Pressures to Cut Medtech Spending Build

Everyone seems to agree that healthcare costs in the United States need to be reined in. As for how to do that, that’s a different matter entirely.

Two professors from a prestigious university had a take on the issue that Advamed didn’t especially like: slash technology spending.

Or at least that was a common interpretation of the report for those in the medtech industry. “Our recommendations are not anti-device,” explains Katherine Baicker, one of the report’s authors explains and a Harvard professor of health economics. “Our main conlusion is that healthcare payments should align with value. There are some high-value medical devices out there and others that aren’t.”

The researchers’ paper is titled “Aspirin, Angioplasty, and Proton Beam Therapy: The Economics of Smarter Health Care Spending.” It was co-authored by fellow Harvard professor Amitabh Chandra.

In the paper, the authors also question the assumption that it is necessarily a bad thing for healthcare spending to go up over time. As they explain in the intro of the paper, as “societies grow richer, it would seem natural that an increasing share of their resources should be devoted to ‘purchasing’ health and longevity.” (Whether the U.S. society is gaining wealth at an appreciable rate at present is another matter).

The paper goes on to stress, however, that one of the main reasons most people in the United States balk at the high costs of healthcare here is the waste and inefficiency built into the system. And they later argue that the high price of new medical technologies is not justified in every case. As the paper explains, “there is as yet little evidence on comparative effectiveness for a vast array of treatments.” They cite proton beam therapy as one example of such an “exorbitantly unproven” technology.

When asked about the likely broad implications of healthcare reform on healthcare policy, Baicker says “the policy levers that are most likely to succeed are those that reform the reimbursement system. Moving to more-coordinated care will help control costs,” she adds. “That is a more promising way to reform the delivery to promote less fragmented care—than any sector specifically.”

She explains that “payment reform is a challenge because it inherently means that public programs can’t reimburse for all care that might possibly benefit all people There is a virtually unlimited amount of things we could do but there is only a limited amount of funding that can be allocated to spending on healthcare.” Baicker explains that there are a number of things that can be done to cut costs but cutting out fraud and abuse of Medicare won’t be sufficient. Expensive healthcare technology that is of questionable value to the patient would be a logical place to cut, she argues.

In their paper, the authors add that many physicians often select costly procedures that rely on expensive technology.

Describing their scheme to reduce healthcare spending, they explain that “some specialists will see their incomes fall and are unlikely to take these cuts quietly.”

They cite patients with heart disease as an example of how costs could be contained. Inexpensive options such as prescribing aspirin for heart attack patients are underused. “Many expensive technologies are used more extensively in the U.S. than in other countries, such as cardiovascular procedures, at 587 per 100,000 in the U.S. compared with 207 in Denmark,” they explain in the report.

An earlier paper from the researchers that was published in 2009 came to similar conclusions. Titled “Improving Health Care Quality and Values,” the paper cites researchers done by John Wennberg and colleagues in the Dartmouth Atlas of Health Care, who have shown large disparities in the quality and cost of care delivered across the U.S.

A report from the Hastings Center also backs up the authors contention that medical technology, in one way or another, contributes to the cost inflation. “New or increased use of medical technology contributes 40–50% to annual cost increases, and controlling this technology is the most important factor in reducing them.”

“Largely due to the use of medical technology, those costs are now increasing at an annual rate of 7% a year,” that report explains. “That’s because cost control will mean that just about everyone will be forced to give up something and accept a different, more austere kind of health care.”

Conclusions such as those will likely be difficult for many Americans to swallow—the logic behind them notwithstanding. Many involved in healthcare are infatuated with new medical device technology and the incentives to use it whenever possible are strong.

Support for these views, however, has come from an unexpected place. The new Medtronic CEO Omar Ishrak was quoted by the Economist earlier this year as saying medical device companies “do not present comprehensive evidence of value.” Instead, he believes they rely on “an emotional kind of sale.” Owing to depressed healthcare spending, that might change. And there’s a real likelihood that use of technology in the United States could be reduced for at least as long as the economy continues to falter.

As for the likelihood that the U.S. healthcare system will be truly revamped with efficiency in mind, that likely won’t happen any time soon. “I’m not optimistic about what Congress will do about the growth of health-care spending,” Amitabh Chandra was quoted as saying in Bloomberg.

AdvaMed came out against the report, citing a previous report that found medical device spending is flat as a percentage of national health expenditures.

—Brian Buntz