According to market research firm Supplier Relations LLC, the total US surgical appliance and device industry’s revenue for the year 2007 was “approximately $30.4 billion USD, with an estimated gross profit of 46.15%”.
Note that this total includes more than just implantable devices – sutures, surgical dressings, and prosthetics and other stuff are also counted towards the totals. Without buying the report for $600, you won’t know exactly how much is spent on which categories. But research indicates the orthopedic and surgical device share of the total has been quite significant – well above 50%.
The growth of the implant market has been marred by allegations of illegal kickbacks, sleazy business deals between manufacturers and physicians, and hugely inflated prices to payers.
That hasn’t slowed the market.
Another report (more specific to orthopedics) predicts total implant demand will rise “9.8 percent annually to $23 billion in 2012. The four major product segments — reconstructive joint replacements, spinal implants, orthobiologics and trauma implants — will all provide strong growth opportunities.”
But the big growth will come from spine. According to an excerpt from the report,
“Spinal implants will show strong growth due to advances in product technologies and related surgical techniques, coupled with an increasing prevalence of chronic back conditions. Fixation devices and artificial discs used in spinal fusion and motion preservation surgeries, especially procedures for the repair of vertebrae and replacement of degenerative discs, will account for the largest share of the market and best growth opportunities.”[emphasis added]
What does this mean for you?
Higher costs with uncertain results.
Aug
25
With 10 years of managed care contracting and claim negotiation experience, I can assure you this issue has, at best, crossed the line of abuse – and at worst, bordered on fraud in the hospital billing world. If the implant companies are profiting close to 50%, then the hospitals are making a killing. We have years of data and claims billing Revenue Code 278 (Supply & Implants) and their corresponding implant invoices (the price the hospital paid to the supplier). On average, hospitals bill at 200% to 400% of the invoice. This figure has been as high as 3000% of the invoice! Anything collected above the invoice amount represents pure profit to the hospital. Effective negotiators and contractors should be able to “carve out” these charges and reimburse them at cost or at least cost plus 10% to 20%. Hospitals that refuse to supply the invoice or only contract for a percent of charges should raise a lot of red flags to payors! Unfortunately, there are certain states with Work Comp laws that dictate the hospitals DO NOT have to supply these invoices. Guess what happens there?! We’ve always recommended denying reimbursement on those charges until an invoice is supplied (if it can’t be negotiated to a usual and customary amount). Most hospitals eventually produce them at that point, but a rogue few hospitals have threatened lawsuits to protect their right to avoid providing them. Don’t get me wrong – I’m all for making a profit, but racketeering is illegal.
The prevelance of implants has increased steadily over the past few years and more and more payors are starting to experience the effect. Health care expenditures are ever increasing and this appears to be a simple area for cost containment. The screaming should start getting louder on the payor side, I’m just not sure the new Congress is going to hear them.