Physicians choose surgical implants and devices, hospitals order and pay for them, patients get whatever the docs choose, device manufacturers make lots of profits, and payers foot the bill. A process that is seemingly designed to completely avoid any price sensitivity, and the results to date have shown that there is remarkably little concern about cost on the part of the doc or patient, and at least to date, little ability to reduce costs on the part of the hospital, or payer.
A column in today’s New York Times describes the results of an analysis performed by investment firm Sanford Bernstein (registration required) which compared the costs of surgical implants (artificial hips, knees, etc) at 100 hospitals. Many of these institutions thought they were getting preferential pricing, but the results of the study show that their costs may have been substantially higher than other hospitals’.
The net of the article is that the days of price opacity in surgical implants is likely coming to an end; the research, combined with inquiries by regulators and the US Justice Dept. will shine a blinding light on the arcane world of implant pricing, likely bringing to an end the annual 8% price increases.
There is a subtlety missed in the article, which pertains to the small but important role of the workers comp payer. Sources indicate that a substantial portion of surgical implants are covered by workers comp, a portion much greater than the miniscule overall market share of comp (about 2% of all medical dollars are spent on comp, but figures indicate over a third of surgical implants are paid for under workers comp).
In comp, specifically in DRG states like New York, the cost of the implant is added to the DRG cost, which can increase the cost of the care by 50-70%. Therefore, the wounded parties in comp are not the hospitals (who typically price these procedures on a bundled basis in the group health and Medicare worlds and thereby absorb the cost) but the WC insurers.
What does this mean for you?
More light shining on the murky world of medical costs and procedures is always welcome; be sure to make sure you understand how the bundling and unbundling applies to your contracts and reimbursement.

Ohio’s Bureau of Workers Compensation will no longer be subsidizing indigent care at the state’s hospitals. The recent announcement that BWC is cutting reimbursement for inpatient care to Medicare plus 15% is one of the positive outcomes of the Hydra-headed scandal at Ohio’s Bureau of Workers Compensation.
And it appears likely that BWC will next cut payments for outpatient services, which make up a much larger slice of the medical expense pie.
Ohio joins several other states, including Pennsylvania. Connecticut, Rhode Island, California, and Maryland, all of which base workers comp reimbursement on Medicare costs plus a percentage.
Notably, the press has been somewhat neutral in its coverage of the change, with a recent editorial allowing that the reduction will simply result in cost-shifting to other payers. That is an inevitable result; however there is no logical, ethical, or legal requirement that the state’s employers pay for the inefficiencies or hospitals or society’s failure to provide insurance for all citizens.
Work comp has been a very profitable line of business for the state’s hospitals, generating over a half-billion dollars over a seven year period. That figure covers both inpatient and outpatient care, with outpatient significantly larger.
What does this mean for you?
On a micro level, lower costs for workers comp in Ohio; on a macro level another push for universal coverage.