Times Claims Climate of Secrecy Adds to Medical Costs
Doctors and manufacturers are colluding against patients and the hospitals that serve them, according to the September 22 New York Times.
The Times
article cited a climate of secrecy between doctors and
manufactures causing increased costs, but story left out almost any
reference to the patients themselves and bypassed several possible
reasons why costs might have increased. The article, Possible
Conflicts for Doctors Are Seen on Medical Devices, spent 3,207
words criticizing doctors and medical device manufacturers without
even once speaking with patients who had benefited from the medical
advances.
Times reporter Reed Abelson claimed there were several ways that the
unusually close, if largely unseen, ties to device makers were
boosting costs:
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Abelson argued that a reason
for the rise in manufacturers profits was surgeons, who
typically decide which devices are used yet bear no financial
burden for their costs. The article didnt address why the
hospitals cant pass on those costs to customers, the typical
free market approach to increased costs.
The story blamed price secrecy
for keeping costs high but didnt discuss how most companies
closely guard proprietary business information. The price of
a given device can vary by thousands of dollars from one
hospital to the next. One hospital in the New York area, for
example, paid $8,000 more for a DePuy hip than a competitor.
Abelson didnt mention enough data to know whether one
hospital was receiving discounts based on volume, frequency or
negotiated contracts.
The Times piece pushed the
idea that hospitals were powerless against the combination of
manufacturers and doctors. Dr. Cherf says the device
industry has done a brilliant job exploiting the erosion of
the traditional alliance between hospital and doctor. At the
same time, hospital administrators and consultants say
hospitals often hesitate to question surgeons decisions,
since the doctors are a main source of patients and revenue.
Abelson
spent much of the article blaming the marketplace for the cost
increase, when he wasnt blaming doctors or the medical device
community. The article quoted James R. Nathan, the chief executive
of Lee Memorial Health System in Florida, who claimed he couldnt
control costs. According to the Times, he said the marketplace
doesn't work.
Yet it appeared the Times didnt understand the
marketplace. Abelson did ask companies about prices, who responded
that it reflects a variety of business considerations, including
volume. Giving different prices to different customers is
commonplace. Several things can impact pricing including: frequency
and stability of payments, long-term relationships, potential for
lawsuits, etc.
The Times did give the industrys side for dealing
directly with doctors citing the device companies trade
association, AdvaMed, which argued the industry is highly
competitive and spends heavily on innovation. AdvaMed defending the
consulting contracts, adding, they are intended not to buy loyalty
but to pay for research and training and for the help doctors
provide in designing these sophisticated devices. No attempt was
made to detail the savings to customers from such a relationship.
Neither was there any examination of how much research and
development costs have been saved each year by having companies work
closely with doctors.
The article made the point that In the last two years,
Medicare payments to hospitals for implant surgery have risen about
40 percent, from $10 billion to $14 billion, according to an
analysis of Medicare records. The article tried to blame this on
manufactures and doctors profiting from patients with secret
negotiations. But Abelson didnt ask AdvaMed enough questions.
Increased arthritis can lead to more replacement surgeries, and 43
million Americans are afflicted with arthritis. As baby boomers
continue to age, incidents of arthritis likely will increase to 60
million by 2020, according to
AdvaMed.
The article made no mention of the many typical issues
involving manufacturing and consumers such as quality of the overall
products, customer satisfaction, or specifics on long range savings.
The Times briefly mentioned that countless [patients] have been
helped, yet didnt interview any of them or give any mention of
consumer opinion.
According to The
National Institute of Health approximately 120,000 hip
replacement operations are performed each year in the United States
and less than 10 percent require further surgery. New technology and
advances in surgical techniques have greatly reduced the risks
involved with hip replacements. In order to reduce the risks by
creating new technologies, research and development costs are an
ongoing expenditure.
Replacement surgeries at the current price actually
save money. The Times cited the executive of AdvaMed, Blair Childs,
on the matter. He argues that the hospitals overall costs have not
gone up significantly, because improvements in these devices let
doctors operate faster and patients go home sooner. Medicare
payments largely reflect the hospitals' overall costs.
A
look at the numbers from AdvaMed alluded to by Mr. Childs and
not provided by the Times was revealing. A total knee replacement
surgery saved on average $50,000 per patient in lifetime heath care
costs, which totaled to more than $13 billion for the 266,000 people
who have the surgery each year (almost as much as Medicare spends
per year on all replacement surgeries). The loss of individual
independence without the surgery would tally more than $77,000 per
patient (for costs such as a nursing home, in house care, etc). And
so while costing more up front, patients saved more in the long run.
