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Why medical devices are so expensive

Time：

Jan 14,2023

The cost of a procedure usually consists of four components: the cost of drugs, consumables and equipment, the labor costs of the medical and nursing staff, and the hospital overhead. Of these, the labor cost of the medical staff is low, usually only 10%. A heart stent procedure often requires nearly a dozen health care workers to work for a day and costs $50,000 to $60,000. The labor cost to the doctor is only $5,000 to $6,000. Then spread over the individual, it is only one or two thousand dollars, or even a few hundred dollars, which is not really that high.

Doctors who perform surgery in hospitals usually have a lengthy medical education, and hospitals have to pay them well to ensure a high level of care. Such an allocation of costs clearly undervalues the labor of health care workers. The hospital directors are not fools, and they certainly have to pay their medical staff a reasonable income. This money is paid out in surgical allowances, overtime costs, quarterly bonuses, dissertation bonuses, and can only be carved out of other areas.

Of all the items charged by the hospital, the only one that is flexible and loosely regulated is the use of drugs and instruments. What drugs to use and how much to dose are all up to the doctor. The price of medical equipment used in surgery can range from a few tens of thousands of yuan to millions of yuan, which is difficult for officials to control.

When other revenues are regulated, hospitals are left with only two flexible ways to generate revenue: one is by selling drugs, and the other is by introducing expensive medical devices. In these two areas, hospitals and government departments struggle like cat and mouse.

When hospitals prescribe expensive drugs, the government sets high retail prices for drugs; when hospitals prescribe more drugs and prescribe drugs indiscriminately, the government sets a markup rate for drugs to prevent hospitals from making money. Medical representatives and hospitals raise the price of drugs so that all parties can make money, which is the same as the high price of medical equipment chaos.

Most of the quality medical resources in China are concentrated in public hospitals. Public hospitals have little competitive pressure, but they need to be self-financing and strive to make more money. In a situation of tight regulation, they can only use their strong position to get more revenue in medicine and devices.

From their point of view, it can't be wrong to try to increase revenue in order to maintain their business. The upstream sellers, who want to sell their products, have to bribe the deans and department heads, and give rebates both explicitly and implicitly. Rather than saying that the "care fee" is a product of collusion, it is more like a lubricant to break through the control.

The introduction of major medical insurance in recent years has also played a role in driving up medical costs, which should not be underestimated. In terms of billing, health insurance has helped patients cover most of their costs, reducing their burden. Hospitals also know that the cost of procedures can go up again as long as patients can still realistically afford them. Reflected in the bill is the increase in the price of medical devices.

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