Cost Benefit/Cost Effectiveness of Medical

Technologies: A Case Study of Orthopedic

Joint Implants

September 1981

NTIS order #PB82-120833
—

CASE STUDY #14

THE IMPLICATIONS OF

COST-EFFECTIVENESS

ANALYSIS OF

MEDICAL TECHNOLOGY

SEPTEMBER 1981

BACKGROUND PAPER #2: CASE STUDIES OF

MEDICAL TECHNOLOGIES

CASE STUDY #14: COST BENEFIT/COST EFFECTIVENESS OF

MEDICAL TECHNOLOGIES: A CASE STUDY OF

ORTHOPEDIC JOINT IMPLANTS

Judith D. Bentkover, Ph. D.

and

Philip G. Drew, Ph. D.

Arthur D. Little, Inc., Cambridge, Mass.

OTA Background Papers are documents that contain information believed to be

useful to various parties. The information undergirds formal OTA assessments or is

an outcome of internal exploratory planning and evaluation, The material is usually

not of immediate policy interest such as is contained in an OTA Report or Technical

Memorandum, nor does it present options for Congress to consider.
Library of Congress Catalog Card Number 80-600161

For sale by the Superintendent of Documents,

U.S. Government Printing Office, Washington, D.C. 20402
Foreword

This case study is one of 17 studies comprising Background Paper #2 for OTA’s

assessment, The Implications of Cost-Effectiveness Analysis of Medical Technology.

That assessment analyzes the feasibility, implications, and value of using cost-effectiveness and cost-benefit analysis (CEA/CBA) in health care decisionmaking. The major, policy-oriented report of the assessment was published in August 1980. In addition

to Background Paper #2, there are four other background papers being published in

conjunction with the assessment: 1) a document which addresses methodological

issues and reviews the CEA/CBA literature, published in September 1980; 2 ) a case

study of the efficacy and cost-effectiveness of psychotherapy, published in October

1980; 3) a case study of four common diagnostic X-ray procedures, to be published in

summer 1981; and 4) a review of international experience in managing medical technology, published in October 1980. Another related report was published in

September of 1979: A Review of Selected Federal Vaccine and Immunization Policies.

The case studies in Background Paper #2: Case Studies of Medical Technologies

are being published individually. They were commissioned by OTA both to provide

information on the specific technologies and to gain lessons that could be applied to

the broader policy aspects of the use of CEA/CBA. Several of the studies were specifically requested by the Senate Committee on Finance.

Drafts of each case study were reviewed by OTA staff; by members of the advisory panel to the overall assessment, chaired by Dr. John Hogness; by members of

the Health Program Advisory Committee, chaired by Dr. Frederick Robbins; and by

numerous other experts in clinical medicine, health policy, Government, and economics. We are grateful for their assistance. However, responsibility for the case studies remains with the authors.

Director
Advisory Panel on The Implications of

Cost= Effectiveness Analysis of Medical Technology

John R. Hogness, Panel Chairman

President, Association of Academic Health Centers

Stuart H. Altman

Dean

Florence Heller School

Brandeis University

James L. Bennington

Chairman

Department of Anatomic Pathology and

Clinical Laboratories

Children Hospital of San Francisco

John D. Chase

Associate Dean for Clinical Affairs

University of Washington School of Medicine

Joseph Fletcher

Visiting Scholar

Medical Ethics

School of Medicine

University of Virginia

Clark C. Havighurst

Professor of Law

School of Law

Duke University

Sheldon Leonard

Manager

Regulatory Affairs

General Electric Co.

Barbara J. McNeil

Department of Radiology

Peter Bent Brigham Hospital

Robert H. Moser

Executive Vice President

American College of Physicians

Frederick Mosteller

Chairman

Department of Biostatistics

Harvard University

Robert M. Sigmond

Advisor on Hospital Affairs

Blue Cross and Blue Shield Associations

Jane Sisk Willems

VA Scholar

Veterans Administration
OTA Staff for Background Paper #2

Joyce C. Lashof, Assistant Director, 0TA

Health and Life Sciences Division

H. David Banta, Health Program Manager

Clyde J. Behney, Project Director

Kerry Britten Kemp, * Editor

Virginia Cwalina, Research Assistant

Shirley Ann Gayheart, Secretary

Nancy L. Kenney, Secretary

Martha Finney, * Assistant Editor

Other Contributing Staff

Bryan R. Luce Lawrence Miike Michael A. Riddiough

Leonard Saxe Chester Strobel*

OTA Publishing Staff

John C. Holmes, Publishing Officer

John Bergling Kathie S. Boss Debra M. Datcher Joe Henson

● OTA contract personnel.
Preface

This case study is one of 17

Background Paper #2 to the OTA

that comprise

project on the

Implications of Cost-Effectiveness Analysis o f

Medical Technology. * The overall project was

requested by the Senate Committee on Labor

and Human Resources. In a]], 19 case studies of

technological applications were commissioned

as part of that project. Three 01 the 19 were specifically requested by the Senate Committee on

Finance: psychotherapy, which was issued separately as Background Paper #3; diagnostic Xray, which will be issued as Background Paper

#.5; and respiratory therapies, which will be included as part of this series. The other 16 case

studies were selected by OTA staff.

In order to select those 16 case studies, OTA,

i n consultation with the advisory panel to the

overall project, developed a set of selection

criteria. Those criteria were designed to ensure

that

•

●

●

●

●

●

●

as a group the case studies would provide:

examples of types of technologies by function (preventive, diagnostic, therapeutic,

and rehabilitative );

examples of types of technologies by physical nature (drugs, devices, and procedures);

examples of technologies in different stages

of development and diffusion (new, emerging

, and established );

examples from different areas of medicine

(such as general medical practice, pediatrics, radiology, and surgery);

examples addressing medical problems that

are important because of their high frequency or significant impacts (such as

cost ) ;

examples of technologies with associated

high costs either because of high volume

(for low-cost technologies) or high individual costs;

examples that could provide informative .

material relating to the broader policy and

methodological issues of cost-effectiveness

or cost-benefit analysis (CEA/CBA); and

● examples with sufficient evaluable literature.

On the basis of these criteria and recommendations by panel members and o t her experts,

OTA staff selected the other case studies. These

16 plus the respiratory therapy case study requested by the Finance Committee make up the

17 studies in this background paper.

All case studies were commissioned by OTA

and performed under contract by experts in academia. They are authored studies. OTA subjected each case study to an extensive review

process. Initial drafts of cases were reviewed by

OTA staff and by members of the advisory

panel to the project. Comments were provided

to authors, along with OTA’s suggestions for

revisions. Subsequent drafts were sent by OTA

to numerous experts for review and comment.

Each case was seen by at least 20, and some by

40 or more, outside reviewers. These reviewers

were from relevant Government agencies, professional societies, consumer and public interest

groups, medical practice, and academic medicine. Academicians such as economists and decision analysts also reviewed the cases. In all,

over 400 separate individuals or organizations

reviewed one or more case studies. Although all

these reviewers cannot be acknowledged individually, OTA is very grateful for their comments and advice. In addition, the authors of

the case studies themselves often sent drafts to

reviewers and incorporated their comments.

These case studies are authored works

commissioned by OTA. The authors are responsible for the conclusions of their specific case study. These cases are not statements of official OTA position. OTA does

not make recommendations or endorse particular technologies. During the various

stages of the review and revision process,

therefore, OTA encouraged the authors to

present balanced information and to recognize divergent points of view. In two cases,

OTA decided that in order to more fully

present divergent views on particular technologies a commentary should be added to

the case study. Thus, following the case
studies on gastrointestinal endoscopy and

on the Keyes technique for periodontal disease, commentaries from experts in the appropriate health care specialty have been

included, followed by responses from the

authors.

The case studies were selected and designed to

fulfill two functions. The first, and primary,

purpose was to provide OTA with specific information that could be used in formulating

general conclusions regarding the feasibility and

implications of applying CEA/CBA in health

care. By examining the 19 cases as a group and

looking for common problems or strengths in

the techniques of CEA/CBA, OTA was able to

better analyze the potential contribution that

these techniques might make to the management

of medical technologies and health care costs

and quality. The second function of the cases

was to provide useful information on the specific technologies covered, However, this was

not the major intent of the cases, and they

should not be regarded as complete and definitive studies of the individual technologies. In

many instances. the case studies do represent excellent reviews of the literature pertaining to the

specific technologies and as such can stand on

their own as a useful contribution to the field. In

general, though, the design and the funding

levels of these case studies were such that they

should be read primarily in the context of the

overall OTA project on CEA/CBA in health

care.

Some of the case studies are forma] CEAs or

CBAs; most are not. Some are primarily concerned with analysis of costs; others are more

concerned with analysis of efficacy or effectiveness. Some, such as the study on end-stage

renal disease, examine the role that formal

analysis of costs and benefits can play in policy

formulation. Others, such as the one on breast

cancer surgery, illustrate how influences other

than costs can determine the patterns of use of a

technology. In other words, each looks at evaluation of the costs and the benefits of medical

technologies from a slightly different perspective. The reader is encouraged to read this study

in the context of the overall assessment’s objectives in order to gain a feeling for the potential

role that CEA/CBA can or cannot play in health

care and to better understand the difficulties and

complexities involved in applying CEA/CBA to

specific medical technologies.

The 17 case studies comprising Background

Paper #2 (short titles) and their authors are:

Artificial Heart: Deborah P. Lubeck and John P.

Bunker

Automated Multichannel Chemistry Analyzers:

Milton C. Weinstein and Laurie A. Pearlman

Bone Marrow Transplants: Stuart O. Schweitzer and C. C. Scalzi

Breast Cancer Surgery: Karen Schachter and

Duncan Neuhauser

Cardiac Radionuclide Imaging: William B.

Stason and Eric Fortess

Cervical Cancer Screening: Bryan R. Luce

Cimetidine and Peptic Ulcer Disease: Harvey V.

Fineberg and Laurie A. Pearlman

Colon Cancer Screening: David M. Eddy

CT Scanning: Judith L. Wagner

Elective Hysterectomy: Carol Korenbrot, Ann

B. Flood, Michael Higgins, Noralou Roos,

and John P. Bunker

End-Stage Renal Disease: Richard A. Rettig

Gastrointestinal Endoscopy: Jonathan A. Showstack and Steven A. Schroeder

Neonatal Intensive Care: Peter Budetti, Peggy

McManus, Nancy Barrand, and Lu Ann

Heinen

Nurse Practitioners: Lauren LeRoy and Sharon

Solkowitz

Orthopedic Joint Prosthetic Implants: Judith D.

Bentkover and Philip G. Drew

Periodontal Disease Interventions: Richard M.

Scheffler and Sheldon Rovin

Selected Respirator- y Therapies: Richard M.

Scheffler and Morgan Delaney

These studies will be available for sale by the

Superintendent of Documents, U.S. Government Printing Office, Washington, D.C. 20402.

Call OTA’s Publishing Office (224-8996) for

availability and ordering information.
Case Study #14

Cost Benefit/Cost Effectiveness of

Medical Technologies: A Case Study of

Orthopedic Joint Implants

Judith D. Bentkover, Ph. D.

and

Philip G. Drew, Ph.D.

Arthur D. Little, Inc.

Cambridge, Mass.

AUTHORS’ ACKNOWLEDGMENT

The authors would like to thank Don Shepard at Harvard University for his

helpful comments on earlier drafts of this case study.
Contents

Page

Statement of Purpose, Scope, and Approach . . . . . . . . . . . . . , . . . . . . . . .”. . . . . . 3

4

4

7

9

11

13

15

15

15

16

16

17

,. .

. : --

-.;. Technical Feasibility of CEA/CBA of Orthopedic Joint Implants . . . . . . . . . . . . . .

-I -i

- >.*.: .*., . . . ;&.- .: s. ~“:

. . .

. - .

, ,..

. .

Overview of Orthopedic Joint Implant Technology. .’. . . . . . . . . . . . . . . . . . .

Identification of the Target Population . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Specification of an Analytical Framework. . . . . . . . . . . . . . . . . . . . . . . . . . . .

Identification and Quantification of Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . .

Determination of Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Usefulness of CEA/CBA of Orthopedic Joint Implants . . . . . . . . . . . . . . . . . . . . .

Present Policy Formulation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Effect of Limitations and Constraints of CEA/CBA on Its Usefulness in

Public Policy Formulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Feasibility of Expanding and Integrating the Use of CEA/CBA in

Public Policy Formulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Useful Directions for Future Policy Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .’. . .

LIST OF TABLES .-

Table No. Page

l. Types of Joint Implant Prostheses . . . . . . . ... ... ... ... ... ... ,.. ... .$... ~

2. Profile of the Orthopedic Joint Implant Industry . . . . . . . . . . . . . . . . . . . . . . . . 7

LIST OF FIGURES

Figure No, Page,

l. Location of Hip and Knee Prostheses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

2. Detail of Hip Prosthesis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

3. Detail of Knee Prosthesis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

.,

.

.,
Case Study #14:

Cost Benefit/Cost Effectiveness of

Medical Technologies: A Case Study of

Orthopedic Joint Implants

Judith D. Bentkover, Ph. D.

and

Philip G. Drew, Ph. D.

Arthur D. Little, Inc.

Cambridge, Mass.

STATEMENT OF PURPOSE, SCOPE, AND APPROACH

The purpose of this study is the assessment of

the feasibility and potential usefulness of undertaking cost-effectiveness/cost-benefit analysis

(CEA/CBA) of orthopedic joint prostheses. The

two specific questions that we address are the

following:

●

●

Is it feasible to carefully and completely

evaluate the orthopedic joint implant technology within a CEA/CBA framework?

How could such an evaluation be useful in

formulating public policy (e.g., regarding

reimbursement practices, research and development funding, safety and efficacy regulation, capital controls, and medical manpower distribution)?

To investigate these issues, we first examine

technical feasibility by surveying what is known

about orthopedic joint implants and identifying

what must be ascertained in order to apply a

CEA/CBA framework. We gauge technical feasibility by examining answers to the following

questions:

● Is it possible to describe the present state of

orthopedic joint implant technology?

● Is it possible to define the target population?

● Is it possible to identify and quantify the

costs associated with the diffusion of this

technology?

● Is it possible to determine (and quantify, in

the case of CBA) the benefits associated

with the diffusion of this technology?

● What are the limitations and constraints of

CEA/CBA of orthopedic joint implants?

Next, we investigate the issue of usefulness of

CEA/CBA of orthopedic joint implants. The

analysis of this issue answers questions such as

the following:

●

●

●

How are policies regarding orthopedic joint ,

implants currently developed?

How do the limitations and constraints of

CEA/CBA affect its use in the formulation

of public policy directed towards orthopedic joint implants?

In view of the answers to the foregoing

questions, what is the feasibility of expanding and integrating the use of CEA/CBA of

orthopedic joint implant technology in existing public policy decisionmaking systems?

Finally, we identify useful directions for future policy research efforts.

Our approach to investigating the topics

listed above included a review of the literature,

personal communication with selected medical

31
4 ● Background Paper #2: Case Studies of Medical Technologies

specialists with relevant experience, and conver- include this information, because it provides insations with representatives of the orthopedic teresting and valuable insight and obviously

prosthesis industry. Although our foci were the supports our conclusions regarding feasibility.

feasibility and potential usefulness of CEA/ We recognize, however, that the result is a cerCBA of orthopedic joint implants, our efforts tain implied emphasis on topics for which inoften resulted in our answering specific ques- formation is readily available. Therefore, we

tions that in themselves are components of a caution the reader to keep this in mind.

CEA/CBA study. In discussing our results, we

TECHNICAL FEASIBILITY OF CEA/CBA OF

ORTHOPEDIC JOINT IMPLANTS

Overview of Orthopedic Joint

Implant Technology

The current state of the art and the chronological development of orthopedic joint implant technology are well documented and extensively described in the literature. Considered

as an entity, orthopedic joint implant technology is thought to be fairly well developed.

Specific prostheses and implant procedures

associated with some joints (e.g., hips), however, are more advanced than others (e.g.,

elbows). The salient features of orthopedic joint

implant technology and the history of its development are briefly reviewed below.

Description of the Technology

Orthopedic joint implants replace with artificial components one or more of the essential

elements of a joint—namely, the two ends of the

articulating bones and the antifriction pad between them. Muscles, tendons, and ligaments

are attached to various remaining natural structures, so that the joint can function with only

minor restrictions. Figure 1 shows the location

of hip and knee prostheses. Sketches of artificial

hip and knee joints appear in figures 2 and 3,

respective y.

At the time of this writing, the Food and Drug

Administration’s (FDA) Orthopedic Panel has

identified 28 types of orthopedic implants (see

table 1). Depending on their complexity and

potential for doing harm, medical devices are

classified into one of three groups:

Class 1: Those requiring only general controls (e.g., adherence to good manFigure 1.— Location of Hip and Knee Prostheses

Hip prosthesis

— Knee prosthesis

SOURCE: Scientific American, January 1978.
Figure 2.—Detail of Hip Prosthesis

Class II:

/

Pelvic bone

/ Class III:

ufacturing practices.

Those subject to performance

standards.

Those requiring premarket approvi al from FDA in the manner of

drugs.

SOURCE Arthur D Little, Inc

which is often severe, unremitting, and incapacitating, and to restore function of a joint impaired by various kinds of arthritis, bone disease, or trauma.

History of the Technology

The modern era of orthopedic joint prostheses began in 1962

Figure 3.— Detail of Knee Prosthesis

in England. In that year, Sir

SOURCE Sc/errf/flc Arnerlcan, January 1978
Table 1 .—Types of Joint Implant Prostheses

———.———-.—

Ankle, 2-part metal on plastic articulation,

semiconstrained carpal

Diaphysis, custom

Elbow, constrained

Elbow, nonconstrained, unipolar

Elbow, semiconstrained

Finger and toe

Hip, met stem-ceramic self-locking ball-ceramic or PE cup

Hip, acetabular component, metal cemented

Hip, acetabular component, nonpolyethylene

Hip, acetabular mesh

Hip, cement restrictor

Hip, femoral component, cemented, metal

Hip, 4-part plastic-metal-plastic-metal, trunnion bearing

type

Knee, constrained (metal-polyethylene)

Knee, hinged (metal-metal)

Knee, metallic plateau

Knee, mold arthroplasty

Knee, nonconstrained (metal-polyethylene)

Patellar (metal)

Posterior patellar surface, plastic

Shoulder

Tendon, passive

Upper femoral

Upper humeral

Wrist, polysiloxane

Wrist, 2-part metal-plastic articulation, semiconstrained

Wrist, 3-part metal-plastic-metal articulation,

semi constrained

SOURCE Ar!hu; D Little lnc Cam b;ldge, Mass 1980

John Charnley introduced techniques for total

hip replacement using a metal component inserted in the medulla of the femur and a polyethylene cup replacing the acetabulum or femoral socket. Both components were held in

place with methyl methacrylate, which behaves

as a cement and distributor of stresses.

Since 1962, the hip replacement operation has

undergone considerable development. In addition to the use of new materials, modified designs, and different techniques, there has been a

refinement of the indications for the operation.

There has also been a proliferation of orthopedic surgeons trained in the technique. Until

1971, hip implantations performed in the United

States were largely experimental and done only

in teaching centers. However, after FDA released methyl methacrylate as an acceptable

substance in this application, the number of hip

implantations performed annually increased

about 20 percent per year. Currently, it is

estimated, at least 100,000 total hip replacements are done in the United States each year,

many of them at community hospitals (2).

Stimulated by the success of the hip operation, orthopedic surgeons and engineers have

recently addressed replacement of other joints

with similar prosthetic devices. They have met

with considerable success in the use of knee

prostheses in the past 5 years or so, and it is

estimated that perhaps 50,000 knee replacements are now done annually in the United

States (2). Prostheses for the elbow, shoulder,

wrist, fingers, and toes exist, but replacements

of these joints are much less common (12,000

per year) than those of the hip or the knee,

partly because the afflictions they relieve are

much less debilitating than those of the hip or

knee (33).

As the oldest and most common orthopedic

joint operation, hip replacement is the most

completely characterized. There is voluminous

literature discussing several attributes of the hip

operation, including comparisons of material,

mechanical design, indications, contraindications, epidemiology, costs, success rates, failure

modes, failure rates, techniques, etc. The techniques and results of the operation are still

vigorously discussed, but it is widely agreed

that total hip replacements done by skilled

surgeons in properly equipped facilities on

properly selected patients have a high (85 to 90

percent) probability of success in relieving pain

and restoring the hip to full functional capacity

for the normal activities of middle-aged and

elderly adults.

Although Charnley’s original approach to hip

implantation has remained, various improvements in details of design have been made.

These include the use of other metals (e.g.,

cobalt steel and titanium) in place of stainless

steel and other polymers for the joint. Techniques used to prepare bones for prostheses

have been the subject of considerable experimentation. Methods for avoiding complications

have been developed as complications have

been discovered. In the early days, infection

rates sometimes ran as high as 10 percent, Now,

however, through the strict adherence to sterile

procedures, infection rates, at least in some

centers, have been held to 1 percent. There is
some hope that impregnating the methyl

methacrylate with antibiotics such as gentamycin can reduce infections still further. This

technique is used in Europe, but FDA has not

yet approved it for use in the United States.

Techniques to prevent loosening of implants

have been explored, but loosening remains

the most common failure, Though sometimes

asymptomatic, such loosening is believed to be

the precursor to most mechanical failures. Mechanical failures have been reduced through better engineering design of prostheses.

Arriving at the current state of knowledge

about hip implants has required considerable

experimentation and experience. Some of this

has been supported by Federal agencies such as

FDA and the National Institutes of Health (NIH)

in the United States and similar agencies

abroad. Much of it, however, has been undertaken at the initiative of orthopedic surgeons

and biomedical engineers in academic settings

and elsewhere. Approximately nine commercial

firms in the United States supply the parts and

instruments used in hip implant surgery (see

table 2). These firms have contributed some of

the knowledge concerning materials, manufacturing, and finishing. In particular, industry has

been responsible for developing manufacturing

techniques for these devices. 1

The state of knowledge about joint prostheses

other than hip is relatively less advanced. Knee

implants are the second most common type, but

less experience has been accumulated with these

than with hip implants. Furthermore, failures of

knee implants are more frequent, in part because the mechanics of the knee are more complicated than those of the hip. (There are now

over 80 different knee designs, indicating that

the field is by no means so well established as

that for hips. ) Prostheses for other joints (e.g.,

finger, toe) are much less common, and relatively little clinical experience with them has

been gained.

———

1 Design of orthopedic prostheses is something of an art, since

their engineering properties, in terms of the forces to which they

will be subjected and the stresses they will impart to adjacent bone

and ligament, are somewhat unpredictable. For this reason,

various orthopedic surgeons have created their own designs: successful designs, associated with the surgeon’s name, are often the

basis of a manufacturer’s product line.

Table 2.— Profile of the Orthopedic

Joint Implant Industry

Estimated sales of joint

implants in the United

States in 1980

Company ($ millions)

Zimmer(owned by Bristol Meyers) . . . . . . . . $45

Howmedica (owned by Pfizer) . . . . . . . . . . . . 35

DePuy (owned by Biodynamics) . . . . . . . . . . 12

Richards (owned by Rorer). . . . . . . . . . . . . . . 5

Dow Corning Wright (owned by

Dow Corning). . . . . . . . . . . . . . . . . . . . . . . 4

Cintor(owned by J & J). . . . . . . . . . . . . . . . . . 3

Orthopedic Equipment Co. . . . . . . . . . . . . . . 3

3M (Minnesota Mining and Manufacturing) . 2

U.S. Surgical Corp. . . . . . . . . . . . . . . . . . . . . . 1

All others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Total . . . . . . . . . . . . . . . . . . . . ... ... .. .$114

SOURCE Arthur D Little, Inc , Cambridge, Mass , 1980

In general, orthopedic joint implant technology can be characterized as being relatively mature. Fairly detailed literature pertaining both to

the nature of the operations and the original

development of the technique of joint replacement is available.

Orthopedic joint implant technology may illustrate many of the features of applying CEA/

CBA to a rehabilitative technology (e.g., target

population, nature of the benefits, public policy

implications). Nevertheless, it is important to

remember that orthopedic joint implant technology includes a variety of procedures at

various stages of development. In this case

study, an attempt is made to provide general information about orthopedic joint implants;

where it is necessary to illustrate a specific

point, the appropriate specific prosthesis or set

of prostheses is discussed. Since the focus of the

study is on issues inherent in the application of

CEA/CBA to orthopedic joint implant technology, no attempt is made to analyze exhaustively

the technology associated with the implant of

any single limb.

Identification of the Target Population

Aggregate Data

The literature and readily accessible aggregate

data do not reveal the orthopedic joint implant

target population per se. As discussed below,
8 . Background Paper #2: Case Studies of Medical Technologies

however, there are data that permit pertinent

inferences.

Orthopedic joint implants are used to relieve

various arthritic conditions, so the prevalence

of arthritis and rheumatism provide an upper

limit to the number of persons who could be

candidates for joint replacement. Orthopedic

joint implant procedures are major operations,

carrying some risk of mortality or aggravated

morbidity, however, so it is not likely that persons with mild arthritic conditions or arthritis of

joints that does not create significant impairment would undergo surgery.

According to the National Health Interview

Survey (46) of the National Center for Health

Statistics (NCHS), the number of people with

limitation of activities due to chronic arthritis

and rheumatism in the United States in 1974 was

4,500,000. Of these individuals, 800,000 suffered limitation of activities other than major

activity; 2,600,000 suffered limitation in

amount or kind of major activity; and 1,100,000

were unable to carry on their major activity.

Individuals with arthritis and rheumatism account for 15 percent of all persons with activity

limitation and 16 percent of all persons unable

to perform their major activities.

Among individuals 65. years and over, arthritic and rheumatic conditions account for 23

percent of all persons with limitation of activity.

They are the second leading cause of activity

“limitation, exceeded only by heart conditions

(24 percent). Among white persons, the same

trend is apparent. Arthritic and rheumatic conditions are the second leading cause of activity

limitation (15 percent), exceeded only by heart

conditions (16 percent). Among nonwhites, arthritis and rheumatism account for 17 percent of

persons with activity limitation. These conditions are more debilitating among nonwhites

than they are among whites.

Thus, arthritis and rheumatism are leading

causes of activity limitation for both a substantial proportion of the population-at-large and

several specific population cohorts. As the population ages, the number of persons limited in

activity by arthritis and rheumatism can be expected to increase.

Disaggregate Data

The literature and existing disaggregate data

are disappointing in that the target populations

for specific types of orthopedic joint implants

are not explicitly identified. However, future

definition of relevant population cohorts may

be possible by considering the indications and

contraindications for joint implant surgery visa-vis discharge abstract data containing diagnostic information. Indications and contraindications are briefly reviewed below.

●

●

Indications. —The principal conditions

amenable to joint replacement are osteoarthritis, rheumatoid arthritis,” ankylosing

spondylitis, other arthropathies, and sequelae of trauma, neoplastic destruction,

and other pathology of the joints. Pain is

usually the primary reason for operating,

but limited range of motion and gait disturbances may also be important. There is

obviously room for judgment about the degree of pain or limits of motion as indications for the operation.

Contraindications. —Existing infection of

the joint is generally a contraindication,

though some success has been reported

abroad with gentamycin-impregnated cement. Excessive damage may make success

improbable, as in the case when osteoporosis has progressed too far for the bones to

hold the prosthesis reliably. The presence

of other disease making it. difficult for the

patient to withstand a major operation may

also be a contraindication.

Data on the Frequency of

Joint Implant Operations

Additional insight into the identification of

target populations is provided by data depicting

the frequency of previous implant operations.

The frequency of joint implant operations has

been estimated to be 100,000 hip replacements

per year, 50,000 knee replacements, and 12,000

replacements of other joints (2).

A review of the literature on orthopedic joint

implants reveals that the total number of joint

replacement procedures performed annually in

the United States has never been reported. How-
ever, to compute an estimate of this number,

data can be obtained from a number of sources

and then aggregated.

The Office of Research and Statistics, Division of Health Insurance Studies, Health Care

Financing Administration (HCFA), has statistics

consisting of a 20-percent sample of medicare

recipients who were discharged from a shortstay hospital (a hospital where the average

length of stay is 30 days or less). These data indicate when an orthopedic joint implant procedure was the major surgical procedure being

performed. By multiplying the number of orthopedic joint implants derived from these data by

a factor of five, one can produce an estimate of

the total number of operations for patients 65

and over.

The number of artificial hip implants for patients of various ages is available for a sample

(33 to 42 percent, depending on the year) of U.S.

hospitals from the Commission on Professional

and Hospital Activities (CPHA) in Ann Arbor,

Mich. These data can be extrapolated to national totals by multiplying the published Professional Activities Survey (PAS) data by the reciprocal of the percentage of the national total

of patient discharges that PAS hospitals constitute. Then, the ratio between patients of all

ages receiving total hip implants v. patients

older than 65 receiving these implants can be

derived. The estimated total of patients age 65

and over (as calculated above) can be multiplied

by this ratio in order to compute the estimated

total number of patients receiving total hip implants. Unfortunately, since PAS data do not

identify implant procedures for joints other than

the hip, it is not possible to estimate the frequency of all orthopedic joint implants in the

same manner.

The number of artificial hip implants performed in Veterans Administration (VA) hospitals can be obtained from the VA central office and added to the medicare total to give an

estimate of the national total of hip implants

each year. To the extent that patients eligible for

but not taking advantage of medicare are not included, this total is likely to slightly underestimate the actual total.

Prior to 1971, the cement methyl methacrylate was regulated by FDA as an investigational

new drug, so all cases in which it was used were

reported to FDA, and there was an accurate record of the frequency of implant procedures.

Since that time, however, the amount of reporting has not been growing rapidly, although the

literature reveals that the number of operations

on hips and knees has. According to industry

sources, in 1978, some 200,000 prostheses were

sold annually.

At present, there are about 11,000 boardcertified orthopedic surgeons in the United

States. As this number increases (and orthopedic joint implants remain the most efficacious

long-run means of alleviating the limitations imposed by arthritis), the frequency of orthopedic

joint implants and perhaps the number of persons comprising the target population may increase. Also, as the prostheses and surgery become more refined, the number of contraindications may diminish and similarly promote a

larger target population.

The Emergency Care Research Institute, in

Philadelphia, is about to complete a study for

FDA based on a survey of experience at approximately nine representative hospitals. This

study will provide additional data on the frequency with which joint implant procedures are

undertaken.

Specification of

an Analytical Framework

CEA and CBA are both useful, widely applied

analytical techniques, but CEA is more amenable than CBA to assessing the technology of orthopedic joint implants. There are two reasons.

First, although both these techniques require the

identification and quantification of costs, only

CBA necessitates placing a value on the benefits

associated with the reduction in pain, suffering,

and impairment—the improvement in quality of

life—for a predominantly nonworking population. Second, CBA usually involves the consideration of systemwide effects. Thus, for example, CBA would require assigning value to the

effect on the economy of having a less impaired,

older population.
Although economists have long been considering the problems associated with the valuation

of these benefits in connection with CBA and

other analyses, to date, no solutions have been

developed. In this section, therefore, we develop

a cost-effectiveness analytical framework within

which the technology of orthopedic joint implants can be assessed in accordance with the

present state of knowledge. (For the sake of

completeness, benefits are described, although

not quantified, in a subsequent section. )

Cost-effectiveness ratios (C/E) for orthopedic

joint implants, expressing the net medical expenditure per year of healthy life gained by an

individual undergoing an orthopedic joint implant procedure, can be computed with the following formula:

C/E = ( Co j i – Ca + Cc)/(Em – Ec)

where:

C/E = net cost-effectiveness ratio

c ““ 0ji = costs associated with orthopedic joint implant

procedures

C a = costs associated with the treatment of arthritic

and other individuals that would be prevented

by orthopedic joint implant procedures Cc = costs associated with the treatment of complications of orthopedic joint implant procedures

E m . quality-adjusted life years of morbidity prevented

by orthopedic joint implant procedures

Ec = quality-adjusted life years of morbidity and mortality associated with complications of orthopedic joint implant procedures

Separate cost-effectiveness ratios can be calculated for different types of orthopedic joint

implants and for population cohorts of various

ages as bases for evaluating alternative courses

of action in relation to investment in different

research projects and reimbursement policy

formulation.

The cost-effectiveness ratios that ar e

generated by using the equation cited above depend on the assumptions that are made about

the value of several cost and effectiveness

variables. Note, for example, that the effects of

orthopedic joint implants are expressed in

a single-index, quality-adjusted life years

(QALYs).

2 To compute QALYs, different dis2QALYs were developed by Zeckhauser and Shepard (72) and

have been used in much subsequ,mt public policy research.

ability/impairment states are assigned rankings

along a continuum which ranges from death, on

the one extreme, to full functioning, on the

other. The measure of net effectiveness in the

equation above incorporates both the notion of

the expected gains associated with increased

functional status and the concept of potential

risk. The determination of weights or various

values for different disability states poses a

problem for the researcher, Another problem

associated with the use of QALYs are the

distributional effects implied by attributing the

same value to years of disability-free life gained

by individuals of different ages. Obviously,

younger persons would necessarily have better

cost-effectiveness ratios than older persons.

Both of these problems have been discussed in

the literature, and solutions, albeit imperfect

ones, can be found there. Weighings for different health states were derived by Bush, Chen,

and Patrick (13) and used by OTA (48). Shepherd (60) and Larson (36) designed methods for

assessing the results of hip surgery. The Shepherd system is difficult to use because it does not

integrate function with motion and does not

assign a single overall value; thus, interpersonal

and intertemporal comparisons are difficult.

The Larson system yields a single value, but has

been criticized as lacking sensitivity y.

Another weighting scheme to evaluate the

results of hip implants integrates pain, function,

range of motion, and the absence of deformity

was developed by Harris (30). This method,

which integrates pain, function, range of motion, and the absence of deformity, has much intuitive appeal and is likely to be adaptable to the

analysis of the results of other orthopedic joint

implant procedures. On the premise that pain

and functional capacity constitute the indications for surgery in the vast majority of patients, Harris devised a point scale with four

categories and a maximum of 100 points: pain

(44 points), function (47 points), range of motion (5 points), absence of deformity (4 points).

Within each category, gradations are possible. Thus, for example, “slight” pain (defined as

“occasional ache or awareness of pain of low

grade, no compromise of activities”) is allotted

40 points; “marked” pain (described as severe at
times, but not precluding ambulation) is allotted

10 points. Similarly, function is broken down

into two series: daily activities (14 points) and

gait (33 points). Motion is described in accordance with an index based on preference and

value; based on the assumption that the first 450

arc of flexion is of more value than the arc from

900 to 130

0

, the former receives a higher index

value. Finally, the 4 points given for the absence

of deformity are all eliminated in accordance

with a set of predetermined criteria (e.g., permanent flexion contracture greater than 300,

fixed adduction of more than 10 O).

Further research might incorporate another

similar benefit measure, the sickness impact

profile (SIP), a health status indicator reflecting

social interaction, ambulation, sleep, nutrition,

usual daily work, household management, mobility, body movement, communication activity, leisure, intellectual functioning, family interaction, emotions, and personal hygiene (8). The

use of the SIP measure would have to be undertaken via surveys in order to assess the benefits

of orthopedic joint implant patients.

Identification and Quantification

of costs

As is fairly common in economic cost studies,

it is useful to classify costs associated with the

diffusion of orthopedic joint implants into two

categories: direct and indirect.

Direct Costs

Direct costs include expenditures for materials and services associated with orthopedic joint

implants. Since specific data quantifying the

total direct costs of various types of orthopedic

joint implants do not exist in a convenient format, one would probably employ a “bottomU P” (aggregative) approach to estimate these

costs. 3

‘The other method used in estimating the direct costs, the “topdown” (disaggregative) approach, begins with aggregate total

expenditure estimates by type of expenditures (e. g., hospital,

physicians’ services). For each type of expenditure, the total is then

distributed, by diagnosis, by using utilization and cost estimates

from various sources. This method of calculating direct costs is

most common in studies whose primary purpose is to estimate aggregate costs of illness by broad diagnostic category. Excellent exSuch an approach involves three steps:

1.

2.

3.

Ascertain utilization of specific services

and supplies.

Determine unit costs for each resource

identified in the first step.

Multiply quantities of resources utilized

by their unit costs to determine resource

expenditures; then aggregate similar expenditure components to obtain categorical totals.

The utilization of specific services (e.g., number of days of hospitalization) often varies with

patient age and perhaps sex, so utilization estimates should be developed with specific regard

to patient age group and sex. Direct costs projected to occur at future time periods should be

appropriately discounted (discussed later), and

all such future follow-on costs should be adjusted for patients’ survival probabilities. The

identification of resources utilized (both type

and quantity) can be largely accomplished by

reviewing the literature identified in the bibliographic references at the end of this case study.

(Professional judgment can be employed for further clarification or to fill any gaps. )

Unit cost data could be compiled so as to reflect geographically representative prices. Pertinent regional data exist in the American Hospital Association’s Guide Issue and Hospital

Statistics (hospital costs); Medical Economics

(physician fees); California Relative Value Scale

(physician fees); Medicare Survey published in

New England Journal of Medicine, May 13,

1976 (physician fees); HCFA’s Invoice-Level

Price Survey (drug costs); IMS American, Ltd.,

National Prescription Audit (drugs); the Napositions of this method and examples of its use are found in Rice

(54) and Cooper and Rice (17).

As one might imagine, the major difficulties with this approach

arise from the quality of available data used to distribute total

expenditures related to a given diagnosis. For example, it would be

necessary to distribute diagnostic-related expenditures (for arthritis) in accordance with the frequency of surgical v. medical treatment. The availability of data necessary to implement this approach is not readily apparent. Furthermore, although associated

conditions or multiple diagnoses do affect length of stay, diagnostic distribution of days of hospital care is based on primary

diagnosis. Also, several different data sources are often used in distributing hospital care expenditures by diagnosis depending on the

particular type of hospital in which patients receive care (e. g., Federal, long-term, non-Federal )
12 ● Background Paper #2 Case Studies of Medical Technologies

tional Ambulatory Care Survey of NCHS (outpatient followup and chronic care costs).

In the event that long-term nursing home care

or home care is identified as a relevant resource

for a particular population cohort, pertinent

cost information can be obtained from available

Federal documents (e.g., 11). Finally, the cost of

the prosthesis can be obtained from industry

data. (The procurement of hospital charges

associated with various orthopedic joint implant procedures from the Social Security Administration’s 20-percent sample of medicare recipients, CHAMPUS, NCHS, or PAS discharge

abstract data is worthy of future investigation. )

In order to demonstrate the aggregative costing methodology just described, we generate a

very crude estimate of the initial direct cost of a

hip, knee, ankle, shoulder, or elbow joint implant below. This estimate is based on resource

needs identified in the literature and typical

values.

Surgeon’s fee . . . . . . . . . . . . . . . . . . $1,000

Operating room fees . . . . . . . . . . . . 500

Anesthesiologist’s fee . . . . . . . . . . . . 200

Prosthesis . . . . . . . . . . . . . . . . . . . . 500

20-day stay at $200 per day . . . . . . . 4,0004

Miscellaneous . . . . . . . . . . . . . . . . . 400

Total initial direct cost . . . . . . . . . $6,600

A toe or finger joint implant requires a shorter

hospital stay, so the total initial direct cost

would be slightly lower,

Other pertinent direct cost components include the cost of followup and, occasionally, rehabilitation therapy. The resource needs associated with these cost components would probably have to be estimated by medical experts

and costed out by using existing hospital and

provider data. Hospital and provider data must

be derived from a variety of sources. The use of

these data implies the necessity of having to deal

with the inconsistencies imposed by differences

between costs and charges as well as by variations in reporting techniques. Consequently, a

well-defined, consistent set of assumptions is

necessary in order to “merely aggregate costs. ”

4

1t should be noted that the ~ nit cost estimate reflects charges,

which do not represent true cost estimates.

Direct costs must include the expected value

of a complication and thereby account for the

necessity of patients’ having further medical

treatment. This value can be calculated on the

basis of data that present the frequency of

various complications (by population cohort)

and the direct cost of such complications.

Indirect Costs

Indirect costs associated with orthopedic joint

implants include productivity losses that result

from patients’ spending time in the hospital and

recuperating at home and from the patients’

family and friends spending time visiting in the

hospital, etc. Typically, such time is valued by

lost earnings and lost household production

data. These data are readily available in a study

by Mushkin, et al. (45). Earnings foregone due

to premature death also comprise indirect costs.

These data, too, are available in the Mushkin

study.

Complications

Both direct and indirect costs must include

costs of any lack of safety and resulting presence

of complications associated with orthopedic

joint implants. Expected values of the direct and

indirect costs associated with complications

must be included in the estimate of total cost.

The literature suggests that much is known

about safety of joint implants. The materials—

metal, plastic, and cement—now have a long

period of use behind them and only mild evidence of toxicity, quite commensurate with the

benefits. Cemented bones sometimes resorb

(dissolve) for reasons that are not well understood. Delayed infections are thought by some

to be the consequence of sepsis (infection) originating elsewhere in the body, but most believe it

is the consequence of bacteria introduced at the

time of operation. Followups must be longterm—2 or 3 years is not long enough—and

later occurring infections have been known to

arise after 8 years. However, most failures, except infections and ultimate loosening of the implant, become evident in the early months.

Complications with hip replacement are well

documented, and means for avoiding them are
well established. Nevertheless, even the “best

centers” have not succeeded in eliminating these

complications entirely. In addition to facing the

risks associated with any major operation, patients with hip replacements have a higher incidence of thromboembolitic problems, although mortality from this cause is only about 1

percent. Deep wound infection occurs in 1 to 2

percent of patients (and may occur very late—

cases up to 8 years after the operation have been

reported). Loosening of the femoral component

is relatively common—estimates run as high as

20 percent of all patients—though in many cases

the patient remains asymptomatic. Occasionally, the femoral component itself fails. Other

complications of joint replacement include

loosening, dislocation, neurovascular deficits,

periarticular calcification, nonunion of cut

bone, malposition of components, fractures,

and discrepancy in limb lengths. Reoperations

are often, but not always, possible.

It should be noted that R&D costs are not and

should not be included in the specification of

relevant costs. R&D costs are already sunk

costs; they are not incurred as the given

technology diffuses.

Determination of Benefits

The benefits that accrue to patients successfully undergoing orthopedic joint implantation

include intangible personal gains in terms of increased self-esteem and decreased pain and suffering, as well as economic savings realized by

increased income and reduced illness-related expenditures. It is convenient to categorize benefits in the same way as costs: direct and indirect.

Direct Benefits

Benefits pertaining to the relief of pain have

been described by Harris (29). He compared the

preoperative and postoperative prevalence of

five categories of pain, ranging from severe to

none, among 124 patients with hip implants.

Fifty of the 124 reported severe pain preoperatively; only 1 of them (with pain secondary to a sciatic palsy) complained of severe

pain after the operation. Preoperatively, only 1

patient reported no pain; 106 patients claimed

no pain postoperatively.

Examining functional status, Harris (29) compared the preoperative and postoperative overall evaluation ratings of the 124 hips with followup periods of 6 months or longer. The average preoperative score was 44.3 and the average

postoperative score was 92.3, substantial

change. In fact, all but a single patient reported

a significant improvement. In terms of support

required, the number of individuals requiring

no support increased from 23 preoperatively to

114 postoperatively. In terms of distance

walked, preoperatively, 15 individuals claimed

the ability to walk an unlimited number of

blocks; postoperatively, 114 individuals asserted the same ability. Finally, in terms of having a

limp, 50 patients classified their limp as severe

preoperatively, and only 1 patient complained

of this problem postoperatively.

In order to ascertain monetary benefits, it is

necessary to take account of the heterogeneity

of the population undergoing surgery. On the

basis of several sources (Charnley in 1972 and

Ring in 1974, as described by Taylor (65)), we

can separate the population into three groups:

1) persons under 60 years (30 percent); 2) persons aged 60 to 70 (42.5 percent); and 3) and

persons aged 70 or older (27.5 percent). T h e

most significant economic benefits based on earnings accrue to those individuals in the preretirement group (i. e., the first group and half of

the second group), although there is an underestimation of the savings accruing to females. If

we use income data that value household production and take account of labor force participation rates, productivity increases, and mortality trends (45), we can obtain a fairly good

estimate of the benefits accrued as a result of alleviating disabled and handicapped

persons.

Benefits paid to those incapacitated with

rheumatism and arthritis are transfer payments

and therefore should not be measured as part of

the real (resource) cost to the economy. However, they do merit consideration as an indication of the amount of economic assistance society is offering potential recipients of orthopedic

joint implants. These benefits include appropriate payments under the following programs:

Old Age, Survivors, and Disability Insurance;
14 . Background Paper #2: Case Studies of Medical Technologies

Aid to the Permanently and Totally Disabled;

Veterans Administration Annual Compensation

and/or Pension.

Indirect Benefits5

Indirect benefits associated with joint implants primarily consist of the savings that

result from averted expenditures on caring for

the individuals who without an implant would

have been handicapped by their arthritis. They

also include additional savings that result from

averted drug and equipment expenditures associated with arthritis. Data concerning these can

be derived from information contained in a

study of the economics of arthritis by Nuki,

Brooks, and Buchanan (47). More recent information can be found in unpublished and published data from the Health Interview Survey of

NCHS.

Success and Efficacy

Both direct and indirect benefits must take account of both the expected success of the implant procedure and the efficacy of the orthopedic joint implant.

It has been observed, though not reliably documented, that success rates are higher with surgical teams who do joint implantations frequently, and who presumably, therefore, have

more skill and experience (4). Because deep infections are a more frequent and severe complication in joint implantation operations than

in others, adherence to rigorous standards of

asepsis is very important. Adherence to such

standards requires properly equipped facilities

and properly trained staff, and these requirements are sometimes used as arguments to

support confining joint implantation operations

to selected centers.

Hip implants are said to be efficacious—that

is, to yield good to excellent results in relieving

pain and restoring nearly normal function—in

85 to 90 percent of the cases undertaken (26,

27). Knee implants have almost as good a

5

1n the cost-effectiveness framework described above, these indirect benefits offset (and are therefore subtracted from) the cost of

the orthopedic joint implant procedure.

record—relief of pain in 90 percent of the cases,

deep infections in O to 7 percent, and an overall

failure rate of 7 to 22 percent after 2 years (18).

The aforementioned figures are drawn from

review articles, which in turn are the product of

long series of results. Charnley is still active in

the field, and his early patients provide the

longest term data. Many of the clinical trials of

orthopedic joint implants are simply voluntary

submissions by surgeons of a long series of their

patients. As a result, it is often difficult to identify the sources of differences in outcome among

different groups.

Focus on Average Rather

Than Marginal Effectiveness

The focus of CEA/CBA of orthopedic joint

implants is on average effectiveness, a measure

which assumes that benefits and/or effectiveness are equally distributed among all persons

included in the computation of a single ratio,

Marginal effectiveness, a concept which refers

to the benefit and/or effectiveness derived from

the last orthopedic joint implant recipient, is

likely to be less than average effectiveness,

because the people who are likely to derive the

greatest benefit from orthopedic joint implants

are likely to receive prostheses earlier than

others for whom the potential benefit is not as

great.

In order to remove this constraint from the

analysis, it would be worthwhile to perform

CEA/CBA separately for different population

cohorts.

Regression to the Mean

Another limitation inherent in CEA/CBA of

orthopedic joint implants is the complication of

the interpretation of the results due to the regression-towards-the-mean phenomenon. This

phenomenon is the tendency exhibited by pain

or functional status indicators that are selected

for a group of patients on the basis of extreme

values that may reflect a fluctuating component. Thus, the actual fluctuation of pain and

functional status may obscure the difference

between preoperative true v. observed values.

For example, if there are substantial ranges
associated with the definition of two health

status disability or functional impairment

categories, incorrect inferences would result

from a comparison of the higher boundary of

the low range with the lower boundary of the

higher range. This situation is likely to occur

when arthritis victims experience both painfree, unimpaired days and painful, disabled

days. Obviously, a before-and-after comparison yields results that are very dependent on the

value assigned to the before period.

Shepard and Finison (58) review methods of

removing the effect of regression towards the

mean. Many of these have practical—often ethical—difficulties. From a theoretical point of

view, the best procedure is to identify a randomly assigned control group of patients who

would not be offered orthopedic joint implants.

A more ethically acceptable, albeit more costly,

method is to obtain a series of measurements

and average them. Shepard and Finison suggest

an alternative approach that builds on systematically collected data from large samples of

longitudinal research studies. Their work suggests that it is possible to derive estimates of statistical regression and thereby obtain a meaningful baseline indicator to determine the effects

of orthopedic joint implants.

Placebo Effect

The interpretation of benefits might be further obscured by the placebo effect. In particular, it is possible that the benefits of orthopedic joint implants are overstated by the

value of benefits equivalent to the value of those

which are associated with any “treatment” (e.g.,

a bone scraping).

USEFULNESS OF CEA/CBA OF ORTHOPEDIC JOINT IMPLANTS

Present Policy Formulation

At the present time, orthopedic joint implant

technology is regarded in much the same manner as other surgical procedures. Since it does

not require a substantial investment ($150,000)

in capital equipment, it is not affected by capital

controls, except to the extent that the building of

additional operating room facilities are affected.

In most cases, there are operating rooms fairly

well equipped to handle orthopedic joint implant procedures; hence, the marginal cost associated with this procedure is very low. The materials and devices used in the procedures are

subject to FDA regulation.

Effect of Limitations and Constraints

of CEA/CBA on Its Usefulness

Public Policy Formulation

Imperfect Substitutability of Alterna

Orthopedic Joint Implants

in

ives to

The alternatives to joint implantation are

analgesics and other drugs, aids to ambulation,

and physical therapy. Rheumatoid arthritis can

be treated with a variety of drugs, none of them

very satisfactory. Osteoarthritis in its early

stages can be relieved by analgesics, but there

are no effective medical treatments for its advanced stages. Arthritis of all kinds tends to

become progressively worse with time, so conservative medical treatment is almost always

appropriate at first. Eventually, however, patients with these afflictions become candidates

for surgery. The stage at which surgery is appropriate depends on many factors—age, general health, lifestyle, degree of impariment, response to analgesics, etc. Surgeons emphasize

the matter of staging (particularly with rheumatoid arthritis, which is a systemic disease)—not

operating on a hip, for instance, until problems

with the knee and ankle have been brought

under control.

Thus, although there are short-run alternative

treatments, in the long-run, only orthopedic

joint implants restore functional and pain-free

status. Consequently, unless the analytical time

horizon (i.e., short-run v. long-run) is specified,

the policy implications of CEA/CBA results are

not clear and may even be misleading.
16 ● Background Paper #2: Case Studies of Medical Technologies

Arbitrary Selection of a Policy Decision Rule

Another limitation on the usefulness of

CEA/CBA in public policy development, applying in the case of orthopedic joint implants as

well as other applications of such analysis, is

that imposed by the arbitrary selection of a

policy decision rule.

Feasibility of Expanding and

Integrating the Use of CEN/CBA in

Public Policy Formulation

Typically, the overwhelming problem precluding CEA/CBA is the lack of adequate data.

Although an optimal set of data to allow quick

and precise estimation of the costs and benefits

of all orthopedic joint implants does not exist,

further study in the area of CEA/CBA of orthopedic joint implant technology is feasible,

because the necessary cost, incidence, prevalence, and outcome data can be assembled

from existing data and the literature. Furthermore, such study would be useful, because or

thopedic joint implants have the potential of

becoming a widespread technology and could

affect more than 900,000 arthritis patients who

are unable to engage in work, housekeeping, or

school activities.

Close study of the hip implant appears to be

particularly worthwhile, because research on

this would provide insight into future funding

decisions for other orthopedic joint prostheses.

Because the prostheses are at different stages of

development and address problems of different

degrees of severity, the prostheses for each joint

must be discussed separately. Although hip

joint replacements, in the great majority of

cases, are an accepted therapy to relieve pain

and restore the important function of mobility,

the same cannot be said of replacements of other

joint Whether or not to undertake replacement

is much more of an issue in the case of other

joints, and selection of patients remains a policy

issue about which the results from a current

CEA/CBA of hip joint implants could provide

valuable insights.

A prerequisite to the incorporation of CEA/

CBA of orthopedic joint implants in the process

of public policy development is the use of additional material to supplement such analysis. The

choice of which technologies’ development and/

or diffusion should be encouraged depends on

society’s welfare function, a weighted combination of values of the constituency, Although

CEA/CBA does provide a convenient means of

organizing and considering information about

orthopedic joint implants, results from such

analysis must be considered in conjunction with

relevant political realities and legal and ethical

issues.

Another prerequisite to the incorporation of

CEA/CBA of orthopedic joint implants in public policy formulation is the use of current

analyses. Policies developed on the basis of outdated data and discount rates are not very useful and can be misleading.

If these prerequisites are met, then CEA/CBA

of orthopedic joint implants could be a useful

input into policy decisions regarding reimbursement practices, R&D funding, safety and efficacy regulation, capital controls, and medical

manpower distribution.

USEFUL DIRECTIONS FOR FUTURE POLICY RESEARCH

In this study, we have indicated that CEA/ by arraying and quantifying costs and benefits

CBA is a feasible means of providing an objec- for each.

tive, systematic, and useful analysis of public

policy issues relating to the diffusion of or- Although CEA/CBA has intrinsic limitations

thopedic joint implant technology. Performed as an analytical technique (e.g., failure to procorrectly, the technique provides a convenient vide a unique, nonarbitrary criterion for choice;

method of comparing two or more alternatives failure to account for rapidly evolving techno-
logical advancements; possible dominance of an

unknown factor, for instance, the discount

rate), these limitations are not sufficient to

preclude future CEA/CBA studies related to

the medical technology of orthopedic joint implants.

It has been pointed out that the costs of orthopedic joint implants can be more easily measured than the benefits. As a result, it is easy to

overemphasize the costs associated with such

procedures. Furthermore, there is a danger of

underestimating benefits by inadvertently discounting the value of relieving pain and restoring functional ability to a predominantly nonworking population. Therefore, it might be suggested that studies of othopedic joint implant

technology should focus on the efficiency and

cost effectiveness of alternative investments

related to orthopedic joint implants.

A CEA study of the artificial hip would be a

particularly worthwhile future research endeavor. Since the necessary data are available,

it would be possible to complete the study relatively quickly, easily, and inexpensively. Because arthritis affects so many persons and in

most cases eventually affects the hip joint, a

CEA study of the artificial hip to answer questions such as those listed below would be of

widespread interest.

What are the costs of artificial hip implants?

For which population cohorts is it most

cost effective to adopt this technology?

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●

●

●

✎

How do cost-effectiveness ratios computed

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</ U S COV ERNMENT PRINTING OFFICE 1981 341-844 ‘1017