By Kristin Jones
How much does a knee replacement cost?
By now, you may know that the answer to this question varies wildly. It depends where you live. It depends which hospital you visit. It also depends on who’s paying.
Grand Junction, Colo. became a national poster-child of cost-effective medicine in 2009, after surgeon Atul Gawande, MD noted the community’s extraordinarily high quality-of-care ratings from Medicare in a now-famous New Yorker article called “The Cost Conundrum.” The community’s doctors had managed to incur some of the lowest per-patient Medicare costs in the country by collaborating to share patient records, review charts, avoid redundant care and reduce complications. Grand Junction was a model for the nation.
Or was it? More recently, national research has pointed out that low Medicare spending doesn’t necessarily translate into lower spending by private insurers, which most patients use for their care. On this measure, Grand Junction actually doesn’t look so good. In fact, private insurers spend more on care there than in most places in the country. This can hardly have been news to the people of Grand Junction, who pay some of the highest insurance premiums in the state, with the fewest options for carriers.
Now, new research from the Center for Improving Value in Health Care (CIVHC), a grantee of The Colorado Trust that collects payment and claims data from a wide range of insurers, shows that the Western Slope doesn’t even have the worst discrepancies in the state between Medicare and private-payer spending.
That distinction goes to the northeast region of Colorado, where the average cost of a hip or knee replacement is $78,000 if commercial insurers are paying, versus $23,000 if Medicare is paying. That is to say: In that part of the state, private insurers pay more than three times as much as Medicare pays for the same procedures.
Of course, that’s not to say that individual patients are paying that extra $55,000 for their knee and hip replacements. But you can be sure that private insurers are passing the costs down to their customers, just as Medicare spending ultimately lands on taxpayers.
Why the difference in costs? That’s not clear. But researchers note that some of the larger hospital systems, which are best able to contain costs by fostering collaboration and communication among doctors, also enjoy monopolies or duopolies in their communities that give them the upper hand in negotiating with insurers. Multi-hospital systems are largely absent from northeast Colorado—except when you include Fort Collins-area hospitals, which the CIVHC study did.
Some places in Colorado do much better at containing costs for all populations—though even this is relative. In Denver, for instance, the CIVHC research found that there’s still a $17,000 difference between what Medicare spends, on average, for a knee or hip replacement and what commercial insurers pay. But put that in perspective: While Medicare spending for this procedure in Denver is similar to what it is in northeast Colorado, private insurers in Denver are spending $39,000 less per procedure than similar carriers operating in Fort Collins.
As affordable health care continues to elude many Coloradans, including the newly insured, policymakers and advocates are likely to take an even closer look at these differences for lessons that can lower costs for all.