One of the first questions a potential customer logically asks a vendor desiring to provide goods and services to that customer is, “What is the price?”. The answer to that question is the fundamental basis around which our entire economy functions and all purchasing decisions in light of the relative benefits are made. That is…except for health care. The lack of price transparency in health care has been well documented for many years, but this article recently published in Health Affairs is a fascinating reminder that pricing ignorance also extends to the service provider, in this case orthopedic surgeons. In this study, surgeons were asked to estimate the costs of 13 commonly used orthopedic devices between December 2012 and March 2013. The results, although not surprising, were still startling. Among ~500 physicians across 7 academic medical centers, they were only able to arrive at a legitimate ballpark estimate ~20% of the time (bear in mind that anything within 20% of the actual cost were counted as “correct”). Estimates ranged from 2% of the price to more than 25 times higher than the actual cost. Not surprisingly, residents performed worse than experienced physicians, guessing correctly 17% of the time. In other words, their answers were literally all over the map, never mind that Medicare spends $20 billion on medical devices annually, approximately half of which are attributable to orthopaedic devices. So, here we have one of the biggest sources of expense within health care and little to no knowledge of the true costs. Perhaps this represents blissful ignorance on the part of orthopaedic surgeons who, according to Medscape’s Physician Compensation Report: 2013 Results handsomely benefit from such ignorance (ie, they are the highest paid specialty on average in health care).
It also doesn’t take a rocket scientist to figure out that with the aging population, spending on orthopaedic implants is only going to keep rising. Although hospitals have an incentive to encourage surgeons to use less expensive devices (total knee implants range from $2 to $12K as an example), administrators rarely strong arm physicians to do so given the extent to which surgeons represent a veritable cash cow for hospitals. In other words, hospitals are extremely reluctant to risk upsetting a physician’s preference when it comes to which devices to use. The sordid conflicts of interest which often exist between surgeons and device manufacturers has been well documented and continues to represent a plague of sorts to our health care system.
To be clear, this is not intended as an assault on orthopaedic surgeons as the lack of price transparency is a pervasive problem throughout health care system. Nonetheless, this is one of the first examples demonstrating that pricing ignorance extends also to the very providers of those services. Although some efforts are underway to tie payment to price transparency, device manufacturers are no doubt less than anxious to increase pricing transparency within health care so we still have a long way to go. What say you?