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Imagine this: You go to buy a car, but you don’t know who makes it, how other customers feel it’s performing, or how its price compares to other cars in its class.

This is exactly the situation facing insurers who reimburse hospitals for orthopedic implants, and a new study in the Journal of the American Medical Association reveals they are paying more than twice what hospitals do for devices inserted into hundreds of thousands of patients every year. This overpayment trickles down to patients in the form of higher premiums, say the study’s authors, but with regards to patient safety, the lack of information about manufacturers means it’s nearly impossible to track the performance of the implants.

“This system ends up flying blind,” said Dr. Kenneth Mandl of Boston Children’s Hospital. “Without knowing which specific implant was used, we can’t assess the safety or the effectiveness of the different devices. This is information any patient would want to know.”


Mandl and the research team found that commercial insurers paid an average of $10,605 for knee implants, while hospitals paid an average of $5,023 to get the devices from manufacturers. The difference was even greater for hip implants — $11,751, compared to $5,620. They found that the payment discrepancy added about $425 million in additional expenses for implants.

The researchers aren’t the only people worried about tracking performance. The Food and Drug Administration recently established a rule requiring unique identifiers to be added to devices inserted in patients so that their use can be tracked in a government database. But several powerful groups and individuals, including the former leaders of the FDA and Centers for Medicare and Medicaid Services, have also pushed for the information to be included in insurance claims data to increase transparency.


“Adding device identifiers to claims would provide data that researchers currently lack to study safety and effectiveness,” said Ben Moscovitch, manager of health information technology for the Pew Charitable Trusts. “The first step is to gather better data … so that patients, providers, researchers, and others can make more informed decisions.”

A key advisory panel known as the X12 committee has recommended the inclusion of device codes in insurance claims, but the proposal still faces a long bureaucratic process before a change could take effect. The standard claims form used by insurers was last updated in 2012.

Meanwhile, a 2016 report by inspectors within the federal Department of Health and Human Services found that faulty cardiac implants inserted into patients resulted in $1.5 billion in costs to Medicare, and $140 million in copays and other expenses paid by patients.

Given the volume of knee and hip replacements performed in the US — knees are the most common procedure, and hips are the eighth most common procedure — poor-quality implants could be resulting in even higher excess costs.

The study included nearly 64,000 patients under age 65 who received hip or knee replacements between 2011 and 2015. The cost of the implant is typically the largest expense associated with those surgeries.

Despite the volume of operations performed every year, determining the price paid by hospitals for implants is exceedingly difficult. Mandl and his co-author, Yi-Ju Tseng, obtained information from the Orthopedic Network News, a publicly available implant registry. The registry provided information submitted by 160 hospitals nationwide, but not specific information about what devices costs and specific facilities.

Mandl said the lack of information puts patients in an untenable position, especially as they face higher deductibles and other out-of-pocket costs for surgeries and other medical services.

“This will increasingly become an issue for consumers,” he said, adding that better information is needed to allow robust price negotiations among insurers, hospitals and drug and device makers. “There is very limited transparency into what comprises the true cost of health care.”

  • Do you go to a store and request to pay cost for their products? No there is a mark up. And yes, some may charge more than twice their cost. It has to do with the expense of doing business. Factored in are things like overhead, theft and loss. In healthcare that theft and loss is related to uninsured and underinsured patients who don’t pay for services they receive as well as government payors who pay pennies on the dollar for services.

  • The entire healthcare system needs full disclosure and transparency of healthcare costs in order to make care affordable. From providers to hospitals and facilities to insurers the proprietary cloak must be removed. Consumers, my patients, should be able to shop around for the best deal on where to have a knee replacement, or any other procedure for that matter. Imagine a world where you can go to a website and calculate exactly what it would cost to have a procedure at differing venues. How powerful of a cost controlling tool would that be? That is what is proposed in a bill circulating for support in the California Legislature. Who is apposing it? Insurers and hospitals.

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