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Tseng Y, Mandl KD. Difference Between Estimated Purchase Price and Insurance Payments for Knee and Hip Implants in Privately Insured Patients Younger Than 65 Years. JAMA. 2017;317(8):854–855. doi:10.1001/jama.2016.19579
Total knee arthroplasty (TKA) and total hip arthroplasty (THA) are common procedures with charges ranking first and eighth among all procedures in the United States.1 The cost of the implant device is typically the largest expense associated with these procedures,2 but insurance companies pay without knowledge of either price or even the device model. We compared allowed insurance payments for these devices to an estimated price at which the hospital purchased the implant from the manufacturer to estimate the discrepancy.
This retrospective cross-sectional study used deidentified data from a nationwide, private health insurance plan. Forty-five million unique individuals with medical claims between 2011 and 2015 were included in the study. Boston Children’s Hospital institutional review board approved the study with a waiver of consent. Patients younger than 65 years who were admitted to hospitals in 2011-2015 were included if they had at least 1 claim for a primary TKA or THA and at least 1 implant payment with limited case complexity (Diagnosis Related Group code 470). Payment for implants is the total paid by payers to surgical centers including co-pays, deductible, and coinsurance. We excluded patients whose payment for implant devices was below the 1st percentile or above the 99th percentile.
Although implant prices vary by brand and model, the average selling prices (ASPs; paid from surgical centers to manufacturers) of knee and hip implants were available from Orthopedic Network News (ONN),3 the largest publicly available implant registry. ASPs were based on pricing information submitted by more than 160 hospitals per year covering 375 385 cases in 2011-2015. To assess the accuracy of ONN, ASPs for knee and hip implants were also obtained from ECRI Institute’s PriceGuide,4 based on pricing information submitted by 1500 hospitals from May 2015 to December 2015.
The estimated ASPs of implants were compared with insurance payments for implants. Analyses were performed using R (R Foundation), version 3.2.3.
The study population included 40 372 patients with primary TKAs and 23 570 patients with primary THAs in 2011-2015 (Table). The ASP based on ONN was $5023.01 (95% CI, $5022.21-$5023.80) and the mean insurance payment was $10 604.52 (95% CI, $10 543.50-$10 665.53) for knee implants. The ASP was $5619.75 (95% CI, $5618.31-$5621.19) and the mean insurance payment was $11 751.25 (95% CI, $11 663.34-$11 839.16) for hip implants (Table). Based on the differences between the ASP and the mean insurance payments, the cumulative differences in payment for patients in this insurance database were estimated at $225.3 million for TKA and $199.7 million for THA. ASPs from ONN and PriceGuide were similar (Table).
The total payments insurance companies pay for knee and hip implants were twice as high as the average selling prices at which hospitals purchased the implants from manufacturers, resulting in hundreds of millions of dollars of additional insurance claims.
This study has some limitations. The claims data were provided by a nationwide, large private payer, but the beneficiaries are not nationally representative. The results may not be generalizable to publicly insured patients. Patients older than 65 years were excluded. Although they comprise an important population receiving implants, nearly half the patients who underwent TKA and THA were younger than 65 years in 2014,1 and such patients are projected to receive the majority of TKA and THA procedures in the United States within the next decade.5 Furthermore, previous studies found patient characteristics, including age, accounted for only a small percentage of the total variance in implant cost.2
Although ASPs based on a nationwide, cross-hospitals estimate were used, the prices might not precisely correspond to those paid by the insurance companies in this study. However, the similarity of ASPs between ONN and PriceGuide validates the accuracy of the price estimates.
Insurance companies pay for implants without knowing the brand or model, and device pricing by manufacturers is not publicly reported. Availability of such information would allow price negotiation between insurance companies, hospitals, and manufacturers and may lower implant prices.
Corresponding Author: Kenneth D. Mandl, MD, MPH, Computational Health Informatics Program, Boston Children’s Hospital, 300 Longwood Ave, One Autumn Mail, Stop BCH3187, Boston, MA 02115 (firstname.lastname@example.org).
Author Contributions: Dr Tseng had full access to all of the data in the study and takes responsibility for the integrity of the data and the accuracy of the data analysis.
Concept and design: All authors.
Acquisition, analysis, or interpretation of data: All authors.
Drafting of the manuscript: All authors.
Critical revision of the manuscript for important intellectual content: Mandl.
Statistical analysis: Tseng.
Obtained funding: All authors.
Administrative, technical, or material support: Mandl.
Conflict of Interest Disclosures: Both authors have completed and submitted the ICMJE Form for Disclosure of Potential Conflicts of Interest and none were reported.
Funding/Support: Dr Tseng was funded by grant MOST105-2218-E-182-003 from Ministry of Science and Technology, Taiwan, and grant CMRPD3F0051 from Chang Gung Memorial Hospital.
Role of the Funder/Sponsor: The sponsors had no role in the design and conduct of the study; collection, management, analysis, and interpretation of the data; preparation, review, or approval of the manuscript; and decision to submit the manuscript for publication.
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