Since it was founded in 2004, the surgeon-owned distributorship, Inland Spine Products, has been so successful in reducing implant costs for local hospitals that last year it formed a consulting firm, Alliance Surgical Distributors, to help other like-minded physicians set up similar partnerships. Today, surgeons at 7 hospital systems in California, Colorado and New Mexico have started their own implant distributorships, selling implants for joint replacement and spine surgeries to other facilities for less than a traditional medical device distributor. At a time when surgical facilities are struggling to find ways of keeping pricey implant cases profitable, could these doctor-owned distributorships catch on?

Surgeon-owned distributorships like Inland Spine Products "work very much like outpatient surgery centers," says Angela Carlson, president of Alliance Surgical Distributors. They yield the best results "when you have a local group of doctors who work together and share a common vision, similar business ideals and similar clinical ideals."

John Steinmann, DO, and 3 other surgeons formed Inland Spine after seeing implant costs rise at an annual rate of about 13%, while reimbursements and hospital profits were shrinking. "The escalation of orthopedic implant prices is a direct result of the absence of effective market forces in this industry," says Dr. Steinmann. Ms. Carlson explains that the traditional model has failed to keep prices in check because the person who chooses the device — the surgeon — is not the same person who's negotiating prices with the supplier. That burden falls to the surgical facility administrator or materials manager, whose leverage is further limited by the fact that implants are often purchased one at a time. Dr. Steinmann and his partners believed that by combining their clinical expertise, negotiating directly with manufacturers and purchasing implants in bulk, they could create a more efficient and affordable distribution model, passing the savings on to hospitals and surgery centers.

Ms. Carlson says she and the 4 physician-owners of Inland Spine spent "quite a bit of time" working through the legal and logistical issues involved in setting up the distributorship before opening for business in 2006. "On a federal level, we are confident that this model is going to pass scrutiny," says Ms. Carlson, who notes that they follow the same rules as other types of physician-owned ancillary services. "We've always been transparent and honest in our business dealings" by disclosing ownership and the company's structure, she says.

The company initially had to combat some skepticism from the hospitals. "They get told all the time, 'We're going to save you money,' and it so rarely translates into true savings," says Ms. Carlson. According to Inland Spine's own analysis, the company saved 3 California hospitals 34% in implant costs between May 2006 and May 2008. The company conducted a price comparison of 4 implant systems it supplied to the hospitals for total knee and hip replacements, posterior lumbar and anterior cervical spine cases over the 2-year period. The total cost of the implants the company sold to the hospitals was $2,058,217, as compared to the $3,099,192 the facilities would have paid if they'd contracted with traditional vendors. The analysis was presented at the 2009 annual meeting of the American Academy of Orthopaedic Surgeons.

— Irene Tsikitas

Woman Fatally Burned in OR Fire
Attorney for the patient's family says a laser sparked the fire in an Illinois hospital.
A patient died from injuries sustained in a hospital operating room fire last month. Janice McCall, 65, died 6 days after an accidental flash fire broke out while she was undergoing a biopsy on her right temporal artery at Heartland Regional Medical Center in Marion, Ill., says her family's attorney, Robert Howerton of Howerton, Dorris and Stone. He says the laser sparked a fire that was exacerbated by the oxygen Ms. McCall depended on for breathing. The hospital confirmed in a statement that the fire "was immediately extinguished by operating room personnel," but that the patient had been injured. Ms. McCall was rushed to the burn center at Vanderbilt Hospital in Nashville, Tenn., for treatment on Sept. 3 and died 6 days later from complications from thermal burns, according to the Tennessee Medical Examiner's Office, which classified her death an accident.

Mr. Howerton told reporters he's requested medical records from the hospital to determine exactly what happened. Efforts by Outpatient Surgery to reach Mr. Howerton for comment were unsuccessful. Citing privacy laws, the hospital declined to provide details about the fire, saying only that it's "taking all the necessary and appropriate measures to address this incident." The Illinois Department of Public Health and the local fire chief have launched their own investigations.

Surgical fires are relatively rare — the ECRI Institute estimates 550 to 650 occur each year, and one or two of those are deadly. But because of the grave risks they pose to patient safety, ECRI ranked OR fires as No. 5 on its list of the Top 10 Health Technology Hazards in 2008. Recommended strategies for preventing OR fires include letting alcohol-based preps evaporate fully before starting a case, moistening sponges and gauze to reduce their flammability, ensuring the integrity of electrosurgical devices, keeping a safe distance between fuel and ignition sources and administering the minimum amount of oxygen required for a case. ECRI also recommends that you regularly conduct surgical fire drills so staff will be prepared to respond quickly should sparks fly in the OR.

— Irene Tsikitas