Independent Hospital Pricing Authority data on medical devices - Apples & Oranges

Today, The Australian carries a story (‘Premium hopes rest on knees, hip’) based on the Independent Hospital Pricing Authority (IHPA) data as part of the Senate Community Affairs Committee inquiry into the Prostheses List (PL) framework.

The Medical Technology Association of Australia (MTAA) is of the view the IHPA data is like comparing ‘apples and oranges’ when it comes to comparing the prices of the same prostheses in the public sector versus the private sector as:

• The data does not collect that information given the purpose of IHPA data collection is to determine levels of funding for public hospitals; and
• There is no one to one correlation between the average price reported by the IHPA data and the actual price of a prosthesis

The IHPA data collects information on the price of several different types of prostheses used for a range of procedures and reports an average prosthesis price.

The average price is influenced by the number and different types of prostheses used for the same procedure and these will vary with the complexity of the surgical case, specific patient requirements and the age of the patient. 

Without adjusting for these factors, the use of the IHPA data to determine price adjustments to prostheses on the Prostheses List would be flawed and would lead to significant consequences for privately insured patients.

The data showed the average prostheses price differential derived from the use of the IHPA data was significantly overestimated at 50% - the actual differential is less than 15%. 

MTAA understands the interest that has been generated in the cost of prostheses in the private sector and incorrect claims of potential savings of $1 billion. 

PwC analysis of the impact of potential price changes to medical devices on the PL shows a raw difference between public and private pricing of $305.7 million.

MTAA is willing to assist Government maintain the viability of private health insurance in Australia but it can only do so using appropriate data sets that have been collected to determine price differentials between markets and not for the purposes of determining public hospital funding.

Ian Burgess, Chief Executive Officer of the Medical Technology Association of Australia said:

“We estimate that a $1 billion cut to the PL would result in not even 5% of the current 210 companies that supply prostheses in Australia would remain in the market. 

“MTAA recognises the importance of the need for PL reform and increased transparency but it needs to be based on real world evidence.

“MTAA is working with Government to deliver reforms which improve patients access to the best medical devices in the private system.

“The industry has also undertaken a significant data collection exercise which captures approximately 80% of the total PL benefits paid during 2015-16 (based on APRA private health insurance expenditure data) and 70% of all billing codes on the February 2017 PL.

“The analysis shows what MTAA has been saying all along, the scope for reductions to PL benefit levels is not as large as some have suggested and to use the IHPA data to determine cuts would be irresponsible and result in significant consequences for Australian patients and the healthcare sector.”