$600 Billion, Where Does Your Copay Go – January 17, 2010.

The U.S. spends roughly $3 billion more than it should on orthopedic implants. Orthopedics represents 3% of U.S. overspend on drugs and devices and .45% of total overspend.

The past twenty years have seen an explosion of innovation by orthopedic companies. The new generation of metal-on-metal and ceramic-on-ceramic hip and knee implants are in many ways better than what nature gave us to start with. These new implants not only give mobility back to elderly women with osteoporosis, they let 50-year old distance runners keep running into their 80’s and 90’s. Coupled with new advances in orthobiologics – putties, pastes, and glues that promote bone healing – innovation in orthopedics has inarguably improved the lives of millions of Americans.

This kind of medical success story doesn’t come without a price. Ten years ago Americans spent 54 cents for hip and knee implants surgeries out of every $100 they spend on any kind of healthcare. Today they spend 78 cents. Total costs for hip and knee replacement surgery have grown at 10.2% annually since 2000, with about 70% of the growth driven by the amount of procedures, and 30% of the growth driven by the cost of each procedure.

Neither the orthopedic industry, orthopedic surgeons, nor the patients who get hip and knee implants is really any more to blame for healthcare spending growth than the next group of companies doctors, or patients you might take a look at. But things could still be a lot better.

In this article, I will explore where we are missing opportunities to save money, and why. We’ll start with a look at the orthopedic implant industry, which has managed to keep implant prices sky high despite competitive and commoditization pressure that would have destroyed margins in other, less ‘unique,’ industries. Next, we’ll explore how hospitals and insurers/payors have failed to push back against high implant prices and unnecessary surgeries. We’ll also examine surgeons and the role they play.

Go to the Full Story at $600 Billion, Where does Your Copay Go