Medical Device Spending a Small Piece of the Healthcare Pie: AdvaMed

Posted in Medical Device Business by Brian Buntz on June 17, 2014

AdvaMed has released a new study stating that medical device spending is slow relative to other healthcare costs. From 1989 to 2011, the cost of medical technology has increased at roughly one-third of the rate of the broader economy and one-fifth the rate of other healthcare goods and services. In 2011, the cost of medical technology increased 0.7%—roughly one fifth the rate of overall inflation.

Although the amount of money spent on medical devices (as a share of national healthcare expenditures) has wavered since 1992, it has hovered around 6%. Nearly all of the increase in device spending relative to overall healthcare costs occurred between 1989 and 1992, the study notes.

Over the years, AdvaMed has issued a series of such studies, which have consistently found that medical device spending has been slow.

Device spending has been relatively flat in the United States, according to data presented by AdvaMed.
Device spending is relatively flat in the United States, according to AdvaMed. Image drawn from AdvaMed report.

That was certainly the point made by Don May, AdvaMed’s executive vice president for payment and healthcare delivery policy who was quoted in Modern Healthcare as saying that “[t]he findings further make the case that medical technology is not the driver of healthcare costs, as some critics wrongly claim, and that our industry is very price competitive.”

Now, however, healthcare spending in general is becoming increasingly scrutinized and some economists argue that medical device technology is often wasteful, and is a significant driver of overall healthcare costs.

Harvard health economists Katherine Baicker, PhD, and Amitabh Chandra have noted the inefficiency of spending on technologies like angioplasty, proton beam therapy, and surgical robotics. While such technologies may be useful in certain contexts, they are overused relative to more cost-effective therapies, they argue.

Harvard economist David Cutler, for instance, has also noted the waste inherent in U.S. healthcare spending, predicting that 20–30% of U.S. healthcare costs could be cut with not impact on quality of care.

Refresh your medical device industry knowledge at MEDevice San Diego, September 10–11, 2014.

In any case, the costs of medical devices is often not public information and a number of device companies requires hospitals to agree to “gag clauses” that prevent them from comparing the prices of medical devices with other healthcare institutions.

Another recent study from CMS supports the overall argument of the AdvaMed study, however, noting that, in 2012, money spent on durable medical equipment ($41.3 billion) and non-durable medical products ($53.7 billion) is dwarfed by every other major category of healthcare spending. For instance, in the same year, $882.3 billion was spent on hospital services and $565.0 billion was spent on physician services. Dental services totaled $110.9 billion  and $263.3 billion was spent on prescription drugs to cite two more examples.

The AdvaMed study was written by Roland “Guy” King, former chief actuary at the Health Care Financing Administration (now CMS), and Gerald Donahoe, a former U.S. Commerce Department economist.

Brian Buntz is the editor-in-chief of MPMN. Follow him on Twitter at @brian_buntz and Google+.

Josh Sandberg

Josh Sandberg is the President and CEO of Ortho Spine Partners and sits on several company and industry related Boards. He also is the Creator and Editor of OrthoSpineNews.

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