The hospital cost of total knee arthroplasty at the Lahey Clinic was evaluated by a comparison of the data for twenty-eight patients who had had the operation in 1983 with the data for forty-two patients who had had the same operation in 1991. The hospital bills were analyzed for each patient. Each hospital charge was converted to cost with the use of government-mandated hospital-specific cost-to-charge ratios. The average actual hospital cost for total knee arthroplasty increased 17 per cent, from $10,122 in 1983 to $11,826 in 1991. However, in inflation-adjusted dollars, the hospital cost for total knee arthroplasty decreased 15 per cent during this period. When the costs for total knee arthroplasty in 1983 and 1991 were allocated to various service centers in the hospital, the cost for a hospital room was found to have decreased from 47 per cent of the hospital cost in 1983 to 31 per cent of that in 1991. The cost of a hospital room decreased 23 per cent in actual dollars and 46 per cent in inflation-adjusted dollars during this period. In sharp contrast, the cost of a knee implant increased from 13 per cent of the hospital cost for total knee arthroplasty in 1983 to 25 per cent of that in 1991. The average cost of the prosthesis increased from $1359 in 1983 to $2960 in 1991. This represents a 118 per cent increase in actual dollars. The inflation-adjusted increase in the cost of the implant was 59 per cent.(ABSTRACT TRUNCATED AT 250 WORDS)