GAO report finds some hospitals paying more for devices

Findings from a new Government Accountability Office report are causing some members of Congress to push for greater transparency so hospitals pay a fair price for implantable medical devices (IMDs). The report determined that some hospitals are paying more--a lot more--than their peers for such IMDs as defibrillators and joint replacements. And those higher costs are often passed on to the Medicare program.

As the U.S. population ages, the demand for IMDs is rising. Hospitals are responding to the need, and while some of them buy IMDs from group purchasing organizations, others obtain them directly from the manufacturers. However, there are often confidentiality clauses preventing hospitals from revealing how much they paid for the devices. This situation has caused some concern in Washington, as lawmakers think the lack of transparency hurts competition, driving up costs for hospitals and ultimately leading to higher Medicare spending.

Their concerns seem to have merit. The report cited data showing "substantial variation" in prices for cardiac devices. In one instance, the difference between the lowest and highest price hospitals said they paid for a particular automated implantable cardioverter defibrillator model was $6,844. For another model, the difference was $8,723.

The report also found that from 2004 through 2009, expenditures for hospital IMD procedures jumped  from $16.1 billion to $19.8 billion, an increase of 4.3% per year--"a rate equal to that of Medicare spending for other hospital procedures."

"The lack of available data makes it extremely difficult for Medicare and hospitals to get a full sense of the cost problem. We simply have to find smart ways to curb rising costs, preserve quality care and save taxpayer dollars, and getting more information about the cost of implanted medical devices is a strong first step," said Senate Finance Committee Chairman Max Baucus (D-MT), who initially requested the report.

Device industry insiders have responded by suggesting that healthcare savings can be found elsewhere. In fact, a 2011 report sponsored by AdvaMed found spending on a range of devices and nondrug supplies was between 5% and 6% of total health spending from 1989 to 2009, The Wall Street Journal notes. "We're not seeing the problem," said AdvaMed Executive VP David Nexon, who added the confidential price agreements are the norm in many industries. Furthermore, if transparency were imposed, prices might actually go up, as sellers might be discouraged from offering discounts, he added, as quoted by the Journal.

So, will hospitals be able to make better pricing decisions? Good question--and it's a situation MedCity News likens to a black hole. But we can be sure that members of the Senate Finance Committee will be very interested in the report's findings.

- see Baucus' release
- read the GAO report (.pdf)
- see the WSJ story
- get more from MedCity News