Short Takes On News & Events

How Much Does A New Hip Cost? Even The Surgeon Doesn’t Know

By Jenny Gold

January 6th, 2014, 4:00 PM

What will a gallon of milk set you back? How about a new car? You probably have a rough idea.

But what about a medical device — the kind that gets implanted during a knee or hip replacement? Chances are you have no clue. And you are not alone: The surgeons who implant those devices probably don’t know either, a just-published survey shows.

Medicare spends about $20 billion each year on implantable medical devices — nearly half of it for orthopedic procedures. And as the population ages and more Americans get joint replacements, that number is only going up, which will have a bigger and bigger impact on the nation’s health care spending.

But orthopedic surgeons don’t know much about how much their work contributes to that spending. They were only able to correctly estimate the cost of a device 21 percent of the time, according to a survey of 503 physicians at seven major academic medical centers published this week in Health Affairs. Their guesses ranged from 1.8 percent of the actual price to 24.6 times the actual price. Researchers could not release the actual costs, because they signed nondisclosure agreements with the hospitals.

And residents were worse at guessing — they were correct only 17 percent of the time. Estimates within 20 percent of the actual cost were considered correct. The study did not look at what patients know about cost.

“In orthopedic surgery, we’re never told how much things cost.  We never see the cost displayed anywhere, and even if you were interested, there’s no great way to find it,” says Dr. Kanu Okike, lead author of the Health Affairs study and an orthopedic surgeon at Kaiser Permanente Moanalua Medical Center in Honolulu (Kaiser Health News is not affiliated with Kaiser Permanente).

Unlike pretty much every other consumer industry, health care costs are not transparent, even for the surgeons. Each hospital system and purchasing group negotiates deals with device manufacturers and signs a nondisclosure form, promising not to share the details of those prices with anyone else.  That’s because “medical device manufacturers strive to keep their prices confidential so that they can sell the same implant at a different price to different health care institutions,” the study authors write.

But costs matter: for a total knee replacement, the actual piece of machinery that gets implanted can cost anywhere from $1,797 to $12,093, depending on the negotiated price. And there’s little evidence that one particular device is any better than another for the patient, says Okike.

The hospital actually has a financial incentive to use cheaper devices — it’s paid a lump sum for the procedure by Medicare (the government’s health insurance program for seniors and disabled people). That means that if a hospital uses a cheaper device, it ends up with a bigger profit.

But they don’t tend to pressure surgeons to use the cheaper device, says Dr. Kevin J. Bozic, an orthopedic surgeon at the University of California San Francisco, who studies the cost of medical devices. That’s because orthopedic surgeons are big moneymakers. “They don’t want to offend the doctors. They cater to them however they can, which includes not telling them which devices to use,” he explains.

And many orthopedic surgeons are aligned with a particular manufacturer, says Bozic. That makes them even less likely to take cost into consideration. Doctors may be paid as consultants to manufacturers and can also receive royalties when other doctors at other hospitals use a device, if they contributed to the design. (But not when they themselves or their colleagues use them; anti-kickback laws prohibit that.)

Some hospitals are seeking to make the cost of devices more transparent, in the hopes that just knowing what things cost will encourage surgeons to make different choices and lower spending. There are some glimmers of hope, including a national pilot project that makes a surgeon’s payment for each surgery dependent on the cost of the device they use.

“But at the root of it, the biggest problem is the lack of price transparency across the industry,” says Okike, the author of the Health Affairs study. And device manufacturers aren’t in a hurry to change that without some sort of pressure.

Update: This story was updated on 1/9/2014 to explain how anti-kickback laws apply to orthopedic surgeons.

This article was produced by Kaiser Health News with support from The SCAN Foundation.

32 Responses to “How Much Does A New Hip Cost? Even The Surgeon Doesn’t Know”

  1. william says:

    I really don’t care I have one and it has worked for 16 years

  2. K says:

    What no one here is seeing is that these “so-called” greedy doctors (like Blair, supposedly) will only amass exorbitant amounts of cash if we are willing to pay for their services. That’s the BEAUTY of capitalism: if he sucks at his job don’t use his services, don’t pay him, and he’ll earn exactly what he deserves. If he’s an exceptional doctor, pay him for his hard work, effort, intelligence, dedication, and then quit fussing about how much money he’s made and whether or not he’s “greedy”. What Obamacare does is limit our choices and limit Blair’s incentive to do his job better than the next guy.
    And I know someone’s going to bite my head off, because what I’m implying is that the nation’s poor will only be able to afford the really bad doctors. But this is what Medicaid/Medicare are for: so no one’s stuck scraping the bottom of the barrel in healthcare (or going without… unless they CHOOSE to go without, which they SHOULD have the right to do).
    And as an aside, I don’t think there’s anyone who just stumbles into medical school on a whim. It takes more commitment, dedication, and know-how than most other professions (and an un-Godly amount of time and money). So I doubt there are many doctors out there that are inherently lazy or stupid. They wouldn’t have made it.

  3. K says:

    FURTHER: there’s an annual exodus of Canadians who come to the United States for surgeries, because they are difficult to schedule and come by in Canada. It’s time to stop suggesting that Canadian healthcare is far superior to ours. It may be cheaper for the patient, but they don’t have our resources.

  4. Eric says:

    Of course the docs at academic centers don’t know, because they are removed from the decision making about purchasing. As a private practice orthopaedic surgeon and partner in a hospital, I know exactly how much these things cost. Furthermore, no hospital “profits” off of medicare. The medicare reimbursement for the procedure is so low, it doesn’t even cover the cost of the operation, which is one reason hospitals are struggling. And these are implants, not “machinery”. Furthermore, I disagree with Dr. Bozic. Very few surgeons have a financial relationship with implant companies. The companies have dramatically reduced the number of consultants over the past years. Most sureons simply get comfortable, efficient and familiar with one company and continue to use their products because of this relationship, not financial. Hospitals most definitely are beginning to pressure doctors, now that many of them are employed by the hospital, if not outright dictate to them, what implant they can use. And implants do matter. Some have higher failure rates. And forcing surgeons to switch can, at least temporarily, lead to more problems.

  5. camaron says:

    Yes, it’s true. Canadians wait a little longer for elective appointments than Americans, but not much longer. I’ve witnessed it first hand! Canadians may wait for “elective” procedures a little bit longer than Americans but they do not wait any longer for urgent care. The reason? Canadians don’t push the panic button when they need a wart removed. Canadians don’t call 911 for a flu shot. Also, it may be true that Canadians with the financial resources are seeking state-of-the-art medical care in America but, for the vast majority of Canadians, they get exactly what the vast majority of Americans get. The get sufficient healthcare. The only difference? Americans pay twice as much for sufficient healthcare and still, there are over 50 million Americans without any hope of seeing a doctor on a regular basis. In Canada, everyone is covered and they get sufficient healthcare. If I have a choice of paying twice as much for my routine healthcare to pay for the 50 million freeloaders that get free healthcare at the emergency room. I’ll take the Canadian system in a heartbeat! In Canada, citizens actually get value for their healthcare dollar and nobody falls through the cracks.

  6. Brent says:

    1. The overarching problem is that healthcare has become a right. Even the staunchest conservatives that I know admit that if someone is poor, they should receive complimentary healthcare. Very few politicians would be elected if they said that a diabetic 10 year old Mexican illegal alien in renal failure cannot have access to our hospitals. Care for the old (MDC) and poor (MDD) is budget-crushingly expensive, and I see no way out of that. Thanks LBJ. Now if you’re old or poor, it’s fantastic.

    2. The fact that the free market has been removed from healthcare (and most U.S. industries) actually hurts the majority of us. Again, be thankful if you have your health – but realize that the reason that no one knows what implants cost is because the consumer isn’t paying for it. The third party payer system is a Godsend for the healthcare industry (doctors, hospitals, insurance payers) because the user is essentially insulated from the costs. The fact that Vioxx reps made six figures and had company cars is indicative of the fact that the patient who was prescribed the more expensive NSAID was not writing a check for it. If I’m paying the same amount, I want the best. If I’m getting a new hip, I want the best – and I don’t care if it’s $2,000 or $200,000. You can’t run any industry like that forever.

    The only way that this works is by having a lot of young, healthy participants paying in more than they should – to subsidize the old and sick. We need 20 or so twenty year olds paying in the exchanges to offset the cost of the old fart who needs a $30,000 hip. Health insurance rates are increasing astronomically, and the main reasons are the fact that no one cares what the prices are, since they’re not paying – and the fact that we subsidize healthcare through the employer based model – where there is a double write-off: the employer writes off the cost, and the employee receiving the benefit does not pay taxes on the income (benefit). Again, that’s awesome – I’m not complaining as a recipient of that arrangement – but it warps the free market. I no longer care about healthcare costs – since I am now paying a nominal fee.

    Not until people write personal checks, post-tax, will prices start to normalize. At that point, patients will tell their surgeon that they want the generic implant which is just as good but costs 90% less, and they’re willing to pay $10,000 for the entire procedure. If the surgeon can’t deliver, they can shop the next center. If they want surgeon X, at hospital Y, with implant Z – great, and pay for it. If you’d rather have a PA or NP take care of you for a third of the price, then that’s your choice, because it’s your hard earned money that you’re spending. Not someone else’s.

  7. camaron says:

    Brent,

    In your rush to defend American style healthcare, you fail to mention the most obvious and most glaring problem that continues to drive healthcare costs higher and higher every day….

    1) Over 50 million Americans are uninsured and get their healthcare at the hospital emergency room which drives costs up for Americans that pay.

    As a result, Americans that buy their own insurance pay twice as much for healthcare as any other industrialized nation in the world mainly because over 50 million Americans are getting a free ride.

    Your long winded post is just more useless rhetoric as long as over 50 million Americans remain uninsured and refuse to pay. Here’s my advice, get real and get out of the weeds and begin to solve the basic problem. Until we find a way to insure over 50 million non-paying Americans, America will continue have the most expensive healthcare system in the world by double.

  8. Brent says:

    I have a shorter answer, remove that access to the E.R. Ask them cash or credit before they’re seen like any other business. They’ll think twice about coming in for a runny nose or a sprained ankle.

    And I’m not defending the American style system. It’s broken and unsustainable.

    As a wise-man once said, in healthcare there is quality, cost, and access. You only get two out of three unless you live on fantasy island. If you’re proposing access for all, do you want to sacrifice quality or cost containment? That’s why some other people posting have said that the poor may just have to live with less expensive providers. Instead of an MD or DO, they might afford a PA, if not a PA, a nurse, if not a nurse, maybe a medical assistant. Or maybe there are some unemployed actors who once played a doctor on TV that could help out for less. It is CA after all.

  9. camaron says:

    Brent,

    Frankly, your first paragraph “is” fantasy island.

    For the poor, your suggestion of sacrificing quality is already a reality.

    Your suggestion of cost containment has promise when you mention expanding the role of PA’s and RN’s for routine healthcare. In my opinion, there’s absolutely no need to see an MD or a DO for primary healthcare. My personal PCP will readily admit, after 30 years in family medicine, that 85 percent of the cases he sees in a day can easily be handled by a qualified RN. The remaining 15 percent of his cases get referred to specialists. With the advent of Obamacare, everyone was worried that we didn’t have enough primary care doctors to handle the projected tsunami of new patients. I say, like in the military, new patients should see an enlisted person as their first point of contact. If the problem can’t be solved at that initial visit, then a referral to a specialist is in order. To put it another way, primary care is nothing more than triage.

  10. K says:

    Some hospitals that are having trouble recruiting physicians (so particularly rural hospitals) are moving towards delegating more patient care to PA’s and RN’s, which is a cool thing. As was mentioned above, a huge majority of cases delt with by physicians could probably be delegated, and this move could ultimately result in major cost reductions for the hospitals/health systems.

  11. Once I initially commented I clicked the -Notify me when new feedback are added- checkbox and now each time a remark is added I get four emails with the same comment. Is there any approach you can remove me from that service? Thanks!

  12. Brent says:

    Camaron, I fear that you are correct in your assessment of the plausibility of a healthcare industry in which the user actually paid for services used. But that shows you just how far we’ve fallen – that we can’t even imagine a world where the government does not take care of us. I’ll admit, it’s comforting to know that when things get bad, I know that the government will buy my food, and pay my rent, pay me not to work, and pay for my education and my healthcare. It’s awesome in fact.

    You either misunderstood my point about physician extenders or you do not understand the industry. Again, I am talking about people writing a check for the less expensive PA or NP – not billing it through insurance. If that PA bills under the supervising doctor’s tax ID, BlueCross pays the same amount, for example. That did not save any money at all.

    BUT – if you write a check, the nurse might be $50, the PA $100, and the MD $200. Again, out of pocket, post-tax. The consumer will decide what their provider is worth, as Blair posted a few days ago. The fact of the matter is that if you see 4 patients per hour at $200 per visit, that equates to $800 per hour, and $1.6 million per year – cash. Most people can live on that – even doctors. Malpractice insurance would have to be rethought. You drop most office staff, since you’re not billing insurances any longer. There is no one working your AR, because you’ve been paid – just like you pay when you’re served a meal at a restaurant.

    Revolutionary. Pay for what you consume.

    I haven’t seen anyone else in this forum with an actual idea that would solve the problem of rising healthcare costs.

Share