No fix needed

Price trans­parency for med­i­cal de­vices a non­so­lu­tion for a non­prob­lem

Modern Healthcare - - OPINIONS COMMENTARY - By Stephen Ubl

In an en­vi­ron­ment as com­plex as to­day’s health­care sys­tem, sim­ple-seem­ing so­lu­tions are of­ten merely sim­plis­tic. Noth­ing bet­ter il­lus­trates that maxim than calls for “pric­ing trans­parency” in the med­i­cal tech­nol­ogy mar­ket. But a closer ex­am­i­na­tion of that mar­ket ought to lead in­stead to this con­clu­sion: If it’s not broke, why fix it?

The fact is the cur­rent sys­tem of price ne­go­ti­a­tions be­tween man­u­fac­tur­ers, group pur­chas­ing or­ga­ni­za­tions and in­di­vid­ual hos­pi­tals serves hos­pi­tals and the health­care sys­tem well—so well that there is not only less in­fla­tion in the price of med­i­cal de­vices than vir­tu­ally any­thing else in the health­care sec­tor, but even far less than in the econ­omy as a whole. Price trans­parency for med­i­cal de­vices is truly a non­so­lu­tion to a non­prob­lem.

It is ac­tu­ally fairly easy to an­swer the ques­tion raised by the re­cent re­port from the Gov­ern­ment Ac­count­abil­ity Of­fice about whether hos­pi­tals are achiev­ing the best prices pos­si­ble. Just look at the data.

Med­i­cal de­vices are re­duc­ing med­i­cal in­fla­tion, not in­creas­ing it.

Ac­cord­ing to a study co-au­thored by a for­mer Medi­care chief ac­tu­ary, med­i­cal de­vice prices in­creased at an av­er­age an­nual rate of just 1% be­tween 1989 and 2009, com­pared with a 4.7% an­nual in­crease in the med­i­cal con­sumer price in­dex over the same pe­riod. In­deed, with very low gen­eral in­fla­tion over the past sev­eral years, med­i­cal tech­nol­ogy prices have gone up less than half as fast as the CPI. In terms of to­tal health spend­ing, med­i­cal de­vice spend­ing ac­counts for about 6% of na­tional health ex­pen­di­tures, a per­cent­age that has stayed sta­ble for ap­prox­i­mately two decades.

It needs to be noted, as well, that im­plantable de­vices fre­quently re­duce health­care costs in the long run. A study has found, for ex­am­ple, that a to­tal knee re­place­ment saves an av­er­age $77,000 a pa­tient in life­time health­care costs be­cause of a re­duced need for cus­to­dial care.

The health­care mar­ket­place doesn’t lend it­self to sim­ple so­lu­tions.

As the GAO rec­og­nized, dif­fer­ences in the prices paid by dif­fer­ent hos­pi­tals are driven by mul­ti­ple fac­tors. In what is a highly com­pet­i­tive mar­ket­place—for ex­am­ple, eight dif­fer­ent ma­jor man­u­fac­tur­ers de­velop and mar­ket re­place­ment joint tech­nolo­gies—pric­ing can de­pend on the vol­ume of de­vices a hospi­tal buys from a par­tic­u­lar man­u­fac­turer, the na­ture of the ser­vice agree-

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