MEDICAL PROCEDURES AND DEVICES CONTRIBUTE TO TOTAL COST OF HEALTHCARE

If we break down the components of today’s health care concerns, one area where a good majority of voters are “very concerned” with the total cost of health care is medical procedures and devices.

The cost of your healthcare procedures is dependent on where you live[1]  There were huge ranges in prices even within the same state. In the example below, a colonoscopy (a procedure that allows doctors to look inside and see how healthy your large intestine, or colon might be) could cost anywhere from $202 to $1,966 in South Dakota.[2]

healthcare procedures price variance chart

The Dartmouth Atlas of Health Care addresses “unwarranted regional variation” where a surgical procedure is part of the treatment possibilities.  Unwarranted variation is defined in the Atlas as differences in care that are not explained by patient needs or preferences. The Dartmouth project identified “unwarranted variation” in treatment of hip fracture, cholecystectomy (removal of the gall bladder), hip replacement, colectomy (removal of the colon), CABG (returning blood supply to the heart after a heart attack), back surgery. mastectomy for breast cancer, lower extremity revascularization (unclogging of arteries of the leg), carotid endarterectomy (opening the artery in the neck), radical prostatectomy (removal of the prostate in men), and TURP for BPH (opening up the pathway from the bladder blocked by an enlarged prostate).

For many of these procedures, the medical evidence for doing the surgery was unclear. For many others, the risk of complications for surgery may be higher than the risk of the disease process. “Many of these differences appear to be explained by differences in local medical opinion of the value of surgical care.”[3]

The prices contracted and paid for across the country (by region and even in the same region) by our multiple healthcare plans to the army of healthcare providers is (you guessed it) variable!  Let us look at some of the very same procedures the Dartmouth Atlas found to be suffering from “unwarranted variation.”

Hip replacement

Average price in America: $26,489
Average price in Australia: $26,297
Average price in Argentina: $6,862

The American average price (50th percentile) for a hip replacement=$12,000.  Hip replacements in countries such as Argentina, Spain, and the Netherlands all fall somewhere below on average. America’s 25th percentile for a hip replacement is $16,622, and the 95th percentile is $53,644.

And now the connection between procedures and devices. Artificial joint implants prices in the U.S. are exaggerated from the git go because of the few companies that manufacture them.  Then the complexity of our American health care “system” in transition flares its ugly head. The prices are marked up several times by intermediaries, making artificial implants the single biggest cost of most joint replacement surgeries.

And the story is similar for CABG,  also known as bypass surgery:

Average price in America: $75,345
Average price in Australia: $42,130
Average price in the Netherlands: $15,742

Angioplasty, opening up of the coronary artery instead of bypassing it as in the CABG also follows this pattern:

Average price in America: $27,907
Average price in New Zealand: $16,415
Average price in Argentina: $5,246 [4]

cost of healthcare procedures chart

In the search for solutions, the emphasis may not be on the correct syllable. Unfortunately, the emphasis for problem solving is different for those policy makers looking at variation in production (number of services provided) and those trying to solve pricing variation (the cost of doing business). This process fuels the VARIABILITY.

Medical Devices

As mentioned earlier, there is a connection between procedures and devices. Artificial joint implants prices in the U.S. are exaggerated from the git go because of the few companies that manufacture them.  Then the complexity of our American health care “system” in transition flares its ugly head. The prices are marked up several times by intermediaries, making artificial implants the single biggest cost of most joint replacement surgeries.

cost of healthcare medical devices chart

Medical devices are classified from the simple to the complex based on their intended use, indications, and need for patient protection. Class I devices include non-sophisticated elastic bandages, examination gloves, and hand-held surgical instruments. They are subject to the least regulatory control, or general controls. General controls include the least restrictive provisions with minimal oversight.

Class II devices include a little more sophistication and potential for harm and include such tools as acupuncture needles, powered wheelchairs, infusion pumps, air purifiers, and surgical drapes. These devices require a little stricter oversight than the general controls to “assure safety and effectiveness. Special controls may include special labeling requirements, mandatory performance standards and post-market surveillance.”

Class III devices are “those for which insufficient information exists to assure safety and effectiveness when general or special controls are applied as these devices are usually those that support or sustain human life, are of substantial importance in preventing impairment of human health, or present a potential, unreasonable risk of illness or injury.” [5]

Enter premarket approval, a scientific review to ensure the device’s safety and effectiveness, right? Well, maybe. Premarket approval (PMA) is the most stringent type of device marketing application required by the FDA. PMA is required for new devices for which there is no similar product on the market. This approval is granted only if the FDA determines that the new device has “sufficient scientific evidence demonstrating that the device is safe and effective for its intended use.”

There is a dangerous loophole however.  There is a “back door”- Premarketing Notification (510(k) which is a ‘fast-track’ process.  “Applicants must demonstrate that the device to be marketed (must be a moderate risk or Class II) is ‘substantially equivalent’ to a pre-existing legally marketed device in terms of safety and effectiveness”. In other words, it must be similar to a device already on the market that has been previously approved.

You ‘pays your money and you takes your chances.’ “You must resign yourself to taking risks.; Everything costs something but paying for something does not guarantee that you will get it. (The grammatical errors are intentional.) Customer: Can you guarantee that this washing machine won’t break? Salesman: No guarantees. You pays your money and you takes your chances.”[6] In this case we are talking about health care costs, but you get my drift.

[1] http://healthaffairs.org/blog/2015/12/30/making-sense-of-price-and-quantity-variations-in-u-s-health-care/

[2] Figure-http://healthaffairs.org/blog/2015/12/30/making-sense-of-price-and-quantity-variations-in-u-s-health-care/

[3] http://www.dartmouthatlas.org/downloads/atlases/Surgical_Atlas_2014.pdf

[4] https://www.usatoday.com/story/money/personalfinance/2015/03/28/cheat-sheet-expensive-medical-procedures/70442260/

[5] https://www.fda.gov/MedicalDevices/DeviceRegulationandGuidance

[6] McGraw-Hill Dictionary of American Idioms and Phrasal Verbs. © 2002 by The McGraw-Hill Companies, Inc.

By | 2018-09-18T14:50:26+00:00 September 18th, 2018|Categories: Healthcare|Tags: , |0 Comments

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