The use of Cypher stent in surgical procedures was approved by the United States Food and Drug Administration (FDA) in the year 2003. The approval was based on the fact that Cypher stent was seen to reduce the occurrence of restenosis. Restenosis is a condition where the coronary artery narrows after angioplasty. The Cypher stent falls within the group of drug-eluting stents. These stents have a chemical coating that prevents the formation of scar tissue after the occurrence of surgery (Currie and Arundine, 2005). Drug-eluting stents are used in treating heart disease. Heart disease is known to be a major killer disease in the US.
Medicare is a government funded health insurance plan and it took a step by stating that it would reimburse any hospital that performed angioplasty using the coated stents. Medicare ended up reimbursing the hospitals with amounts that were below the costs the hospitals incurred. The hospitals made losses every time they performed a procedure using the stents. Medicare would stand firm on its decision saying that the additional cost incurred while using coated stents instead of uncoated stents was not justifiable (Currie and Arundine, 2005). The use of coated stents was advantageous to patients because it prevented repeat procedures, and postponed the need for the patient to have a heart bypass surgery. The advantages were clear, but Medicare needed justification for the additional costs associated with the coating of the stents. Drug-eluting stents are known to help patients in avoiding restenosis, but it does not eliminate this problem. It only serves for a short period of time. Medicare did not see the need for high costs that did not eliminate the problem completely. The patients would have to undergo another surgery procedure in the long run. The financial dilemmas faced by the health care providers exposed the patients to risk of death. The drug-eluting stents had both positive and negative impacts on the different sectors of the society.
Drug-eluting stents have created problems for Medicare, private insurers, and hospitals. The introduction of the Cypher stent led to an increase in the cost of the procedure by $2800. The cost of the procedure increased due to the high cost of the stent as well as the additional drugs required by the patient while recovering so as to prevent blood from clotting. The short run costs of using drug-eluting stents are high. The long run costs are lower due to reduced number of repeat surgical procedures and will result in a save of $2500 per procedure (Currie and Arundine, 2005). This leads to a loss of $300 per procedure.
The hospitals are facing the problem of losing money both in the short run and in the long run. In the short run, the hospitals do not receive the full reimbursement of the costs incurred in performing a surgical procedure using the drug-eluting stents. Medicare says that there is no justification for the additional costs incurred on coated stents as opposed to uncoated stents since both procedures will still require repeat procedures. In the long run, the hospitals will still lose because most of the patients who undergo the surgical procedure using drug-eluting stents will require few bypass surgeries. The bypass surgeries are known to cost a lot of money. The profits of the hospitals will decline.
In the long run, the demand for Cypher stents will decline because their use will not be profitable to the hospitals. The hospitals will prefer to perform surgical procedures that are profitable to them. The manufacturer of Cypher stents will suffer losses because their products will move slowly.
Alternative Solutions and Probable Outcomes
The first alternative solution is for Medicare to reimburse the hospitals the full costs that they incur while performing procedures using the drug eluting stents. The hospitals will be able to cover all their costs and make profits. The drug-eluting stents have many advantages that make them the best option of treatment for the patients. The number of deaths caused by heart diseases will decline further and add many patients will opt for the drug-eluting stents. The use of the drug-eluting stents will reduce the number of repeated procedures experienced by patients. It will also ease the congestion at the hospitals. The hospitals can then focus on other surgical procedures.
The second alternative is for the hospitals to increase the costs of other services so as to cover for the losses incurred while performing the surgical procedures using the drug-eluting stents. Medicare is responsible for the reimbursement of the costs incurred by the hospitals. Medicare insists on reimbursing a lower cost than that incurred. The assumption made by Medicare is that each patient uses 1.5 stents by basing on the fact that some people use one stent while others use two or more stents. The cost of bypass surgery is higher than that of the procedure using drug-eluting stents; therefore, the hospitals can create a budget where they estimate to conduct more bypass surgeries so as to use the excess money to cover for the procedures that require drug-eluting stents. The government makes an annual budget of the expenditure it plans to use on hospitals based on the price rates on the market. The hospital will be able to avoid losses by using this alternative.
The third alternative is for the hospitals to continue using the uncoated stents on patients, unless the patient is willing to pay for drug-eluting stents. The patients can pay for the additional cost that is not covered by Medicare. It will enable the hospitals to recover their full costs without making any losses. On the other hand, the patients will opt to pay for the additional costs so as to avoid repeated surgical procedures that are experienced when uncoated stents are used.
Recommended Solution and Probable Outcome
The recommended solution is for the hospitals to increase the prices of the other services they provide so as to cover up for losses incurred while performing procedures using drug-eluting stents (Currie and Arundine, 2005). One of the procedures that enable the hospitals to make profits is the bypass surgery. In the short run it will be possible for the hospital to cover up for the costs incurred on drug-eluting stents because there will be many people seeking bypass surgeries. In the long run it won’t be profitable for the hospitals because one of the impacts of performing surgical procedures using drug-eluting stents is the decline in number of bypass surgeries (Currie and Arundine, 2005). The profits will decline and the hospitals will have to rely on the other services which are not highly profitable. One of the outcomes of this recommendation is the rise of specialization areas by hospitals. Some hospitals will end up providing only those services that do not lead to losses. The use of the drug-eluting stents may end up declining because hospitals do not want to make losses.
Currie, David, and Mark Arundine. Medicare and Drug-Eluting Stents. Ontario: Ivey Publishing, 2005. Print.