The Business of Hip Replacements Gives Used Car Industry a Bad Name

From a Medical News Today story written by Catharine Paddock:

A study that used “secret shopper” techniques to find out the price of a hip replacement in hospitals across the US finds a huge variation in price, by as much as a factor of ten, with many hospitals contacted not able to give an estimated price. Reporting in the 11 February online issue of JAMA Internal Medicine, researchers at the University of Iowa (UI) Health Care and Iowa City VA Medical Center say their findings highlight the difficulties American consumers face when trying to obtain prices for a common surgical procedure.

Consumers can get their hands on information about hospital quality reasonably easily in the US, but information on pricing is much harder to come by, according to the study, which suggests efforts to achieve greater transparency in pricing have largely been ineffective. Lead author of the study, Jaime Rosenthal wrote:

“There have been many initiatives to increase pricing transparency, including state and federal laws, and still many hospitals are unable to provide price information for a common procedure.”Rosenthal, currently a senior at Washington University in St. Louis, conducted the research as a summer project at UI Carver College of Medicine.

For their study, the researchers randomly selected two hospitals from each state of the US, plus the District of Columbia, that performed total hip replacements. They also included 20 top orthopedic hospitals from the U.S. News & World Report rankings. To find out what the hospitals would charge, Rosenthal pretended to be inquiring on behalf of a fictitious patient, a 62-year-old grandmother with no health insurance who would be paying for the procedure herself. Rosenthal asked each hospital to provide the lowest “complete” price (that is physician plus hospital fees) for an elective total hip replacement.

When the hospital was only able to give an estimate for the hospital fee and not the physician fee, the researchers contacted an orthopedic surgery affiliated to the hospital to get an estimate of the physician fee.

The researchers contacted each hospital up to five times to get a quote. The results show that 40% of the top-ranked orthopedic hospitals and 36% of those not in the top rankings were not able to provide an estimated price for a total hip replacement. Plus, of those that could give an estimate, there was a tenfold difference between the lowest at $11,100 and the highest at $125,798. Rosenthal describes the variation as “striking”, particularly as they “tried to give each hospital identical information in terms of what the procedure would require”.

Only 9 of the 20 top-ranked hospitals (45%) and 10 of the ones not in the top ranking (10%) were able to give a completed bundled price for the procedure. The researchers were able to compile complete prices for another 3 top-ranked (15%) and 54 non-top-ranked (53%) by contacting the hospitals and the affiliated physician surgeries separately. Putting these results together, the complete price ranged from $12,500 to $105,000 at top-ranked hospitals and from $11,100 to $125,798 at non-top-ranked hospitals.

The researchers couldn’t find any specific hospital characteristics or reasons for why the higher prices were higher and the lower ones were lower, although they concede that their study only sampled a small number of hospitals. Senior author Peter Cram, UI associate professor of internal medicine and director of the Division of General Internal Medicine, says: “A big finding was the absolutely huge variation in price estimates. We believe that our results highlight the reality that hospitals have a very hard time knowing their own prices,” he adds. Rosenthal says the huge range in prices that they found suggests a “savvy” consumer would be able to shop around and make some significant savings.

“Our study suggests that it is important for consumers to ask for information about the cost of medical care and procedures and to be persistent,” urges Rosenthal, adding that the message for policy makers and hospital managers is that they have a long way to go to improve their pricing transparency.

  • In an accompanying invited commentary, policy researchers Andrew Steinmetz and Ezekiel Emanuel of the University of Pennsylvania in Philadelphia, liken the current state of the US healthcare system to that of the retail car industry in the 1950s, where prices varied hugely among dealers, depending on what “exorbitant” charges were added for shipping, “preparation fees”, and other spurious reasons without the buyer’s knowledge. “There is no justification for the inability to report a fee estimate, or a 12-fold price variation for a common elective procedure like a hip replacement,” they write, predicting that eventually, healthcare providers will be traveling down the same path as the one car dealers were forced to take, with federal laws brought in to get them to disclose full pricing information.

Funds from the National Institutes of Health helped pay for the study.

Source: Medical News Today

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I get more than a big kick, despite the condition of my hip, when reading the results of these studies and listening to lame conclusions being drawn like, “we believe that hospitals may have a hard time understanding their own pricing…” Are you kidding me? At this stage of the game, the lack of pricing transparency is inexcusable, if not deliberate, when considering the fact that all of the top hospitals surveyed for this study –all of them—have sophisticated systems in place to optimize the management of both pricing and collections. And even that’s not the point. Even if these providers didn’t, it would still be incumbent on them to provide a fair and reliable estimate to the patient. That’s common sense.

My favorite part of this story is the conclusion drawn by the University of Pennsylvania researchers. Likening the run-around given the researchers who were trying to nail down a hip replacement price to dealing with a used car salesman is perfect. But it’s unfortunate –for the used car salesman– because it gives the used car business a bad name.

  • An old joke: What’s the difference between a used car salesman and a hospital-billing administrator? The used car salesman knows when he’s lying.

By the way, if you’re thinking about a total hip replacement, then be sure to check-out the Direct Anterior Approach (DAA). DAA outcomes, when compared to standard hip replacement procedure-based outcomes, are genuinely off the charts. It’s the difference between a minimally invasive procedure where patients are walking out of the office the next day virtually pain free (best case) versus a relatively painful and long recovery process.

—Tom Finn

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