Tuesday, August 6, 2013

Have Hip Will Travel

This Sunday in the NYT there was an article about the growth in Medical Tourism. I looked into it 2 years ago for Dental surgery, which I have to upgrade now regardless but I did use that information to negotiate a better price and treatment program from my local providers.  It did not hurt that I agreed to pay cash and knew them for decades.  However, the real story behind any industry is "mark up" When I was working remodeling homes, I used mark up as a guide for profit. 

There is NO industry that does not have a mark up plan in action to reduce and offset costs and earn profits. I used 20% as my average, in some cases there is 100% and others there are loss leaders that are used to be marked down to generate traffic into stores.  When I worked mass retail for a drug store chain we used certain food items as front page coupon draws that were sold below cost and then used speciality seasonal items at a higher markup to offset those losses. This is not rocket science, it is not even advanced algebra it is basic math.

But no industry has it better with regards to both monopoly and price then the Medical Industrial Complex.  The article below discusses the hows and whys behind this industry and of course their efforts to somehow justify or explain the reasoning behind their blatant ripping off of the American people and in turn the Government by overcharging on procedures and in turn products that are sold elsewhere at much cheaper rates.  Loss leaders are the other countries and we are the foot traffic that gets upsold.

There are many travel agencies that specialize in Medical Tourism. You can find them easily and they fully disclose prices and costs involved.  You do have to calculate your travel costs and expenses into that figure and the time needed to travel but frankly it is quite shocking that even with those costs added in you are still saving immensely.  And having seen Medical providers in foreign countries I can assure you they are fine if not better than the American counterpart. And given my recent experience with the assholes at Harborview I would say that is doubly so. 


In Need of a New Hip, but Priced Out of the U.S.

By ELISABETH ROSENTHAL
| Published: August 3, 2013

WARSAW, Ind. — Michael Shopenn’s artificial hip was made by a company based in this remote town, a global center of joint manufacturing. But he had to fly to Europe to have it installed.

Mr. Shopenn, 67, an architectural photographer and avid snowboarder, had been in such pain from arthritis that he could not stand long enough to make coffee, let alone work. He had health insurance, but it would not cover a joint replacement because his degenerative disease was related to an old sports injury, thus considered a pre-existing condition.

Desperate to find an affordable solution, he reached out to a sailing buddy with friends at a medical device manufacturer, which arranged to provide his local hospital with an implant at what was described as the “list price” of $13,000, with no markup. But when the hospital’s finance office estimated that the hospital charges would run another $65,000, not including the surgeon’s fee, he knew he had to think outside the box, and outside the country.

“That was a third of my savings at the time,” Mr. Shopenn said recently from the living room of his condo in Boulder, Colo. “It wasn’t happening.”

“Very leery” of going to a developing country like India or Thailand, which both draw so-called medical tourists, he ultimately chose to have his hip replaced in 2007 at a private hospital outside Brussels for $13,660. That price included not only a hip joint, made by Warsaw-based Zimmer Holdings, but also all doctors’ fees, operating room charges, crutches, medicine, a hospital room for five days, a week in rehab and a round-trip ticket from America.

“We have the most expensive health care in the world, but it doesn’t necessarily mean it’s the best,” Mr. Shopenn said. “I’m kind of the poster child for that.”

As the United States struggles to rein in its growing $2.7 trillion health care bill, the cost of medical devices like joint implants, pacemakers and artificial urinary valves offers a cautionary tale. Like many medical products or procedures, they cost far more in the United States than in many other developed countries.

Makers of artificial implants — the biggest single cost of most joint replacement surgeries — have proved particularly adept at commanding inflated prices, according to health economists. Multiple intermediaries then mark up the charges. While Mr. Shopenn was offered an implant in the United States for $13,000, many privately insured patients are billed two to nearly three times that amount.

An artificial hip, however, costs only about $350 to manufacture in the United States, according to Dr. Blair Rhode, an orthopedist and entrepreneur whose company is developing generic implants. In Asia, it costs about $150, though some quality control issues could arise there, he said.

So why are implant list prices so high, and rising by more than 5 percent a year? In the United States, nearly all hip and knee implants — sterilized pieces of tooled metal, plastic or ceramics — are made by five companies, which some economists describe as a cartel. Manufacturers tweak old models and patent the changes as new products, with ever-bigger price tags.

Generic or foreign-made joint implants have been kept out of the United States by trade policy, patents and an expensive Food and Drug Administration approval process that deters start-ups from entering the market. The “companies defend this turf ferociously,” said Dr. Peter M. Cram, a physician at the University of Iowa medical school who studies the costs of health care.

Though the five companies make similar models, each cultivates intense brand loyalty through financial ties to surgeons and the use of a different tool kit and operating system for the installation of its products; orthopedists typically stay with the system they learned on. The thousands of hospitals and clinics that purchase implants try to bargain for deep discounts from manufacturers, but they have limited leverage since each buys a relatively small quantity from any one company.

In addition, device makers typically require doctors’ groups and hospitals to sign nondisclosure agreements about prices, which means institutions do not know what their competitors are paying. This secrecy erodes bargaining power and has allowed a small industry of profit-taking middlemen to flourish: joint implant purchasing consultants, implant billing companies, joint brokers. There are as many as 13 layers of vendors between the physician and the patient for a hip replacement, according to Kate Willhite, a former executive director of the Manitowoc Surgery Center in Wisconsin.

Hospitals and orthopedic clinics typically pay $4,500 to $7,500 for an artificial hip, according to MD Buyline and Orthopedic Network News, which track device pricing. But those numbers balloon with the cost of installation equipment and all the intermediaries’ fees, including an often hefty hospital markup.

That is why the hip implant for Joe Catugno, a patient at the Hospital for Joint Diseases in New York, accounted for nearly $37,000 of his approximately $100,000 hospital bill; Cigna, his insurer, paid close to $70,000 of the charges. At Mills-Peninsula Health Services in San Mateo, Calif., Susan Foley’s artificial knee, which costs about the same as a hip joint, was billed at $26,000 in a total hospital tally of $112,317. The components of Sonja Nelson’s hip at Sacred Heart Hospital in Pensacola, Fla., accounted for $30,581 of her $50,935 hospital bill. Insurers negotiate discounts on those charges, and patients have limited responsibility for the differences.

The basic design of artificial joints has not changed for decades. But increased volume — about one million knee and hip replacements are performed in the United States annually — and competition have not lowered prices, as would typically happen with products like clothes or cars. “There are a bunch of implants that are reasonably similar,” said James C. Robinson, a health economist at the University of California, Berkeley. “That should be great for the consumer, but it isn’t.”

‘Sticky Pricing’

The American health care market is plagued by such “sticky pricing,” in which prices of products remain high or even increase over time instead of dropping. The list price of a total hip implant increased nearly 300 percent from 1998 to 2011, according to Orthopedic Network News, a newsletter about the industry. That is a result, economists say, of how American medicine generally sets charges: without government regulation or genuine marketplace competition. “Manufacturers will tell you it’s R&D and liability that makes implants so expensive and that they have the only one like it,” said Dr. Rory Wright, an orthopedist at the Orthopedic Hospital of Wisconsin, a top specialty clinic. “They price this way because they can.” Zimmer Holdings declined to comment on pricing. But Sheryl Conley, a longtime Zimmer manager who is now the chief executive of OrthoWorx, a local trade group in Warsaw, said that high prices reflected the increasing complexity of the joint implant business, including more advanced materials, new regulatory requirements and the logistics of providing a now huge array of devices. “When I started, there weren’t even left and right knee components,” she said. “It was one size fits all.”

Mr. Shopenn’s Zimmer hip has transformed his life, as did the replacement joint for Mr. Catugno, a TV director; Ms. Foley, a lawyer; and Ms. Nelson, a software development executive. Mr. Shopenn, an exuberant man who maintains a busy work schedule, recently hosted his son’s wedding and spent 26 days last winter teaching snowboarding to disabled people.

His joint implant and surgery in Belgium were priced according to a different logic. Like many other countries, Belgium oversees major medical purchases, approving dozens of different types of implants from a selection of manufacturers, and determining the allowed wholesale price for each of them, for example. That price, which is published, currently averages about $3,000, depending on the model, and can be marked up by about $180 per implant. (The Belgian hospital paid about $4,000 for Mr. Shopenn’s high-end Zimmer implant at a time when American hospitals were paying an average of over $8,000 for the same model.)

“The manufacturers do not have the right to sell an implant at a higher rate,” said Philip Boussauw, director of human resources and administration at St. Rembert’s, the hospital where Mr. Shopenn had his surgery. Nonetheless, he said, there was “a lot of competition” among American joint manufacturers to work with Belgian hospitals. “I’m sure they are making money,” he added.

Dr. Cram, the Iowa health cost expert, points out that joint manufacturers are businesses, operating within the constraints of varying laws and markets.

“Imagine you’re the C.E.O. of Zimmer,” he said. “Why charge $1,000 for the implant in the U.S. when you can charge $14,000? How would you answer to your shareholders?” Expecting device makers “to do otherwise is like asking, ‘Couldn’t Apple just charge $50 for an iPhone?’ because that’s what it costs to make them.”

But do Americans want medical devices priced like smartphones? “That,” Dr. Cram said, “is a different question.”

A Miracle for Many 

When joint replacement surgery first became widely used in the 1970s, it was reserved for older patients with crippling pain from arthritis, to offer relief and restore some mobility. But as technology and techniques improved, its use broadened to include younger, less debilitated patients who wanted to maintain an active lifestyle, including vigorous sports or exercise.

In the first few decades, implants were typically cemented into place. But since the 1980s, many surgeons have used implants made of more sophisticated materials that allow the patient’s own bone to grow in to hold the device in place. For most patients, implants have proved miraculous in improving quality of life, which is why socialized medical systems tend to cover them. Per capita, more hip replacements are done in Britain, Sweden and the Netherlands, for example, than in the United States.

Motivated in part by science and in part by the need to create new markets, joint makers churn out new designs that are patented, priced higher and introduced with free training courses for surgeons. Some use more durable materials so that a patient requiring a hip implant at age 40 or 50 might rely on it longer than the standard 20 years, while other models are streamlined and require smaller incisions.

Zimmer got a big sales bump a few years ago when it began promoting its new “female knee,” a slightly slimmer version of its standard design, in an advertising campaign directed at patients. Hospitals on average pay about $800 more to buy the gender-specific knee implants, according to MD Buyline.

Many doctors say that for most patients, older, standard implants with a successful track record are appropriate. Expensive modifications make no difference for the typical patient, but they drive up prices for all models and have sometimes proved to be deeply flawed, they say. < In the last few years, joint manufacturers have faced lawsuits and have settled claims with patients after new, all-metal implants, which were meant to be more durable than the standard version, had unusually high failure rates. As for those “female knees,” a study featured at the meeting of the American College of Orthopedic Surgeons this year concluded, “While we certainly use the female components frequently in surgery, we don’t detect any objective improvement in clinical outcomes.”

That is why Dr. Scott S. Kelley, an orthopedist affiliated with Duke University Medical Center, generally tries to dissuade patients who request “new, improved” joints. “I tell them: ‘That’s taking a big risk for the potential of a few percentage points of improvement. You wouldn’t invest your retirement account this way.’ ”
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