Understanding the Role of Implants in America's Healthcare Costs

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In the latest story of its series on American healthcare costs, the New York Times explored the "sticky pricing" of joint replacement surgeries in America compared with those performed in other developed nations.
In economics, "sticky" refers to pricing that resists change — a relevant phenomenon in American healthcare, according to the article. The list price for a total hip implant increased by nearly 300 percent from 1998 to 2011. Rather than dropping, implant prices are sticky by remaining high or increasing over time.

The nearly one million knee and hip replacements performed in the United States each year paired with competition between manufacturers have not led to lower prices for implants, as would typically happen with products like clothes or cars, according to the report. Throughout the report, sources said implant manufacturers price their products high "because they can."

Peter M. Cram, MD, a physician at University of Iowa's medical school who studies healthcare costs, compared implant prices with prices of iPhones: "Why charge $1,000 for the implant in the U.S. when you can charge $14,000?" He said "to do otherwise is like asking, 'Couldn't Apple just charge $50 for an iPhone?' because that's what it costs to make them."
 
Hospitals and orthopedic clinics typically pay $4,500 to $7,500 for an artificial hip, but those prices grow larger with the cost of installation equipment and intermediary fees. Medicare offers all-inclusive payments for surgery to hospitals to prompt them to bargain harder for better implant prices, as the federal health program does not directly negotiate with manufacturers. "Instead, hospitals complain that acquiring the implant consumes 50 percent to 70 percent of Medicare's reimbursement, which now averages $12,099, up 25 percent from $9,645 in 1993," according to the report.

The Patient Protection and Affordable Care Act tries to recoup a portion of medical device manufacturers' profits by imposing a 2.3 percent tax on their revenues, effective this year. But some critics say that tax could end up hurting consumers more, especially as the average age of patients receiving an implant is 67. Some critics say the best solution to lower implant costs — especially since there are estimates that joint replacement surgeries may quadruple by 2030 — is to decrease government interference.

The story also compared joint replacement surgeries in the United States with those in Belgium. An American in the story underwent a hip replacement in Belgium for $13,660 after a hospital finance employee told him the procedure in the states would exceed $65,000, according to the report.

More Articles on Healthcare Prices:

AHA: Hospital Price Growth Continues to Decline
Are Academic Medical Centers Overpriced?
Study: Outpatient Services Main Driver of Employer Health Spending

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