Cost reductions in total hip arthroplasty after DRG payment reform and volume-based procurement in China: a difference-in-differences study
Abstract
Background:Between 2021 and 2022, China's health system reforms deployed two overlapping cost-containment instruments in quick succession: diagnosis-related group (DRG) bundled payment and a nationalized volume-based procurement (VBP) programme that cut orthopedic implant prices by 70%−90%. Disentangling their independent contributions to hospitalization costs is both methodologically challenging and policy-critical. We examined whether the January 2021 DRG roll-out in Wenzhou was associated with a differential change in total hip arthroplasty (THA) costs and adverse discharge outcomes across insurance groups, and whether the observed cost reductions are consistent with a larger contribution from either reform.MethodsWe analyzed 2,518 consecutive THA admissions at a tertiary hospital in Wenzhou (2015–2025). Patients were classified as Social Insurance (NRCMS, URBMI, and UEBMI; n = 2,046) or Other Payment (self-pay, full public-service, miscellaneous; n = 472). A difference-in-differences (DID) framework with year fixed effects and HC3-robust standard errors estimated the group-specific cost change associated with the reform. An event-study design assessed pre-reform parallel trends and traced the year-by-year trajectory of any post-reform divergence. Five sensitivity analyses varied the reform window (excluding 2020–2021, excluding 2021 alone, and a DRG-only window before the implant-price break), the comparison group, and the covariate set; in addition, E-values were used to assess sensitivity to unmeasured confounding. Significance was set at a two-sided α of 0.05, with Holm adjustment across the three cost outcomes. The adverse discharge outcome — defined as death, non-recovery, or other non-standard disposition at discharge — served as a safety endpoint.ResultsAcross the full sample, median total THA cost fell from CNY 52,527 in the pre-reform period (2015–2020) to CNY 34,397 post-reform (2021–2025), a decline of 34.5%. The reduction was dominated by implant and material costs, which fell by 61.9% in Social Insurance patients (CNY 36,167 to CNY 13,772; p < 0.001) and 56.3% in Other Payment patients (CNY 36,264 to CNY 15,864; p < 0.001). The DID interaction term — capturing the group-differential change beyond the shared time trend — was not statistically significant for total cost (β = −0.015; 95% CI −0.072 to 0.042; p = 0.610), drug cost (β = −0.055; 95% CI −0.146 to 0.036; p = 0.235), or implant cost (β = −0.015; 95% CI −0.096 to 0.067; p = 0.725). Sensitivity analyses were directionally consistent: excluding 2020–2021 yielded β = −0.011 (p = 0.760), excluding 2021 alone β = −0.014 (p = 0.644), excluding other social insurance patients β = 0.017 (p = 0.600), and restricting to the DRG-only window (January 2021–April 2022) β = +0.038 (p = 0.314). The event study showed that pre-reform coefficients (2015–2019) were uniformly non-significant and centered near zero, and post-reform year estimates showed no sustained directional divergence, consistent with the absence of a large independent DRG effect over the five-year post-reform window. Adverse outcomes were rare (21 events; 0.8% overall) and did not differ differentially between groups (OR = 1.32; 95% CI 0.19–9.01; p = 0.777); this exploratory analysis was underpowered.ConclusionsThe similar decline in implant costs in both insurance groups, with no significant differential change in the DID analysis, is consistent with nationalized VBP being the main driver of THA cost compression in this cohort, although a DID design cannot test this directly. DRG may have contributed a modest incremental effect that this single-center design cannot isolate from the much larger procurement shock. Adverse discharge events were rare (n = 21) and the safety analysis was underpowered, so it cannot exclude an important safety signal. These findings illustrate an evaluation challenge when supply- and demand-side reforms overlap, and point to the need for multi-site designs exploiting staggered DRG adoption to disentangle their separate contributions.
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BibTeX
@article{xiang2026cost,
title = {{Cost reductions in total hip arthroplasty after DRG payment reform and volume-based procurement in China: a difference-in-differences study}},
author = {Xiaochan Xiang and Kangkang Su and Ge Li and Jianwu Shi and Xiaoli Gao and Qianwen Ye and Qi Xu and Wei Chen and Zhangchen Wu and Kecheng Li and Weiwei Zeng},
journal = {Frontiers in Public Health},
year = {2026},
month = nov,
doi = {10.3389/fpubh.2026.2014201},
url = {https://www.frontiersin.org/articles/10.3389/fpubh.2026.2014201},
note = {CC BY 4.0},
}
RIS
TY - JOUR
TI - Cost reductions in total hip arthroplasty after DRG payment reform and volume-based procurement in China: a difference-in-differences study
AU - Xiaochan Xiang
AU - Kangkang Su
AU - Ge Li
AU - Jianwu Shi
AU - Xiaoli Gao
AU - Qianwen Ye
AU - Qi Xu
AU - Wei Chen
AU - Zhangchen Wu
AU - Kecheng Li
AU - Weiwei Zeng
PY - 2026
DA - 2026/11/09
JO - Frontiers in Public Health
DO - 10.3389/fpubh.2026.2014201
UR - https://www.frontiersin.org/articles/10.3389/fpubh.2026.2014201
AB - Background:Between 2021 and 2022, China's health system reforms deployed two overlapping cost-containment instruments in quick succession: diagnosis-related group (DRG) bundled payment and a nationalized volume-based procurement (VBP) programme that cut orthopedic implant prices by 70%−90%. Disentangling their independent contributions to hospitalization costs is both methodologically challenging and policy-critical. We examined whether the January 2021 DRG roll-out in Wenzhou was associated with a differential change in total hip arthroplasty (THA) costs and adverse discharge outcomes across insurance groups, and whether the observed cost reductions are consistent with a larger contribution from either reform.MethodsWe analyzed 2,518 consecutive THA admissions at a tertiary hospital in Wenzhou (2015–2025). Patients were classified as Social Insurance (NRCMS, URBMI, and UEBMI; n = 2,046) or Other Payment (self-pay, full public-service, miscellaneous; n = 472). A difference-in-differences (DID) framework with year fixed effects and HC3-robust standard errors estimated the group-specific cost change associated with the reform. An event-study design assessed pre-reform parallel trends and traced the year-by-year trajectory of any post-reform divergence. Five sensitivity analyses varied the reform window (excluding 2020–2021, excluding 2021 alone, and a DRG-only window before the implant-price break), the comparison group, and the covariate set; in addition, E-values were used to assess sensitivity to unmeasured confounding. Significance was set at a two-sided α of 0.05, with Holm adjustment across the three cost outcomes. The adverse discharge outcome — defined as death, non-recovery, or other non-standard disposition at discharge — served as a safety endpoint.ResultsAcross the full sample, median total THA cost fell from CNY 52,527 in the pre-reform period (2015–2020) to CNY 34,397 post-reform (2021–2025), a decline of 34.5%. The reduction was dominated by implant and material costs, which fell by 61.9% in Social Insurance patients (CNY 36,167 to CNY 13,772; p < 0.001) and 56.3% in Other Payment patients (CNY 36,264 to CNY 15,864; p < 0.001). The DID interaction term — capturing the group-differential change beyond the shared time trend — was not statistically significant for total cost (β = −0.015; 95% CI −0.072 to 0.042; p = 0.610), drug cost (β = −0.055; 95% CI −0.146 to 0.036; p = 0.235), or implant cost (β = −0.015; 95% CI −0.096 to 0.067; p = 0.725). Sensitivity analyses were directionally consistent: excluding 2020–2021 yielded β = −0.011 (p = 0.760), excluding 2021 alone β = −0.014 (p = 0.644), excluding other social insurance patients β = 0.017 (p = 0.600), and restricting to the DRG-only window (January 2021–April 2022) β = +0.038 (p = 0.314). The event study showed that pre-reform coefficients (2015–2019) were uniformly non-significant and centered near zero, and post-reform year estimates showed no sustained directional divergence, consistent with the absence of a large independent DRG effect over the five-year post-reform window. Adverse outcomes were rare (21 events; 0.8% overall) and did not differ differentially between groups (OR = 1.32; 95% CI 0.19–9.01; p = 0.777); this exploratory analysis was underpowered.ConclusionsThe similar decline in implant costs in both insurance groups, with no significant differential change in the DID analysis, is consistent with nationalized VBP being the main driver of THA cost compression in this cohort, although a DID design cannot test this directly. DRG may have contributed a modest incremental effect that this single-center design cannot isolate from the much larger procurement shock. Adverse discharge events were rare (n = 21) and the safety analysis was underpowered, so it cannot exclude an important safety signal. These findings illustrate an evaluation challenge when supply- and demand-side reforms overlap, and point to the need for multi-site designs exploiting staggered DRG adoption to disentangle their separate contributions.
SN - 2296-2565
ER -