medical device pricing

The Government Accountability Office (GAO) recently released a report that cites “substantial variation” in the prices paid for implantable medical devices in the Medicare program, and a lack of robust data needed to properly compare the prices paid for these devices across surveyed hospitals. A key driver of both of these findings is the existence of confidentiality clauses in medical device purchasing contracts that prohibit hospitals from sharing prices with third parties, including physicians, the health plans that pay for these devices, and patients.

It was with a sense of déjà-vu that I read this report; in 2010, UC Berkeley professor James Robinson and I published a series of briefs looking at variation in implantable device prices in California hospitals as part of a joint Value-Based Purchasing of Medical Devices project between the Berkeley Center for Health Technology and the Integrated Healthcare Association (IHA). This project included data collection on device costs, total surgical costs, complications, and length of stay for seven orthopedic and cardiac procedures in 45 California hospitals.

The data, as well as a series of IHA-sponsored roundtable conversations with stakeholders, found the same thing that the GAO report finds: a lack of transparency in device prices, sometimes driven by clauses that prohibit hospitals from disclosing the prices paid for devices, a lack of alignment between hospitals and the physicians practicing within their facilities, and very substantial variation in both the prices paid for devices and the total costs of the procedures used to implant these devices. For example, the average cost hospitals paid for knee implants ranged from $3,408 to $10,830, and the average paid for implantable cardioverter-defibrillators ranged from $19,578 to $35,916. There was also a substantial amount of within-hospital variation in device prices.

Continue reading “Price Variation and Confidentiality in the Market for Medical Devices”

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