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Private Health Insurance (National Joint Replacement Register Levy) Bill 2009

CHAIR (Senator Moore) —We are commencing our inquiry into the Private Health Insurance (National Joint Replacement Register Levy) Bill 2009. You have information on parliamentary privilege and the protection of witnesses. We have your submission, thank you very much. I would now ask either or both of you to make some opening comments and then we will go to questions.

Mr Burgess —The Australian Orthopaedic Association wishes to thank the committee for the invitation to provide evidence. The Australian Orthopaedic Association, AOA, is the peak professional body for orthopaedic surgeons in Australia. As I have mentioned, I am the chief executive and Professor Graves is the director of the registry and, as such, is responsible for its operation and management. I would also mention that Professor Graves has extensive experience not only through his involvement with the registry since its inception but also through his liaison and involvement in international registries. Professor Graves is appointed Director of the National Joint Replacement Registry by the board of AOA. I will also mention that, unfortunately, Professor Graves and I are in different locations for this teleconference.

I will just give you some background very briefly, if I may. The purpose of the registry is to define, improve and maintain the quality of care for individuals receiving joint replacement surgery. AOA recognised the need to establish a registry back in 1993. At that time, the outcomes of this surgery in Australia were unknown. It was not clear who was receiving joint replacements or the types of prostheses and techniques being used to implant them. The need to establish a registry was in part based on the documented success of a number of arthroplasty registries in other countries, in particular the Swedish arthroplasty registries. The ability to identify factors important in achieving successful outcomes had resulted in both improved standards and significant cost savings. The key driver behind AOA’s desire to establish a registry was to improve patient outcomes. That is, AOA’s primary concern is patient welfare, and, as such, I think it is fair to say that we do enjoy a somewhat unique perspective with regard to the various stakeholders in the National Joint Replacement Registry.

It is also important to recognise the significant pro bono contribution that members of AOA provide to the National Joint Replacement Registry. Many members are involved in reviewing data and developing the annual report of the registry, for which they receive no remuneration. Our members also actively participate in the governance of the registry through the board of AOA and various committees, again for no remuneration. The director of the registry, Stephen Graves, and also two deputy directors are partly remunerated. However, this does not fully compensate their involvement. In addition, the infrastructure that AOA provides to support the National Joint Replacement Registry is not fully cost recovered. I highlight the pro bono commitments of AOA and its members to the National Joint Replacement Registry simply to underscore the dedication of our members to improving patient outcomes.

The registry is a valuable resource for the Australian community. Although it has only been in existence and fully operational for a relatively short time, the information provided by the registry is already influencing joint replacement and associated technologies in a beneficial manner. The data provided by the registry has directly resulted in a reduction in the number of revisions in Australia, which has provided substantial financial benefits to the Australian community, medical device companies, insurers and governments. Major benefits from the registry will be achieved when longer term outcomes can be established—that is, the benefits of the registry will only further increase over time. The registry also enjoys worldwide recognition and respect as a high-quality registry.

With regard to the private health insurance bill, AOA does not have specific comments. AOA has a contractual arrangement with the government to manage and administer the registry. How the government chooses to fund the registry is solely the decision of the government, and AOA plays no role in determining or influencing the funding arrangements. However, AOA do wish to advise the committee that we do not consider that the bill will have any impact on the continued independence, integrity and world renowned quality of the registry. AOA also appreciate the government’s support of the registry over the last 10 years and we recognise and support the government’s efforts to provide assurance with regard to the long-term funding of the National Joint Replacement Registry. In this respect, AOA considers that the bill will provide longer term security for the funding of the registry as opposed to the current annual funding arrangements. That concludes my statement.

CHAIR —Are you wanting to make any comment at this stage, Professor Graves?

Prof. Graves —No. I am happy to answer any questions that there may be but I do not think I have anything more to add to what Mr Burgess has already said.

Senator ADAMS —Could you comment on the consultation with stakeholders prior to this legislation? Was there a lot of consultation with your organisation?

Mr Burgess —There was no consultation with AOA. We were first aware of it with the budget announcements but we are not concerned or surprised by that. As I mentioned, we are not involved in the cost recovery processes of the registry and do not play any part in that process.

Senator FURNER —I have seen other information in respect to the Prosthesis List benefits being minus eight per cent adjusted for CPI and the view that there is no way of passing those costs on. Firstly, is CPI the right vehicle in respect to providing what the actual benefits should be in this area and secondly, is it reasonable, in your particular experience, to suggest that there is no way of passing those costs on to patients or other providers?

Mr Burgess —I will offer a comment in relation to the second question first, and I might ask Professor Graves to address question 1 and also expand possibly on question 2. In terms of the pricing, we cannot comment on the pricing practices or the commercial decisions of prostheses companies although, on a cursory basis, with around 70,000 joint replacement procedures a year and a funding requirement of $1.6 million that would equate to in the order of $22 per procedure. With an average cost of prostheses of around $6,000-$7,000, $22 would not appear to be a significant impost. But we offer those comments, as I said, on a cursory basis. I might hand over to Professor Graves to expand on that and also question 1.

Prof. Graves —I was just wondering if the senator could clarify. It was my understanding that you were talking about the price for prostheses that is determined by the PDC and I am not quite sure of the relevance to the registry of that question.

Senator FURNER —It was in another submission that I have seen. It is not your organisation, of course, but they expressed the concerns about that being able to be absorbed with no mechanism of passing on those costs.

Prof. Graves —I think that it is an important discussion to have from the point of view of whether or not the registry fee is an impost on companies and whether they should be able to pass that on to either the health insurers or state governments and then, from the point of view of the health insurers, to patients through their health levy. But I am not sure that the Australian Orthopaedic Association, and certainly the registry, would have any particular view about that as we would regard this as a cost recovery exercise by the government and that our funding, from the point of view of the registry, is related to the government’s. I think the points you raise are important ones but I am not sure the Orthopaedic Association is in a particular position to comment about that.

Senator FURNER —Okay. Thank you for that.

Senator BOYCE —Good afternoon. Could you please describe for me the contractual arrangement that you have with the Commonwealth government?

Prof. Graves —Each year the Australian Orthopaedic Association signs a contract which is negotiated with the Commonwealth and that contract details what work is required to be done by the registry in the 12-month period of the contract and the payment schedule. One of the things that the Australian Orthopaedic Association does is subcontract the Data Management & Analysis Centre at the University of Adelaide to undertake a lot of the data management and analysis work. It is also detailed within the Commonwealth contract that the Australian Orthopaedic Association will subcontract that part of the work to the Data Management & Analysis Centre at the University of Adelaide.

Senator BOYCE —I presume de-identified information from the registry is then available for all manner of researchers in Australia?

Prof. Graves —The de-identified data from the registry is publicly available. It is available on the website. We produce an annual report detailing our findings each year and there are multiple reports which look at demographics. We also look at outcomes of specific prostheses and look at the outcomes in different clinical situations for particular prostheses and approaches to joint replacement surgery. We also provide a lay summary which details in clear, simple English the main findings of the report each year. In addition to that, we also provide reports to academic institutions, individual surgeons or companies that request those reports during the year, so specific analysis can be done on very specific issues. We provide around a hundred of those separate reports each year.

Most of those reports are provided free of charge; however, a number of years ago the Commonwealth asked us to bill companies for doing the reports and so we bill them at the Australian Bureau of Statistics rate, which I think is a relatively cheap rate. It is about $250 an hour. Most reports can be done within two hours or so of registry work and they are provided to the companies. One of the things that the AOA has emphasised with the registry is the accessibility of the information, and I think we have worked very hard to ensure that. That is one of the reasons why the registry is regarded quite highly internationally—because that information is publicly available. It is also used by international regulatory bodies and other interested parties involved in joint replacement around the world.

Senator BOYCE —Your current contract is for the calendar year 2009?

Prof. Graves —Yes, it is, and we are currently negotiating the contract for 2009-10.

Senator BOYCE —When you talk about the details of the payment schedules, is that the reimbursement?

Prof. Graves —That is right. Those are the payment schedules to the Australian Orthopaedic Association. In the contract those payment schedules are linked to certain milestones, and certain reports are to be made available to the Commonwealth before those payments are received.

Senator BOYCE —What is the contract for 2009 worth?

Prof. Graves —It is worth $1.468 million, and that is pre-GST.

Senator BOYCE —We have had evidence from other organisations, particularly suppliers of prostheses, suggesting comments that the benefits can be as high as $67,000 per product are at the extremely high end and, in fact, the average benefit from a listed orthopaedic product is around $1,700. Does that agree with the Orthopaedic Association’s view?

Prof. Graves —Shall I answer that, Ian?

Mr Burgess —Yes thanks, Stephen.

Prof. Graves —No, I do not think that is true. I think you have been given a misleading picture there in that, while many of the components used within a joint replacement may be of that value, what is not mentioned is that multiple components are used. For instance, in a knee replacement a femoral component, a tibial component and an insert would be used. That would be the minimum number of components.

Prof. Graves —A femoral component on average in Australia would be worth around $3,000, a tibial component on average would be of a similar value and the insert would be worth $1,000.

Senator BOYCE —So that is $7,000.

Prof. Graves —A similar situation occurs with the hip, where the acetabular component usually comprises a shell and an insert, and the femoral component consists of a stem plus a head. The heads are usually worth around $1,000. Depending on the nature of the stem, the stem could vary in value from $2,000 to $10,000. The value of the acetabular component probably varies. The insert would be worth about $1,500, unless you are looking at a ceramic insert or a metal insert, which are more modern technology and considerably more expensive. The shell would be worth around several thousand dollars. I think there is an element of truth in what you have been told, but what has not been explained to you is that multiple pieces are used to make up one prothesis for an individual.

Senator BOYCE —Are those figures you gave me the costs or the benefits for those items?

Prof. Graves —They are the benefits that are paid by the government—the fee that is charged by the orthopaedic manufacturing distributing companies to the health insurer. Those fees are not necessarily relevant to state governments, the public health system, because the amount is negotiated separately from the private system.

Senator BOYCE —I realise this is probably available in your annual report, but I am just trying to check the timing on these. I would like to see a table of the most common joint replacement operations performed and the aggregated cost figures. Would that be available for the first half of this year?

Prof. Graves —It depends on the exact details you want, because, as I have mentioned, there are multiple components used. The registry does not hold any costings data, because the PBC determines the benefit for a prothesis. I would think that the PBC would be able to give you that information. We would have some difficulty in giving you that information. We could give you details of the most used components, but the costings would then have to be linked to that. To do that we would need to link catalogue number and billing code number. We have had discussions with the Commonwealth, who have an interest in that linkage occurring, but that has not occurred to date. It would be possible but not easy to give you exactly what you are after.

Senator BOYCE —On that basis, could you just provide us with the data on the quantum of joint replacement operations? That would be useful.

Prof. Graves —We could do that. We can give you all sorts of breakdowns on that. We can relate it to manufacturers and suppliers, if you wish, or in any way that you would like.

Senator BOYCE —Yes, to have it broken down into the manufacturers would be of use.

Prof. Graves —Would you like that this afternoon?

Senator BOYCE —We are due to report on this bill on Tuesday, so as soon as possible—but not in such as way as to cause anyone injury!

Prof. Graves —No, it would not—that is readily do-able for us. We could supply that to you this afternoon without any problems.

Senator CAROL BROWN —I want to follow up on a question about the reports that you make available. Under the proposed new system of cost recovery, will those that are not sponsors that currently receive reports from you still be able to access those reports?

Prof. Graves —The answer is yes, of course they will be able to access any reports that they wish. In fact, in recent months the Australian Orthopaedic Association has been discussing with sponsors ways of assisting them from the point of view of being able to provide them with more detailed information which is relevant to their needs. It is the Australian Orthopaedic Association’s view that it would be quite happy to provide additional information to companies. In particular, we were looking at establishing secure web access for a company so that it could look at its own products and the real-time outcome of those products; so very accurate postmarket surveillance up to about six to eight weeks prior to the date that is being looked at for checking the data. They would be able to do that and look at their own products and see how they are performing. That would be a secure weblink that they could access at any time.

We are trying to support the companies because it is very important for the companies that their products have very good outcomes. They are very keen to access detailed information that the registry would be able to provide. The Australian Orthopaedic Association can see no particular problem in doing that.

Senator CAROL BROWN —Are you aware of any other jurisdiction that has similar cost recovery arrangements for their joint replacement registries?

Prof. Graves —Yes. Probably the most classic example of that would be the UK. They have also established a registry and they cost recover by levying a fee on prostheses. That fee is around £25 for one prosthesis within an array of prostheses that are used for a procedure. So it is about £25 per procedure. You can see that our registry is less than half that price.

CHAIR —There are no other questions, so I think you have worn them out. Thank you very much for your time this afternoon and your submission, Mr Burgess and Professor Graves.

[3.00 pm]