James Dichter awoke from elbow surgery in May and went home with a simple navy-blue cloth sling. When the bill for that sling arrived a month later, Dichter’s jaw dropped.
He discovered that his insurer had paid Surgi-Care, a Waltham medical equipment supplier, $83 for providing the item, which consists of two panels of thin cloth sewn together and a shoulder strap. His share was $25. Dichter, 59, a consultant with an MBA from the University of California Berkeley, suspected something was wrong with that price. He searched online and found a similar basic sling for $7.
He wondered why any insurer would pay nearly 12 times that amount. “Somewhere in our health care system,’’ he said, “common sense has left the building.’’
His discovery led Dichter to lodge complaints with Surgi-Care, the US Department of Health and Human Services, US Senator John F. Kerry’s office, and his insurer, Tufts Health Plan, which said it is now investigating sling charges. He decided to complain in part because the cost of his own health insurance has nearly tripled over the past decade and includes a $1,000 deductible.
Surgi-Care says its price for the sling was fair because it provides services an online retailer does not. But Dichter’s discovery about his sling reveals the complexity around a little-understood corner of the health care system: durable medical equipment, prosthetics, orthotics, and supplies.
These products account for about $37 billion in medical spending annually in the United States and include items such as blood glucose monitors, wheelchairs, and hospital beds used in patients’ homes. The Government Accountability Office has flagged medical equipment as an area with a high rate of wasteful spending in Medicare, the federal health insurance program for the elderly.
Medicare has struggled for a decade to implement competitive bidding as a way to combat overpayment, but the industry has lobbied hard against these changes. And because payments to hospitals and doctors account for a much larger chunk of health care spending, private insurers generally have not focused as acutely on the cost of medical equipment.
Still, even the cost of slings adds up. Greg DeConciliis, administrator of Boston Out-Patient Surgical Suites in Waltham, where Dichter had his operation, said his center alone provides patients with about 1,000 of the slings delivered by Surgi-Care each year.
Surgi-Care referred questions about Dichter’s case to its lawyers, who said it is an oversimplification to compare Surgi-Care’s prices with those of an online retailer. “You’re comparing apples and oranges,’’ Boston attorney Lawrence Vernaglia said in an interview.
Surgi-Care offers a “full range of services for the patient, including fitting and positioning of the product, establishing quality standards, providing access to clinical staff and expertise to respond to patient questions, operating a complaint process, providing follow-up services, and maintaining patient medical records,’’ he said in a written statement.
Tufts Health Plan executives said the prices it negotiates for equipment are based in part on the rates set by Medicare and often include fitting the patient. The fee Tufts paid Surgi-Care care was intended to include fitting. But Dichter said he woke up with the sling on his arm and has no recollection of seeing anyone from Surgi-Care.
Vernaglia said he could not discuss Dichter’s case because of patient confidentiality, but that Medicare rules allow companies to arrange for another health care professional to fit and adjust slings.
Tufts spokeswoman Sonya Hagopian said the company received another complaint about the cost of arm slings, so it was already investigating the issue when he contacted the plan.
Tufts would not comment further about the details of the case. “Anytime we get information that suggests that a fee is inappropriate, we look at it very closely,’’ said Jonathan Chines, who oversees contracting with medical equipment providers for Tufts Health Plan.
Dichter had surgery May 8 to slightly move a pinched nerve in his left elbow, so it would not hurt when he leaned on his arm. Getting an explanation for the cost of the sling afterward proved frustrating. A woman in Surgi-Care’s compliance department told him the company’s price is based on what Medicare charges, Dichter said. She did agree to waive his $25 copayment.
Dichter said the customer service representative at Tufts thought he was complaining about his $25 copayment and seemed unable to understand his broader point. Friends who work in the medical industry have been equally unfazed.
“The thing that got me was the audacity, the chutzpah,’’ he said. But “no one I’ve told this to in the health care world has been surprised; no one has been outraged.’’
Medicare officials declined to comment. But Kathleen King, a director on the health care team at the Government Accountability Office, said Medicare has paid for medical equipment based on a fee schedule developed in the 1980s, with increases for inflation over the years. Because they are outdated, the prices have little relationship to how much an item costs today.
“Over time, we have found that Medicare has been paying too much,’’ King said. “If you can buy something for $7 over the Internet and your insurer is paying $100 for it, that indicates your payment method is off.’’
King said Medicare’s rate of improper payments for medical equipment is also high, including documentation errors, duplicate claims, and fraud. “It’s been under a lot of scrutiny for a number of years, but there has been resistance to changes,’’ she said. Medicare was supposed to institute a competitive bidding program for medical equipment suppliers in the mid-2000s, but it was put on hold in part because of industry objections.
Walter Gorski, vice president of government affairs for the American Association for Homecare , an industry organization, said the Medicare competitive bidding program is flawed because some medical equipment companies end up being paid less than they bid.
But a pilot program in nine cities last year in which Medicare contracted with the lowest bidders for some medical equipment saved the agency 42 percent, the Centers for Medicare & Medicaid Services found. The agency plans to expand the program to 91 cities.
In the last two years, Blue Cross Blue Shield of Massachusetts found it paid widely different fees to medical equipment providers for the same product, and recently reduced fees, in part through competitive bidding. The insurer said it has saved millions so far.