In 2016, a La Crosse, Wis.-based Gundersen Health System hospital's average list price for knee replacement surgery was more than $50,000. After an 18-month review, Gundersen found the procedure actually cost a fifth of the list price — $10,550 at most, according to The Wall Street Journal.
Here are four highlights from the article:
1. While hospital list prices are a starting point for payer negotiations, greater consolidation has given hospitals more pricing power in many markets, according to WSJ, which cites health economics researchers. Derek Haas, CEO of healthcare cost and analytics company Avant-garde Health, which worked with Gundersen, told the publication, "Being cost effective was not an imperative in that type of market dynamic." However, as WSJ notes, payment reform among Medicare and private health insurers is prompting health systems like Gundersen to get a better grip on their costs.
2. During the review, an efficiency expert recorded the time physicians and nurses spent on Gundersen's knee replacement surgery and tracked which instruments, resources and medicines physicians used. Time spent wheeling VCR carts, a lack of available postsurgery beds and delays in starting physical therapy were among the inefficiencies discovered in the report.
3. Gundersen's analysis also found the hospital had been using brand-name bone cement, which is used to secure the artificial joint to a patient's bone. The hospital cut its cement costs by 57 percent by opting for a generic version, which research indicates leads to the same results in most cases, according to WSJ.
4. Gundersen implemented changes to its knee replacement surgery process after the review. The surgery now costs the hospital $8,700 on average, reflecting a savings of 18 percent. Gundersen lowered its list price for knee surgery, not including the surgeon and anesthesiologist, by 7 percent in 2017. The system attributed the decline to shorter hospital stays. Some employer groups project negotiated prices for the surgery could fall up to 30 percent. Gundersen declined to disclose the price it negotiated with Alliance, an employer group representing 5,600 people in La Crosse and 88,000 people across three states, to WSJ.
Read the full WSJ report here.
Editor's note: This article was updated Aug. 23 at 12:43 p.m. CT to include updated information.