Bundled payments drive down Medical device prices

July 13, 2015 - The U.S. Secretary of Health and Human Services last week proposed moving doctors and hospitals in 75 geographic areas to bundled payments, which makes the hospital where the surgery takes place be “accountable for the quality and costs of the care for the entire episode of care – from the time of the surgery through 90 days after discharge.”

Bundled payments are already becoming more common among private insurers like UnitedHealth Group, Aetna, Cigna, Anthem and other Blue Cross and Blue Shield plans.

Those involved in early bundled payment efforts for knee and hip replacements say the costs are lowered and it’s the device makers who tend to bring their prices down when surgeons go out for bid and become tougher negotiators in effort to get more of the “at risk” bundled payment for themselves rather than the device maker. This could mean a squeeze on revenue for the likes of the Depuy unit of Johnson & Johnson (JNJ), Stryker (SYK) and Zimmer (ZMH).

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Source: Sylvia Mathews Burwell, right, secretary of the Department of Health and Human Services, with Attorney General Loretta Lynch, speaks about a national effort to crack down on Medicare fraud during a press conference at the Department of Justice on June 18, 2015. (Photo by T.J. Kirkpatrick/Getty Images)