Higher fees paid to orthopedic surgeons for performing hip replacements in the U.S. is a “main driver” of higher health care spending in the U.S. than in Canada, France, Germany, the United Kingdom and Australia.
That’s the stated conclusion of a study published in the September issue of Health Affairs by two political science professors from Columbia University. One of the authors, Sherry Glied, Ph.D., has since become the assistant secretary for planning and evaluation at the U.S. Department of Health and Human Services.
Disputed Fees Data
Sherry Glied, Ph.D.There’s just one big problem with their conclusion. The evidence of higher fees paid to U.S. orthopedic surgeons for hip surgery just doesn’t add up.
Glied and her colleague, Miriam Laugesen, Ph.D., in the study, titled: “Higher Fees Paid To US Physicians Drive Higher Spending For Physician Services Compared To Other Countries” (Health Affairs, 30, no.9 (2011):1647-1656), compared fees paid to docs by public and private payers for primary care office visits and hip replacements in the countries noted above.
$1, 634 or $962
The authors claim that public payer Medicare, paid U.S. orthopedic surgeon 70% more for hip replacements than public payers paid their counterparts in other countries. As evidence, they report that Medicare reimbursed surgeons an average of $1, 634 for a hip replacement in the U.S in 2009. See their report’s table 1 for comparison fees paid to physicians for hip surgery.
Table 1: Fees paid by public payers to physicians performing hip surgery.
|
Country |
Fee ($) 2009 |
|
U.S. |
1, 634 |
|
Germany |
1, 251 |
|
UK |
1, 181 |
|
Australia |
1, 046 |
|
France |
674 |
|
Canada |
652 |
Source: Laugesen, Glied
We double checked the U.S. numbers cited by the Columbia study with our sister company, PearlDiver Technologies, Inc. Analysts at PearlDiver found that the average payment to Medicare by hospitals in 2009 in the U.S. for hip replacements was closer to $960 than $1, 600—$960, by the way, would be less than Australia, Germany or the UK.
Charging Records Versus Physician Fee Schedule
To get that number, PearlDiver analysts pulled up the 2009 CMS Carrier Standard Analytical File which holds a random 5% sample of all physicians charging records in Medicare and looked for all instances of a physician submitting a claim for CPT code 27130 (which is the most standard code use by surgeons when charging for a hip replacement).
Miriam Laugesen, Ph.D.We asked Dr. Laugesen about the discrepancy. To her credit, she went back and verified her data. She told us the source of her study’s $1, 634 number was the Medicare Physician Fee Schedule and stands by that number. Dr. Laugesen also told us that their numbers included direct payments to beneficiaries.
Dr. Laugesen wrote us, “I have carefully reviewed the data used in the study published in Health Affairs. Based on a review of the fees paid by Medicare under the Physician Fee Schedule for these services, and a review of the data on Medicare expenditure[s]…I find that the price and average expenditure is [close to the number in her study ($1, 600)].”
According to Centers for Medicare and Medicaid Services (CMS), the Physician Fee Schedule is a, “comprehensive listing of fee maximums is used to reimburse a physician and/or other providers on a fee-for-service basis.” In other words, the maximum allowed for reimbursement, not what is actually paid.
PearlDiver analysts went to CMS’ ResDAC (Research Data Assistance Center) to double check and found that payments to beneficiaries were a very rare event. After tweaking numbers for denied claims and the rare payment to a beneficiary, PearlDiver came up with an average payment of $962 to a surgeon in the U.S. for performing a hip replacement surgery.
According to Laugesen and Glied, the average public payment to surgeons in the five comparative countries for a hip replacement was…wait for it…$960.
Columbia’s Disputed Conclusion
Clearly, this evidence shows that payments to surgeons for performing hip replacements in the U.S. is not a “main driver” of why health care spending is higher in the U.S. than in other countries.
Ben Young, the President of PearlDiver, told us that the average hospital charges for a total hip replacement from Medicare is about $9, 700. In 2007, reimbursement was over $10, 700. “So you can see that even hospital reimbursements for this procedure have been dropping over the past few years, ” said Young.
Surgeons and Hip Maker Respond
PearlDiver’s evidence was not the only challenge to the Columbia study’s conclusion that hip surgeons were the culprits of higher spending.
We asked surgeons, through American Academy of Orthopaedic Surgeons (AAOS), and the biggest hip maker in the world, Zimmer Holdings, Inc. about the Columbia conclusion.
AAOS: Surgeon Payments Are Minimal and Declining
The Academy told us that the study, “failed to point out that physician fees are a very small piece of total U.S. healthcare costs (according to the Congressional Budget Office Medicare payments for physician services comprise 13% of total Medicare spending). Instead, the authors erroneously attribute the significant increases in total U.S. healthcare expenditures directly to payment rates for physicians.”
“Medicare payments for physician services have remained virtually flat or actually decreased in the last decade while healthcare expenditures continue to steadily rise. For instance, the Medicare payment for a hip replacement surgery has decreased by 7% in nominal (actual) dollars and 32% in real (inflation adjusted) dollars since 2000, while total Medicare expenditures have almost doubled in the same time period, according to the Centers for Medicare and Medicaid Services (CMS), ” continued the response from AAOS.
In conclusion, the Academy told us that the study compares costs for physician services across six different countries. “International healthcare cost comparisons are notoriously difficult to make due to variations across countries in practice setting, medical liability rates, the number of insured citizens, and each country’s economic complexities.”
Zimmer: Flawed Study, Wrong Conclusion
Zimmer Holdings which has almost 25% of the world’s hip market share, told us through their health economics team that data, as the authors of the Columbia study noted, must be pieced together from disparate, often conflicting sources. They say this is apparent in the study’s use of $3, 996 (for private payment for hip replacement surgery in the U.S. from HealthGrades).
“Zimmer’s analysis of more than 15, 000 actual hip replacement claims from the Thomson Reuters MarketScan Commercial Claims Database has demonstrated that the average physician hip replacement reimbursement in 2008 was approximately $2, 400.
Zimmer says the study failed also to factor in payer mix—the majority of hip replacements in the U.S are funded via Medicare. Thus, they conclude the weighted average physician payment per procedure is approximately $1, 800. “This payment falls squarely in the payment ranges noted by the authors for Australia and UK.”
“Further analysis by Zimmer has shown that unadjusted Medicare reimbursements have actually fallen while private payments have risen only modestly over a seven-year period. During this same time period, hospital reimbursements have risen substantially.”
Another flaw of the study’s calculations, according to Zimmer, is the omission of variables such as professional liability (malpractice) insurance and administrative expenses.
“In the control markets, single payer systems dominate and thus the corresponding administrative burden is lower than in the U.S. where there are several hundred payers, all of whom establish their own policies. Morra, et al., in a study published in the August 2011 edition of Health Affairs, estimate that U.S. physician burden for payer interactions is $27.6 billion higher than their Ontario, Canada, counterparts in a single-payer system.
“Regarding malpractice, the U.S. is by far the most litigious market in the assessment and there is a corresponding effect of additional required coverage and costs. While one could argue this is part of practice expenses, the specific effect associated with malpractice expenses was not expressly called out.”
The Zimmer team also found a problem with the study’s lack of considering of excess demand within the markets.
“In many countries, surgical reimbursement rates are set by policy and can be treated as predetermined. Some countries lack information on commercial surgical reimbursement rates as the study noted. The article notes per capita demand. However, it does not discuss the excess demand of each country. In most cases, this excess demand does not enter into the world market for surgical procedures. Thus, in this case, the sum of all excess demand is not equal to zero by market clearing. This effect was not taken into account when determining the market price for the procedure.”
“We disagree with the study’s conclusion, ” said the Zimmer response.
The surgeons and hip makers agree that researchers and policymakers should look somewhere else for a culprit to higher spending.
“The authors did not provide adequate total expenditure per market and failed to correctly characterize reimbursement for orthopaedics for major joint replacement. Physician payments are by no means the most significant driver of spending, especially for hip and knee surgeons, whose reimbursement has in fact declined while the number of surgeries has doubled since 2000 and administrative costs and system inefficiencies continue to strain the U.S. health care system, ” concluded the Zimmer statement.
What was not debated was that U.S. orthopedic surgeons are paid more annually than their counterparts. According to the Columbia study, U.S. orthopedic surgeons earned about $442, 450 per year, followed by the $324, 138 earned by British orthopedic surgeons. French orthopedic surgeons are at the low end and earn about $154, 380 annually.
Public Policy Impact
What is in dispute is the conclusion from the challenged study which might find its way into the public policy decision-making process at Medicare.
As we noted, Dr. Glied is now the assistant secretary for planning and evaluation at the U.S. Department of Health and Human Services (HHS). The paper was written before she was appointed to that position and doesn’t reflect the views of HHS, according to a disclaimer published with the paper.
The Columbia study was supported by an Investigator Award in Health Policy Research from the Robert Wood Johnson Foundation and by a grant from the Commonwealth Fund.
