Playing the Market: Why Do Prosthetics Cost So Much?
Playing the Market: Why Do Prosthetics Cost So Much?
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Yes, mobility is priceless. But does the price of a prosthetic leg really have to be so high?
By Larry Borowsky
Last fall, a prosthetics industry innovator named Alan Hutchison rekindled an old debate by posing this question on LinkedIn: Why should you pay more for a prosthetic with a microprocessor knee than for a new average family sedan car? Whats the logic of this, given that the technologies in the feet and knees are similar to those for leaf springs and power liftgates [that represent] a fraction of a cars total cost?
To put hard numbers to this: The average new family sedan (e.g., a Chevy Malibu) retails for about $30,000. The average prosthetic leg equipped with a microprocessor knee (e.g., an Ottobock C-Leg) will cost you and/or your insurer about twice that amount.
How can the reimbursement systems justify paying so much? asked Hutchison, cofounder and CEO of the distributed-care startup ProsFit. If the per-unit cost were lower, couldnt you sell far more devices, improve far more amputees lives, and generate equal or greater profits?
The comments section erupted. Car prices are less outrageous because demand is so much greater, went one popular argument; if prosthesis ownership was as universal as car ownership, prices would fall. A second argument: Cars are mere conveniences, whereas limbs equipped with microprocessor knees (MPKs) are life-changing amenities and therefore infinitely more valuable. Several people observed that the price tag for a prosthesis covers not only the hardware but also several years worth of the clinicians limb-care expertise. If prosthetists were paid for their clinical care and not for devices delivered, the cost would come down, noted one commenter. Another added: A car dealer sells inventory, produced at scale and force-fed to the market. The prosthetist provides custom solutions to meet a very specific set of functional and clinical needs.
Of course, no comment thread is complete without some bitter snark. For-profit healthcare system does exactly what it has been designed to do: making profit, one cynic jeered. Another chimed in: Its a racket between the old boys from MBA schools making side deals in the back room.
The snark seems to capture the emotional truth of most amputees. Unlike the car marketplace, the prosthesis marketplace isnt one that most people enter by choice. And in the car market, buyers negotiate directly with sellers and can opt out at any point, giving them real bargaining power. In the prosthetics market, theres little negotiation to speak ofat least, little that involves the consumer.
Instead, the bargaining takes place among device manufacturers, insurance companies, government agencies, and healthcare conglomerates. And for better or worse, the starting point for those discussions is the L-Code system.
IF YOURE NOT FAMILIAR WITH L-CODES, theyre part of Medicares Healthcare Common Procedure Coding System (HCPCS), which providers and payers use to identify every procedure and device. The HCPCS is the common language of healthcare finance, and its spoken by everyone who participates in the marketplace. Except patients.
HCPCS codes for orthotic and prosthetic devices are designated by the prefix L. Each component of your prosthesis, from the $30,000 bionic knee (L-) to the $3 one-ply sock (L-), has its own L-Code or combination of codes. A single leg typically consists of 15 to 20 distinct L-Codes, and each code carries a standardized reimbursement rate thats established by Medicare. The rates vary by state, and they arent binding on private insurers or other payers (such as the VA or workers comp agencies), who can negotiate their own rates.
When your prosthetist assembles your leg, the clinic also assembles a list of L-Codes and their corresponding payments. Add them all up, and thats what your device costs. A claim for that amount gets sent to your insurer; a check for that amount gets sent to the clinic. Heres a simplified example for an above-knee prosthetic leg delivered to a Medicare patient:
Sources: Dale Berry, Prosthetic Xpert Consulting; MedicareIt seems like a pretty thorough accounting on the surface. But, like every other healthcare invoice, this one reveals nothing about the underlying costs upon which the prices are based. What percentage of that $62,840 covers the manufacturers up-front investment in research, product development, materials, labor, manufacturing, shipping, and other costs of producing the device and bringing it to market? How much gets siphoned off by the insurer and the health-plan administrator? What portion do corporate shareholders add to their investment portfolios? Whats left over for the prosthetic clinic?
Dale Berry, a seasoned prosthetist and longtime Hanger executive who now operates Prosthetic Xpert Consultation, gave Amplitude some realistic estimates. These numbers are reasonable but inexact; they pack a tremendous amount of real-world variation into a single number. But theyre close enough to illustrate some of the broad market forces that drive prices.
The C-Leg is the number-one selling knee in the world, and its got an established price as set through Medicare and the insurance companies, says Berry. As a prosthetist, I buy the kneejust the knee, not the whole prosthesisfor around $20,000, and Medicare reimburses at around $32,000. So I make a $12,000 profit on that knee.
But its not pure profit because, unlike every other professional clinician, prosthetists arent paid on a fee-for-service basis. The clinical care they provide is bundled together with the cost of the device itself. So the $12,000 markup has to pay for every office visit the patient makes over the three to five years of that devices useful life. Many hours of the prosthetists time and expertisefrom initial assessment, fitting, and fabricating to routine maintenance, adjustment, and troubleshootingare covered by that $12,000 payment. So are all the hours spent on insurance filings, appeals, and other administrative paperwork. Professional education, technology upgrades, staff salaries, rent, office supplies, and all the clinics other business expenses come out of the $12,000, too. It also has to cover denied and unreimbursed claims.
To use the analogy of a prosthesis versus a car: When youre buying a car, you need to look at not only the price of the car but also the cost of ownership, says Joe McTernan, director of health policy and advocacy for the American Orthotic and Prosthetic Association. That includes insurance, oil changes, brake replacements, filters, tires, all the things that go into maintaining it.
If the family sedans ownership cost were bundled together with the retail price, the car might sell for, say, $80,000. Instead, you fork over $30,000 for the vehicle itself and pay the ownership costs as you go. If you sell the car after two years, you only pay two years worth of ownership costsand you can claw back a chunk of the original purchase price on the resale market.
None of these dynamics exist in the prosthesis market. The device plus five years worth of clinical care are rolled into a prepaid, nonrecoverable payment thats largely determined by Medicare.
Despite these imperfections, the market might make sense if every case were as simple as this one. But few cases are. To begin with, every insurer reimburses at a different rate for each L-Code. The same knee that brings a $32,000 reimbursement for a Medicare patient might only fetch $30,250 if Aetna is the payer, or $24,750 if the claim is filed with the Iowa Division of Workers Compensation. Moreover, says McTernan, manufacturers dont charge every clinic the same price for components. If you have a large company thats purchasing hundreds or thousands of units a month, their acquisition cost is clearly going to be different from somebody thats purchasing three units a month. And then theres the fact that some patients require far more hours of clinical care than others. One patient needs five appointments [in five years], and another has complex needs and Im seeing them 30 to 35 times, Berry says. The reimbursement for those two patients is identical.
Things get even more tangled when we move beyond the C-Leg and consider other MPKs. Berry pegs the clinics cost for the Genium kneeOttobocks higher-performing alternative to the C-Legat around $30,000. My time, expertise, equipment costs are all exactly the same as for a C-Leg, Berry explains. But Medicare says, Its a microprocessor knee, so it uses the same L-Code [] and gets reimbursed at the same rate. In other words, the $20,000 C-Leg has $12,000 worth of limb care priced into it, while the $30,000 Genium only provides for $2,000 worth, which doesnt come anywhere close to covering the actual cost of delivering the necessary care.
Clinics would never sell components at such steep losses, and that serves neither the patients who need premium technology nor the manufacturers who need to move inventory. Thats where code L-Lower extremity prosthesis, not otherwise specifiedcomes in. L- covers products and services that dont fit squarely within any other L-Code. Because its a catch-all category, Medicare doesnt have a standardized reimbursement rate for L-, so providers can set their own prices and haggle with payers on a case-by-case basis. Its a loophole that clinics canand sometimes doexploit to drive up their earnings. Most prosthetic clinics dont abuse L-, but it happens often enough to create a ripple effect that affects the whole price structure.
Why dont we just add $12,000 to every device and call it a day? Berry asks. This system is broken, and patients get caught in the middle. You cant make heads or tails of it.
YOU MAY HAVE NOTICED THAT THE DISCUSSION so far has focused solely on the tail end of the supply chainthe $12,000 clinical-care markup that gets bundled into the retail price. Whats happening at the other end of the pipeline, where the $20,000 knee gets manufactured?
Thats a far more daunting accounting exercise. Without access to proprietary information, its impossible to factor out the precise component costs of microprocessor knee production. However, a well-qualified manufacturing industry veteran advises Amplitude that $2,000 to $2,500 per unitincluding materials, labor, factory overhead, and product developmentis a realistic estimate. A more conservative projection of $5,000 per unit would still leave device makers a very healthy gross margin of about 75 percent.
These figures are consistent with financial filings from Össur, which has reported an average gross profit (for all products and services, not just microprocessor knees) of 62 percent in this decade. That margin isnt far off the average gross profit for all medical device manufacturers, which various sources place between 55 and 60 percent. Subtract operating costs (such as marketing, sales, distribution, and administrative overhead), taxes, and accounting deductions, and Össurs net profit has averaged 8 percent annually in this decadeagain, consistent with rates reported by other medical equipment makers. (Össurs main direct competitorsOttobock, Blatchford, and Proteorare privately held and therefore not required to publish detailed financials.)
Looking beyond the medical device industry, the average gross profit in auto manufacturing is about 15 percent; construction supplies, 27 percent; consumer electronics, 32 percent; and heavy machinery, 35 percent. The cost of an industrial robot has fallen by half since , from $47,000 to $23,000, and industry analysts expect it drop another 50 percent before this decade is out. Over the same period, the cost of an MPK prosthesiswhose component materials, engineering, and computing power arent far off from a robotshas hardly budged.
Berry counters that its unfair to compare high-volume industries such as consumer electronics or cars with niche industries such as prosthetics. When people tell me that if more people got legs it would become more affordable, I tell them they arent considering all the nuances, he says. They dont know the manufacturing process. Ive been to the facilities where theyre making these devices, and the volume is just not there.
Its also fair to note that other advanced mobility devices (power wheelchairs, for example) have remained as stubbornly expensive as artificial limbs. The same goes for internal prosthetic devices, such as artificial hip and knee implants. Costs have been escalating for decades throughout the US healthcare industry. The prosthetic sectors cost challenges are just part of a much broader problem.
But that doesnt mean its impossible to create a more efficient prosthesis marketone thats easier for consumers to navigate and more equitably balanced between sellers and buyers.
One potential reform, long debated within the O&P profession, is to unbundle clinical care from the sale of the device and compensate prosthetists on a per-office-visit basis. That would cut 30 to 40 percent off the initial purchase price, enabling more amputees to acquire high-performing limbs. And many clinicians think it would allow them to provide better care and get better outcomes for patients.
Since the day I moved to this country, Ive thought the billing system of paying for the product doesnt serve the patient or the practitioner, says Berry, who began his career in Canadas single-payer healthcare system. Its archaic, and it doesnt make any sense whatsoever. Were not having this conversation in Canada, Germany, Sweden, England, or anyplace else. This conversation doesnt exist in those countries.
Theres been a lot of discussion about that, adds McTernan. Younger prosthetists are saying, The people I took graduate classes with, who are now rehab doctors or physical therapists or some other type of clinician, are all getting paid based on their time, intensity, and skill. So why am I getting paid to provide a device? I understand that, but one problem is that doctors are no longer being reimbursed strictly on time, intensity, and skill. They are starting to move toward a value-based care system, where they set their reimbursement based on patient outcomes.
Value-based care is another reform that has many supporters within the industry. Thats the philosophy behind Medicares recent proposal to expand coverage for MPKs, a reform the major manufacturers pushed for. The data suggest that MPKs, though more expensive, ultimately save money by reducing falls, injuries, and other adverse outcomes. Initiatives such as the Limb Loss and Preservation Registry will make value-based pricing more achievable by collecting the data necessary to identify optimal limb-care solutions.
While changes in clinician compensation might help, new production and distribution models are the surest way to empower consumers. Startups such as Open Bionics, Levitate, Unlimited Tomorrow, and Hutchisons ProsFit are circumventing the L-Code-mediated healthcare complex entirely and selling directly to amputees. Theyre testing the theory that a market which prioritizes affordability, convenience, and customer choice can drive sales volumes upward, push prices downward, accelerate technological innovation, and maintain very high clinical care standards, while serving vastly more amputees than the present system.
The industrys leaders arent sitting on the status quo. Össur, Ottobock, Hanger, and other major players are attempting to lower costs and reach more customers by introducing new technologies, improving clinical care, and lobbying for more generous coverage. They rightly note that the present system, however imperfect, has improved countless lives and produced miraculous outcomes that wouldnt have even seemed possible a generation ago.
But the current market leaves too many amputees frustrated, confused, and angry. Most damning of all, it leaves millions of amputees around the globe completely priced out of the market. Thats Alan Hutchisons fundamental critique, and the target of the cynics snark: How effective can a marketplace be if it fails to provide any solution at all for so many of its customers?
One commenter in Hutchisons LinkedIn debate opined that its impossible to put a fair price on mobility, so why bother trying? Mobility for anyone is invaluable, Hutchison responded. This, however, should not be exploited.
Below Knee Prosthetic Leg Cost With Suction Suspension
Below Knee Prosthetic Leg Cost With Suction Suspension
Over the years, we have provided prosthetic service to many people all over Illinois at their residences, nursing homes, assisted living faclities and in the hospital. The question of pricing does comes up for prosthetics fairly often and our goal here is to help give you the answer you are looking for. If you have read our other information, you know that transparency is our goal and we would like to help you find the answers you are looking for in all areas prosthetics & orthotics. This article describes about cost price of Below Knee Prosthetic Leg With Suction.
The price for a below knee prosthetic leg with suction suspension can range from $.00 to $ 16,675.00 approximately.
This article will be cover these costs, but as you can see it must be presented, especially at first, in a range.
We did gave this range to try and inform you about the real world of prosthetics.
If we gave you one price, we would be misleading you and that is not our intention. If you just wanted a simple range of costs, then great. There they are there above us, but if you want to understand your prices more specifically, then take the $ and plug in the foot codes we will talk about shortly. Again, we realize there are variances, but we are trying to give you a good ball park cost here with a good amount of supporting information.
Having said this, we will soon show you how you can get close on the cost that will be yours, based off not only the foot but also what your K Level is. (More on K Levels shortly.)
Please note that these are ONLY the costs, if you were paying in cash. Your insurance or other coverage can pick up 80-100% of the cost, if all documentation, medical necessity and deductibles are met in many instances. So, as you can see there is another layer to this equation, which can help you negate the dollar amounts you see above.
In the world of prosthetics you will find that price varies a lot on quantity of the items you receive and the sophistication of the componentry you are given.
If you are new to prosthetics, you might be wondering what componentry is.
Componentry
Componentry is the term used to describe the parts of the prosthesis that come together to form a complete system.
You already know that just like with other purchases you have made in the past that there is standard version and then there are premium versions of goods sold.
The needs of the user matter and sometimes a person might only need a basic system while others need a lot more sophistication of movement or range of motion that will require higher end componentry.
L Codes
Moreover, many parts of the prosthesis have a certain L code attached to it. And, each L code has a dollar sign attached to it. Please note that the price of each L code is not set by the prosthetist. Coverages (such as insurance, etc) tell a prosthetist what an L code reimburses at, not the other way around. Meaning, the pricing structure is not founded by the person giving you the prosthetic leg. This is good because it holds the pricing to a more uniform spectrum of costs and a greedy salesman can not skyrocket the price on you out of the blue. It is regulated.
We will provide a list of L codes below that we believe are common for a suction type, below knee (bk) prosthesis.
Quantities
We also give common quantities for a certain number of those L codes provided.
For example, sometimes people are given two gel liners and this is done to help with hygiene and longevity of the liner (For example, if you got two gel liners you can switch them out routinely).
As far as quantities go, after having read this, you can now opt for a quantity of one, in the situations where 2 are offered and your price could go down, for example. This is not always recommended from a treatment standpoint, but when it comes to a cash analysis, you could reduce some quantities to get closer to the price you require.
We think you get the general point.
Not all amputees get a suction system either, but we are presenting this for those of you who are interested in learning more about these costs. If you want to learn more about below knee prosthetic leg costs for a pin type suspension system, you are welcome to read our other article located under the pricing tab. Pin locking systems for below knee amputees are in the same realm of the costs mentioned here, but there are a few key differences.
The Prosthetic Foot
Want more information on Prosthetic Parts Manufacturer? Feel free to contact us.
A large part of the price of a prothesis is the foot. An expensive high end foot can really change the range of cost by $.00, for example. Just taking that number () right off of the top of the high end price and replacing it with a $394.00 foot can really change the equation for you. For example, someone who walks up and down curbs but doesnt walk very fast or far, is a K2 ambulator (walker) typically. K2 ambulators typically do not require the K3 or K4 foot that costs $.00. Does the K3 or K4 foot move a lot more fluidly? Absolutely. But if we are trying to minimize costs and just want to get from A to B, then maybe the $394.00 foot isnt so bad after all.
*Please note we will get into what a K Level is shortly, but for now, just know that a K2 in general is more basic than a K4 is. The K4 ambulator (walker) usually is someone who can walk slow, fast and run. Both are amputees, but their functional levels are different.
Prices for Prosthetic Feet With The Different K Levels
K1 feet, as you can already see are very basic. Not bad, just basic in design. The price is minimal and is often
incorporated into the L hcpc code that you will soon see below.
The next level of feet are for a K2 ambulator. This foot can itself vary in cost, but it still remains on the lower end of the spectrum. With one very common distributor, we have seen that the codes for K2 feet can lead us to a price of $394.00 on up to $.00, for example.
The next level above K2, as you probably already figured out is K3. A K3 foot has more range of motion and sophistication of movement. Within this foot type, there are many prices that can be seen. The range basically has a price within every thousand dollar mark from $2,000.00 up to nearly $8,000.00. Prices that are seen within this K level are : $, $, $, $, $, $. We rounded to the nearest dollar for simplicity.
Lastly, there is a group of K4 feet. These feet are typically reserved for athletes. People who exhibit high impact tendencies such as hiking or running for example and are more apt to use the premium feet, lest they break the K3 versions due to over stressing the K3 or K2 range of motion repeatedly. These feet can vary in price, but some of the prices we have seen for K4 feet are : $, $, $, all within the same K4 family.
Check out our other article on prosthetic feet if you want to take a closer look at everything related to prosthetic feet.
Cash Prices & How Insurance & Other Coverages Can Assist
The prices mentioned above are cash prices. But we all know that medical coverage, like insurance for example can assist with reducing your out of pocket expenses. This is nothing new. Having said that, it is very possible that your costs can be reduced by 80-100 percent given the amount of coverage you have. Also, your deductible for these insurance plans, for example will come into play as well.
Please remember that the costs of the feet above are some common prices you will find, there are other prices that exist and this will be more clarified in other articles we write. There are more than 270 prosthetic feet on the market and prosthetic feet deserve a full article unto themselves in terms of pricing. We did try to give you some common prices though so you have a general feel on costs.
Other Cost Factors For A Prosthetic Leg, Beyond The Foot
Are you aware of what your K Level is?
At a glance, your K Level is how well you can move around independently.
A K level like we keep referring to directly relates to your ability to walk certain distances and perform certain activities of daily living. Not everyone is a runner for example. Not everyone goes on long walks at fast speeds even. Some folks walk on level surfaces and get the mail. Some people stay inside mostly. It all varies.
You can see the way in which price can go up and down now probably.
K Levels In Much More Detail
K zero :
This level of functionality is minimal. Many of these amputees might now want to walk or can not do so due to physical challenges.
K 1 Level :
An individual who walks on level surfaces. This individual is most likely in their residence often times. The foot that is directly related to a K1 ambulatory (walker) is a SACH foot. SACH stands for : Solid Ankle Cushioned Heel. In essence it is a very basic foot. K1 walkers most likely consider the use of a cane or walker for example.
K 2 Level :
Someone who can walk slightly more than a k1 ambulator. They can step up and down curbs generally. But the
ambulation is still very simplified. The cadence is at a fixed speed. As shown above in the sections about general foot costs you can guess (without even knowing a lot about K Levels) that the price can vary from $394- $.
K3 Level :
A person who has reached a level of K3 can obviously do more than a K2 ambulator. The big difference is the speed at which they can walk. Basically they can walk fast and slow and can walk greater distances than a K2 ambulator typically. A K3 walker is someone who is referred to as a community ambulator and can do more slopes, inclines and declines as compared to a curb as mentioned above in K2.
K4 Level :
someone who can be extremely active. Usually, this level of amputee is someone who can perform in sports. Think athlete when you think of a K4 amputee. They dont have to be an Olympic athlete, but someone who really is another step above a K3 functional level.
The levels indicated above are not always where the amputee might be a particular moment in time. K levels have a lot to do with potential and where a person will be in the near future. If you are amputee reading this make sure to discuss your abilities directly before an amputation with your doctor and prosthetist. Documentation of this information is an important part in verifying someones k level.
Looking At Price Beyond The Foot
The following is a list of L codes that pertains to a suction style prosthesis. We came to these prices by taking two well known coverages and averaging them. Their prices are often times very similar so the numbers are not skewed, per se. We rounded prices up the next highest dollar if the cents mark was at 50 cents or higher.
L : $.00
L (x2) : $292 x 2 = $584
L : $311.00
L : $377.00
L : $ 698.00
L x2 :$113.00 each x 2 = $226.00
L : $578.00
L : $354.00
L : $491.00
Textiles:
L (x2) $19 x 2 =38.00
L (x6) $45.00 x 6 = $270.00
L (x6) 6.00 x 6 = $36.00
Addition of a flexible inner liner L : $958.00
With Addition of a custom protective cover L : $615.00
And Addition of a protective skin L : $575.00
Again, please keep in mind that the price we are sharing will be affected depending on your insurance or other coverage (if any). There are many different insurance plans and sub-plans, available to patients, therefore it can be difficult to determine exactly how much you will pay out-of-pocket without first contacting your insurance and knowing exactly the kind of prosthesis you will be getting from your prosthetist.
Some insurance plans may cover up to 80% 100% of the leg; other plans may come with higher deductibles, which may lead to larger costs for you up-front before your coverage begins. It is best to contact your individual insurance plan for more information. But now you know the common L codes that you could possibly run into. As a result, you will be more equipped to get the answers you are looking for. Especially if you go directly to the insurance company and not have the prosthetic company help you get the quote of benefits of your plan.
The best price range we can offer for the prosthetic leg as mentioned is $.00 to $ 16,675.00. (We will discuss elevated vacuum in another article.) This is our attempt, based on previous data, to give you the best information possible to make your decision. The range varies based on two main factors
1) higher costs based on prosthetic add-on features and
2) reimbursement levels, which vary across states and from year to year. Most people do not pay cash for a prosthetic leg. However, if you do choose cash, this range provides you with a way to prepare financially for upcoming costs.
To help you decrease your costs, especially if you are paying with cash, one solution would be to ask your prosthetist to do one test socket.
Another solution may be to ask your prosthetist to provide only one gel liner (though most people opt for two gel liners for hygienes sake and for preservation).Though these are not in line with best practices and could affect your overall treatment, these may be a cost-effective compromise to get you closer to the lower range of $.00.
If you lack insurance, Medicare, or Medicaid, you could also contact your prosthetist for an alternative payment program. For those with insurance, there are no compromises on price. It is frowned upon to alternate between charging people cash for a discount and charging insurance at other times.
We hope this article has been some help to you in determining a price for a prosthesis that you may be seeking. We wanted to get you close to the price and illustrate why the price may vary.
Good luck!
*Rinella Prosthetics & Orthotics can not be liable for the prices you may encounter at other facilities. They may use more or less L codes and quantities that we can not control. We hope you understand that this will make the price change and without seeing you ourselves, we have no say in how it is priced out.
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