Congress needs to act to increase medical-device transparency
The U.S. Government Accountability Office recently confirmed what healthcare group purchasing organizations, hospitals and anyone on the front lines of patient care and healthcare cost containment see every day: Medical device pricing secrecy decreases competition, limits the ability of hospitals and their GPO partners to effectively negotiate for medical products and services, and artificially drives up healthcare costs, leaving hospitals, patients Medicare and American taxpayers to foot the bill.
In its new report, Lack of Price Transparency May Hamper Hospitals’ Ability to Be Prudent Purchasers of Implantable Medical Devices, (bit.ly/ar7dec) the GAO examined pricing information for expensive implantable medical devices, or IMDS, and determined that there was substantial variation in the prices hospitals paid for the same devices, and that pricing secrecy limited the ability of hospitals to negotiate for the best price.
Medical device contractual confidentiality agreements, so-called “gag clauses,” prevent hospitals from sharing data and validating that they are receiving a fair price on the products they buy. Contracts between manufactur-
“Gag clauses” prevent hospitals from sharing data and validating they are receiving a fair price.
ers and hospitals often forbid disclosure of prices, even to doctors, which makes it difficult to get physicians the information they need to consider cost when making decisions about devices. As a result, some hospitals unnecessarily pay thousands of dollars more than others for high-cost medical devices such as defibrillators, stents and hip replacements.
The price variation in what hospitals paid for the same type of device was stark. For example, one hospital surveyed paid $8,723 more than another for an identical model of a device that regulates heart rhythm, which typically costs hospitals between $16,445 and $19,007. One hospital reported spending about $4,500 for a specific primary total hip construct, while another paid about $8,000 for the same device construct, or 78% more. In another instance, one hospital paid about $5,200 for a primary total knee construct, while another hospital paid about $9,500 for the same procedure, or 83% more.
The problem is even more extreme in small and rural markets, where community hospitals often lack bargaining power in negotiations with behemoth device corporations. Without GPO benchmarking, hospitals are often in the dark while negotiating with device manufacturers, and manufacturers are able to charge whatever local markets will bear.
In an environment of increasing healthcare