Hip and Knee Replacement Pricing Overblown At Some Hospitals: Study

Researchers warn that many hospitals appear to be overcharging for hip and knee replacement systems, sometimes doubling the costs. 

In a research letter published in the Journal of the American Medical Association (JAMA) late last month, doctors from Boston Children’s Hospital found that the cost private insurance companies were being charged for artificial hip and knee implants were often twice as high as the cost the hospitals paid for the devices.

The study used data from a nationwide, private health insurance plan and looked at medical claims from 2011 to 2015, involving patients younger than 65 who had at least one claim for primary total knee arthroplasty or total hip arthroplasty and involved payment for at least one implant. They found data on more than 40,300 patients who underwent knee replacement, and more than 23,500 patients who received artificial hips.

According to the findings, the average selling price (ASP) for the knee implants was $5,023. However, the mean insurance company payment for those implants was $10,604. For hip implants, the average selling price was $5,620, but insurance companies paid a mean payment of $11,751 for the same devices.

Based on those estimates, the researchers determined that insurance companies may have overpaid $225.3 million for knee implants and $199.7 million for hip implants from 2011 to 2015.

“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 in additional insurance claims,” the letter states.

Researchers indicate that insurance companies are not told how much the implants, the most expensive aspect of joint replacement surgeries, actually cost the hospitals that purchase them. In fact, the companies often do not even know which brand of device they are paying for.

The letter recommends that the average prices of the devices should be made publicly available. The authors also noted that some hospitals pay different prices for the same device, often getting discounts from manufacturers from bulk or bundled sales or being more effective at negotiating the costs for those devices.

The findings may not apply to publicly insured patients, according to the letter, and the study excluded those over the age of 65, who often receive Medicare or Medicaid, which has its own pricing and reimbursement structure.