Hos­pi­tals, de­vice­mak­ers clash over price dis­clo­sure

Modern Healthcare - - FRONT PAGE - Jaimy Lee

Hos­pi­tals, de­vice­mak­ers clash over price dis­clo­sure

Hos­pi­tals and group pur­chas­ing or­ga­ni­za­tions want price trans­parency to get more lever­age ne­go­ti­at­ing for costly med­i­cal de­vices. The com­pa­nies that make the de­vices say the prices are bet­ter kept un­der wraps, even though a fed­eral re­port blames the se­crecy, in part, for sig­nif­i­cant vari­a­tions in what hos­pi­tals pay.

Hos­pi­tals typ­i­cally sign con­fi­den­tial­ity agree­ments with de­vice man­u­fac­tur­ers that pre­vent them from shar­ing price in­for­ma­tion with third par­ties, in­clud­ing physi­cians.

The Gov­ern­ment Ac­count­abil­ity Of­fice found that at least one hospi­tal paid $9,200 more for a car­diac resyn­chro­niza­tion ther­apy de­fib­ril­la­tor than an­other hospi­tal paid for the same model. In an­other ex­am­ple, there was a dif­fer­ence of $828 be­tween the high­est and low­est price paid for the same drug-elut­ing stent. The over­all lack of price trans­parency “makes it dif­fi­cult to know whether hos­pi­tals are achiev­ing the best de­vice prices,” the GAO con­cluded in the re­port re­leased Feb. 3.

The prices that hos­pi­tals pay are de­ter­mined by a com­plex set of fac­tors, in­clud­ing how many prod­ucts a hospi­tal may buy from a sin­gle sup­plier; the to­tal vol­ume that a hospi­tal buys; what share of the prod­ucts a hospi­tal will com­mit to in ad­vance; whether a hospi­tal has stan­dard­ized the prod­ucts and sup­pli­ers it con­tracts with; and the re­la­tion­ship a hospi­tal and its physi­cians have with a man­u­fac­turer.

“We think the cur­rent sys­tem works very well and we don’t think that price dis­clo­sure is a good recipe for the public, for Medi­care, or for our in­dus­try,” said David Nexon, the Ad­vanced Med­i­cal Tech­nol­ogy As­so­ci­a­tion’s se­nior ex­ec­u­tive vice pres­i­dent.

Groups that rep­re­sent hos­pi­tals and group­pur­chas­ing or­ga­ni­za­tions have said that price trans­parency would pro­vide hos­pi­tals with the in­for­ma­tion they need to ne­go­ti­ate bet­ter prices and, in the long term, lower costs. Ad­vamed dis­agrees.

“If prices were in fact pub­lished and avail­able, you could have the prices over­all in­crease,” Nexon said. “Peo­ple are less will­ing to give dis­counts un­der those cir­cum­stances be­cause if you give a dis­count to one hospi­tal, it’s go­ing to be harder to re­sist some­body giv­ing it to some­one else. You maybe end up not giv­ing the first dis­count.”

Hos­pi­tals, which never know if they re­ceived a “good price” for a par­tic­u­lar de­vice, want con­fi­den­tial­ity agree­ments re­moved from their con­tracts with man­u­fac­tur­ers, said Don May, vice pres­i­dent for pol­icy at the Amer­i­can Hospi­tal As­so­ci­a­tion. “The lack of trans­parency around de­vices has likely led to some in­creased costs,” he said. “Trans­parency is a good thing. High­vol­ume pur­chasers are go­ing to get dis­counts in a trans­par­ent world just as they do to­day.”

In ad­di­tion to the in­flu­ence wielded by a hospi­tal’s pur­chas­ing vol­ume and ne­go­ti­at­ing power, the GAO con­cluded that physi­cian pref­er­ence is a “par­tic­u­lar fac­tor” in the price a hospi­tal pays for a de­vice even though con­fi­den­tial­ity con­tracts limit the price in­for­ma­tion that a hospi­tal’s ne­go­ti­at­ing team can share with its physi­cians. One GPO re­ported that some hos­pi­tals used color-coded stick­ers to ed­u­cate physi­cians about high-, medium- and low-cost op­tions to avoid shar­ing price in­for­ma­tion.

“A hospi­tal that is con­strained in shar­ing price data with its physi­cians loses an op­por­tu­nity to en­list their as­sis­tance in the hospi­tal’s ef­forts to be a pru­dent pur­chaser” of im­plantable med­i­cal de­vices, the GAO said.

Dr. Kevin Bozic, vice chair of the depart­ment of or­tho­pe­dic surgery at the Univer­sity of Cal­i­for­nia at San Fran­cisco, and an or­tho­pe­dic sur­geon with UCSF Med­i­cal Cen­ter, agreed with the GAO’S as­sess­ment. He said his re­search in­di­cates that the align­ment be­tween physi­cians and hos­pi­tals and be­tween physi­cians and man­u­fac­tur­ers—such as gain­shar­ing, ser­vice line co-man­age­ment and bun­dled pay­ments—are suc­cess­ful in low­er­ing de­vice prices for hos­pi­tals.

Med­i­cal de­vices make up be­tween 40% to 60% of a hospi­tal’s sup­ply costs, ac­cord­ing to data gath­ered by health­care con­sult­ing firm Bea­con Part­ners and the Premier health­care al­liance. The cat­e­gory has be­come a tar­get for hospi­tal ad­min­is­tra­tors look­ing to re­duce costs. Bea­con Part­ners’ Marla Sim­met said stan­dard­iza­tion can re­duce the costs of im­plants by at least 5% and up to 20%.

With price trans­parency, though, Bozic said prices would be based on a de­vice’s func­tion­al­ity and at­tributes rather than other fac­tors such as stel­lar ne­go­ti­at­ing skills or pro­ce­dure vol­ume. “In a more ef­fi­cient mar­ket, there’s more com­pe­ti­tion, which drives down prices over time.”

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