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:

    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.