Medical technology can keep costs down

Several recent media reports have observed wide and puzzling variations in the amounts hospitals charge for similar procedures. The cost of medical technology is sometimes cited as a potential cause of the variations, but a review of the data proves otherwise.

Overall, medical technology prices in the United States have remained consistently low for 20 years, growing at less than half the rate of prices in the overall economy - or at an average annual rate of 1 percent.

Spending on advanced medical technology has also remained virtually constant from 1992 to 2010 as a percentage of national health expenditures - about 6 percent.

In fact, total joint-replacement devices, along with other major implant types, are experiencing declines in pricing. From 2007 to 2011, the average inflation-adjusted selling prices paid by hospitals for artificial hips and knees fell by 23 percent and 17 percent, respectively.

So prices have been consistently low and are declining. But do they cause variability in hospital charges? In a recent study of Medicare hospital claims data, researchers found that device prices are not the cause of wide variations in hospital charges.

Indeed, advanced medical devices are more often the solution when it comes to health-care costs, helping people live longer, preventing hospitalizations and absenteeism, and keeping patients out of nursing homes.

Over the last three decades, medical advancements have helped add five years to U.S. life expectancy, while cutting fatalities from heart disease and stroke by more than half. These advancements have also helped cut the number of days people spent in hospitals by nearly 60 percent.

Studies have shown that Medicare patients receiving total hip or knee replacements have nearly half the risk of death after seven years compared with a matched group of osteoarthritis patients not receiving total joint replacement.

The impact of knee replacement surgery also includes significant overall cost savings. For the average patient, a recent study showed the direct costs of knee-replacement surgery are offset by indirect savings from increased employment and earnings, fewer missed days at work, and lower disability payments. The result is a lifetime net benefit of nearly $19,000 per patient. If applied across all U.S. knee recipients in 2009, the study estimated net lifetime societal savings of $12 billion just from treatment delivered in that year alone.

Younger patients generate even greater benefits, in large part by returning to work and earning wages that otherwise would have been lost. A total knee replacement in a 50-year-old patient will yield a net societal benefit of $69,000 over 30 years as compared with nonoperative treatment.

Then there are the benefits that medical technology affords the broader economy. According to the Lewin Group, the industry employs more than 22,000 people in Pennsylvania - and supports an additional 57,000 jobs in other sectors. All told, medical technology contributes more than $13 billion to the state economy. The story is similar in New Jersey. Med tech supports more than 63,000 Garden State jobs directly and indirectly - and accounts for $12.6 billion in annual economic activity.

Medical technology can help solve our nation's high and variable health-care costs - and bolster the economy in the process.