


An evaluation of the NSW Osteoarthritis Chronic Care Program has reported that t 10.7% of patients on a waiting list for knee replacement were removed after they had been through a program  of muscle strengthening because they were judged no longer to need the replacement

Other recommendations are for the establishment of triage systems led by physiotherapists or nurse practitioners to efficiently and appropriately stream patients for non-surgical and surgical interventions. For those found to need surgery, there are gains to be had from promoting function such as enhancing muscle strength around the affected joint, even while they wait. Such programs are not widely available in either the public or private sectors and are not readily supported by current funding models. They also require increased care coordination between general practitioners, specialists and allied health professionals and substantial commitment from patients. Under such circumstances, many patients see surgery as the best, quick-fix option.

Counting the Cost

The rush to surgery for private patients often comes with sticker shock at the out-of-pocket costs. Nearly four in ten people will face a gap fee for a knee replacement. The Surgical Variance Reports compiled by the Royal Australian College of Surgeons and Medibank using Medibank data highlight this. The separation cost (hospital, prosthesis, surgeon and other doctors, diagnostic services) for knee replacement surgery in the years 2014-15 and 2015-16 ranged between $13,000 and $33,000, with an average cost of $22,925.

A major portion of this was the cost of the artificial joint, as high as $20,000, with an average of $9,191. There is no way to know what the principal surgeon charged, but the reports do give information about patients’ out-of-pocket costs for the services they received. The principal surgeon charged more than the PHI/Medicare rebate in 39% of separations; the average out-of-pocket cost was $1,885 but the highest was over $6,000. There were also out-of-pocket costs for other medical services in 72% of separations, averaging $457 but as high as $2,600.

Measuring Outcomes

Prominent Australian orthopaedic surgeons have stated there is no evidence that higher charging surgeons and more expensive prostheses deliver better outcomes. Indeed, the information in the Surgical Variance reports indicates that those surgeons who do fewer procedures are more likely to charge more and more likely to have higher rates of complications  with patients transferred to ICU, hospital-acquired infections, patients readmitted within 30 days, with subsequently longer hospital stays and greater out-of-pocket costs for patients.

The data required to be provided to the National Joint Replacement Register (NJRR) operated by the Australian Orthopaedic Association highlights that it is possible to identify outliers – and the hospitals they work in. The 2017 NJRR report, for the first time, looked at surgeon and hospital variations in outcomes and found that 122 of the 1427 orthopaedic surgeons reporting information to the NJRR had worse outcomes for hip and knee replacements than their peers. This information is not made public but is fed back to the individuals involved. However it is not clear what action, if any, is required of these individuals, their colleagues and the hospitals in which they work in order to address the potential quality and safety issues.

Some of this variation in outcomes is attributed to the prostheses used – this despite the registry flagging how the various devices perform. While the government’s recently announced reforms to PHI are expected to address the cost of prostheses to insurers, the ultimate choice of prosthesis for an individual patient lies with the surgeon, with few patients in a position to participate in discussing the selection and price of their artificial joint.

How good are the data?

There is now intense scrutiny of activities sponsored by pharmaceutical companies promoting their products  By contrast there is little information available about the extent to which marketing and promotion activities of medical devices manufacturers influence purchasing decisions by hospitals and surgical decisions by doctors.

The level of scrutiny required to allow new devices to enter and remain on the market is considerably less than that required for pharmaceuticals.  A 2011 study of new hip and knee replacements introduced over five years found none of them was superior to older versions and 30% were worse.  A 2014 study that used international data including from Australia found no convincing, high-quality evidence to support claims for superiority of several newer, apparently innovative devices, including gender-specific and high-flexion knee replacements.

Unfortunately, the focus of the government and health insurers has been on reducing PHI premiums rather than on what happens when PHI is used. There is nothing in the proposed reforms that will address patients’ out-of-pocket costs and the unwarranted variation in specialists’ fees. Clearly also more needs to be done (and be seen to be done) to address issues of quality and safety of both surgical procedures and implantable prostheses.

The Medicare data in this paper were calculated by the author from publicly available statistics.

Dr Lesley Russell is an Adjunct Associate Professor at the Menzies Centre for Health Policy at the University of Sydney.

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