A push to better publicize prices paid by hospitals for implantable devices could gain more steam in response to a recent report from the Government Accountability Office, but device makers contend they should retain the right to keep secret the prices they negotiate with hospitals.
"Lack of price transparency may hamper hospitals’ ability to be prudent purchasers of implantable medical devices," GAO concluded in the report issued earlier this month. It identified substantial variation in prices that hospitals paid for the same type of device based on a survey of dozens of U.S. hospitals, group purchasing organizations (GPOs) and government health care systems. This might indicate Medicare is paying more than it should for certain device-heavy procedures such as cardiac stenting and joint replacements, some policymakers suggest.
In response to the report, Sen. Max Baucus, D-Mont., Senate Finance Committee Chairman who requested the report in 2010, floated the prospect of requiring hospitals that treat Medicare beneficiaries to report to CMS the prices they pay for implantable devices.
Device makers vehemently oppose such an approach, according to David Nexon, senior executive vice president of AdvaMed. Such laws would "disrupt a very well-functioning competitive market and would be bad for the public," he said in an interview.
But hospitals and group purchasing organizations say that the current secrecy puts them at a disadvantage in negotiations with manufacturers, leading to prices that are higher than they would be in a more transparent market. The GAO report offers more support for a statutory change to right the situation, they say.
Jeffrey Lerner, CEO of ECRI Institute, a nonprofit research and services firm for hospitals, is calling for legislation that would simply remove pricing confidentiality clauses from manufacturers’ purchase contracts with hospitals and GPOs.
"In my view, the legislation should be quite simple," Mr. Lerner said in an interview. "It should say, ‘If you want to do business with Medicare, you cannot restrict the sharing and comparing of prices paid.’"
Group purchasing organizations also want to work with Sen. Baucus and other lawmakers to help shape legislation that would prohibit the use of confidentiality clauses in device manufacturers’ purchase contracts. "The medical device companies have essentially made price a proprietary piece of information, which we completely disagree with," said Curtis Rooney, president of the Healthcare Supply Chain Association, the trade group for GPOs.
The American Hospital Association would likely support outlawing gag clauses, said Don May, VP of policy for AHA. But AHA would also be happy to see new rules at least making it easier for hospitals to share more pricing information with the clinical teams that practice at their facilities, Mr. May said.
According to GAO, a manufacturer’s purchase contract often limits a hospital from discussing prices even with its own physicians, which makes it more difficult for surgeons to consider cost when selecting among devices.
Particularly with the evolution toward value-based reimbursement programs and accountable care organizations, hospitals are stepping up efforts to coordinate with physicians to reduce costs. But the lack of price transparency makes those efforts more difficult, hospitals suggest.
Parties on both sides of the price transparency debate admit that any legislation striking down confidentiality clauses would not altogether eliminate variation in device prices charged to hospitals.
"There’s a whole set of reasons prices between hospitals will vary," Mr. Nexon said. This is one reason he argued that it is difficult to come to any policy conclusions based on the data in the GAO report.
Mr. Nexon, citing the work of some economists, also floats the possibility that device prices could actually go up rather than down if full pricing transparency were imposed on manufacturers. Companies may be less willing to give discounts, he explained, "because if you’re going to give a discount to somebody, then how do you justify not giving it to somebody else."
Whether the GAO report actually ends up driving momentum toward legislation in this area remains to be seen. GAO issued a number of caveats in the report, noting, for example, that "the data we obtained on cardiac and orthopedic [device] prices are not generalizable" and "differences in how hospitals purchase the parts or components needed for certain procedures may limit the comparability" of pricing information. Further, the investigators acknowledged that they cannot specify how much implantable device pricing impacts government spending because Medicare reimburses for procedures that incorporate the devices, not the implantables themselves.n
This article was edited from "The Gray Sheet," which is also an Elsevier publication.