The truth behind high-priced implants is not what goes into the implant, but rather who pays for the implant. If there were a few outliers, we could chalk it up to innovation and technology. But the truth is that the vast majority of orthopaedic implants are shockingly over-priced, be it a screw or a “state-of-the-art” total hip replacement.
For the last 20 years, medical device prices have increased 8%, on average. To be clear, the same screw, year in and year out, has experienced an 8% price increase. Perhaps the colors of the screws have changed. Maybe the thread pitch has been honed just a touch. However, if two people, one in 1992 and the other in 2012, sustained identical femoral neck fractures, three large cannulated screws may be indicated to reduce the fracture. Why does a cannulated screw, whose design has not changed in 30 years, command a 300% higher price tag today than it did when Clinton just started office? Five years ago, a fifty inch flat screen plasma television cost $2,000. That very same television today costs $1,000. Actually, the same sized television costs $1,000. The quality is now better.
Perhaps the fee-for-service reimbursement model is responsible? The cost-plus markup might be the single most counter-intuitive paradigm for the reimbursement of orthopaedic implants. If a facility gets a 15% markup in reimbursement on the implants used in a procedure, what administrator in their right mind would opt for high value implants? So on a $1,000 implant, the hospital receives a markup of $150. If models were intuitive, reimbursement would go up incrementally as the cost of the implant goes down. If you double reimbursement to $300 for a clinically comparable implant with a price tag of $500, the hospital makes more and insurance reimburses less. This elementary change to the model saves insurance companies $350 on the implant alone, while the hospital just doubled reimbursement profit. With that, the intersections of Wall and Main Streets just got a welcomed Healthcare rest stop.
Another disconnect driving inflated pricing is that the “customer” doesn’t pay for the implants they use. Traditionally, the large vendors “sell” their wares to doctors, yet the hospital picks up the bill. We all wish the buck stopped there, but for Americans with high deductible insurance or no insurance at all, that buck keeps on rolling. The fee-for-service model is the culprit yet again, driving inefficiency. The doctor receives a separate reimbursement from the insurance company for their services. The doctor has not been incentivized to look on the right side of the implant menu.
While the fee-for-service model has reached its apex and is dissolving in the wake of episodic, bundled reimbursement models, the change does not occur overnight. Systemic changes to healthcare are glacial, regardless of how dire the current situation is. Fortunately, a better solution is far simpler and extremely easy to implement. Patients should have a choice. At a time when people are required to pay more out of pocket than ever before for care, their money should invariably buy them the right to choose what they are paying for. With clinical evidence that high value implants are as good or better than highly priced ones, the choice is easy and should be made by the person receiving and paying for it……and that’s the truth.