GAO: Demanding docs to blame for medical device prices

Some hospitals pay thousands of dollars more than others for big-ticket medical devices, according to Government Accountability Office (GAO) investigators, The Wall Street Journal reported.  From defibrillators to hip replacements to drug-eluting stents, a portion of those higher costs are coming out of Medicare's pockets.

The report released today surveyed 31 hospitals and found, for example, that one hospital paid $8,723 more than another for an identical implantable cardioverter defibrillator, which typically costs between $16,445 and $19,007. The cost of stents varied by as much as $828 from the typical cost of $1,700 to $1,800 each.

The report "raises serious concerns over the prices hospitals and Medicare are forced to pay for implantable medical devices," said Montana Democrat Max Baucus, chairman of the Senate Finance Committee, who requested the GAO study.

The GAO report says lack of price transparency hampers hospitals' ability to be "prudent purchasers" of medical devices.

Device makers say their products represent only a small portion of the $2.8 trillion in annual health spending and that greater savings could be found elsewhere, according to WSJ. Although confidential price agreements are in part to blame, price transparency could increase costs by discouraging sellers from offering discounts, David Nexon, an executive vice president of the Advanced Medical Technology Association, a device trade group, told WSJ.

Drivers of medical device costs includes healthcare organizations' desire to look better than competing hospitals, as well as doctors who demand hospitals provide them with specific devices, even if identical but less-expensive models are available. The GAO report highlights that latter problem and said contracts between manufacturers and hospitals often forbid price disclosures even to doctors, making it harder to steer doctors to less-expensive options, according to WSJ.

In some cases, hospitals bound by such contracts resorted to using color-coded stickers to help doctors distinguish between cheaper or more expensive devices on stock shelves, the report said.

To learn more:
- read the WSJ article (subscription required)
- see the GAO report (.pdf)

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