At the 11th Annual Spine, Orthopedic & Pain Management-Driven ASC Conference on June 13, James Lynch, MD, board-certified and fellowship-trained spinal neurosurgeon with Spine Nevada in Reno, discussed the quantum shift needed in orthopedic and spinal implant strategy.
Dr. Lynch began by explaining how the concept of price in the implant industry diversified since the 1980s. Before then, the price of an implant was less subjective. Now, costs for an implant can vary by geographic location, supplier and a range of other factors.
Historically, service line administrators have been "steamrolled by clever pricing strategies" from implant companies. Administrators, who may not have been the best negotiators, would be led to think that they were receiving a good deal for implants that were highly inflated. The price would already be "hyper-inflated," according to Dr. Lynch, but suppliers would negotiate a certain percentage off the top to make it seem like an attractive deal — even when the final price was still inflated.
From 1991 to 2010, Medicare payments to hospitals for hip implants went up 37 percent for implants. But the implant company's list cost for the hip implant went up 242 percent in the same timeframe. Compounding that significant increase is the face that Medicare payments to surgeons for those hip implants decreased by 36 percent from 1991 to 2010.
Dr. Lynch also emphasized the low proportion of research and development costs in implants. For a $6,000 orthopedic implant, R&D might comprise 6 percent of the implant's cost. On the other hand, in big pharma, R&D accounts for 12 percent to 20 percent of a product's cost.
Dr. Lynch concluded his presentation by saying physicians, hospitals and payers have head their heads in the sand about implants in the past few years. "We need a cost reduction for sure," he said. "We're paying for primary implants for every case we do here."
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Dr. Lynch began by explaining how the concept of price in the implant industry diversified since the 1980s. Before then, the price of an implant was less subjective. Now, costs for an implant can vary by geographic location, supplier and a range of other factors.
Historically, service line administrators have been "steamrolled by clever pricing strategies" from implant companies. Administrators, who may not have been the best negotiators, would be led to think that they were receiving a good deal for implants that were highly inflated. The price would already be "hyper-inflated," according to Dr. Lynch, but suppliers would negotiate a certain percentage off the top to make it seem like an attractive deal — even when the final price was still inflated.
From 1991 to 2010, Medicare payments to hospitals for hip implants went up 37 percent for implants. But the implant company's list cost for the hip implant went up 242 percent in the same timeframe. Compounding that significant increase is the face that Medicare payments to surgeons for those hip implants decreased by 36 percent from 1991 to 2010.
Dr. Lynch also emphasized the low proportion of research and development costs in implants. For a $6,000 orthopedic implant, R&D might comprise 6 percent of the implant's cost. On the other hand, in big pharma, R&D accounts for 12 percent to 20 percent of a product's cost.
Dr. Lynch concluded his presentation by saying physicians, hospitals and payers have head their heads in the sand about implants in the past few years. "We need a cost reduction for sure," he said. "We're paying for primary implants for every case we do here."
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