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

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.