Do you struggle to get reimbursed for the pricey implants used in orthopedic surgery, the specialty where the parts can cost more than the labor? "It can turn a potentially profitable case into a loser in a heartbeat," says Sharon Bowen, CASC, who oversees 3 surgical centers as a vice president of operations for Ambulatory Surgical Centers of America.

There's little you can do about a healthcare economy where a hip implant can cost as much as a used car — or where an implant vendor rep can earn as much or more than a surgeon — but you can try several strategies to prevent anchors, plates, screws, artificial joints and donor tissue from eroding your profit margins. If you're feeling especially bold, you can set your own implant prices, as this colleague managed to do.

1 Cap what you'll pay implant vendors. Tell your implant vendors what you're willing to pay for implants. "$1,500 and not a penny more!" Yeah, right. Sounds absurd, turning the tables like this, but it has worked wonderfully for Kathie Wheeler, RN, BHA, CNOR, the surgical services director at Cape Fear Hospital in Wilmington, N.C. Since she got her implant vendors to agree to a capped pricing system 6 years ago, she says that her facility has saved 12% to 15% on a multimillion dollar spend on primary joints and that pricing has held stable for the past 3 years.

Ms. Wheeler had a good deal of leverage over the 7 vendors that supply hundreds of different implants to her 7-OR hospital, a Center of Excellence for orthopedic surgery. Her 26 surgeons perform more than 10,000 orthopedic cases each year, many involving implants. It's not uncommon for a surgeon to do 8 hip replacements in a day. Here's how she got her implant costs under control.

First she, her materials manager and her finance director classified each ortho procedure based on the number of implants it involved and created a dollar cap for it.

"We wanted to be reasonable with our vendors," she says. "We don't want them to lose money, but we need to make money. That's what guided us in setting the cap."

Ms. Wheeler declined to divulge figures, but she created, for example, a K1 and K2 category for knee procedures where K2 indicated revision procedures with multiple components. Similarly, she created caps for implants used in procedures slotted as Hip 1 or Hip 2, depending on which implants were involved. She also set limits on what she'd pay for implant-sealing cement with and without antibiotics.

Next it was time to sell the implant cap to her vendors. Starting with the lowest-priced supplier, she called each of her 7 vendor reps into the hospital to unveil the plan to them.

"We sat down with each vendor privately and said, 'Here's what we feel is the best price. We will not pay any more than "X" amount of dollars for this prosthesis. Do you want to participate with us?'" says Ms. Wheeler, who presented the cap as an ultimatum. "We won't even show and tell this product if you can't meet this cap," she told them.

One company struggled to meet the cap, but no vendor balked. "We did our homework well," says Ms. Wheeler. "We knew what was fair to them."

Ms. Wheeler says her surgeons, many of whom have close relationships with vendor reps and even deeper connections with the implants they sell, played a key role in getting better implant pricing. "They said to the reps, 'Look, the hospital is going to cap these prices. I'm supporting them. Go to your company and get them to negotiate,'" says Ms. Wheeler. She concedes that it was more bluff than anything: Her surgeons were supportive of the cost-savings initiatives, yes, but they weren't interested in changing implants they've used since their training.

Key to this strategy is the coding and billing staff knowing a K1 knee from a K2 knee. As a safeguard, circulating nurses must sign and approve a purchase order for every implant, says Ms. Wheeler.

2 Negotiate carveouts for your implants. The good news: Most major carriers are amenable to carving out implants. In her experience, Cynthia Jeremica, president of Stat Medical Billing and Consulting in Sacramento, Calif., says 4 of 5 will. The bad news: They're just as likely to deny reimbursement unless the implant invoices you submit exceed certain predetermined thresholds, which can range from $100 to $500. That could leave you in a bind if, oddly enough, you use less-expensive implants in your cases.

At the First State Surgery Center in Newark, Del., the threshold for implant carveouts is invoice pricing on all implants more than $120, says Lynn Truitt, RN, MSN, CNOR, CASC, the chief operating officer. At Boston Out-Patient Surgical Suites in Waltham, Mass., the threshold is $250, says Administrator Gregory P. DeConciliis, PA-C, CASC, who adds that the ceiling for implant claims that get triggered to medical review is $1,200.

Ms. Jeremica asks that insurers pay for any implant over $350. "Sometimes they'll want you to give them on paper a compelling reason why they need to reimburse implants."

3 Negotiate good contracts. One way to work around thresholds is to negotiate good contracts so you can occasionally afford to write off lower-cost implants and still not lose money on a case. "If you negotiate your contracts right, you'll get a higher rate for that grouper anyway. You may take a little bit of a loss or just break even in 1 case, but you might make it up on another case," says Gina Espenschied, RN, BSN, CNOR, the administrator of The Surgery Center at Brinton Lake in suburban Philadelphia. Ms. Truitt says that because she's negotiated good global fees, she can use up to 4 $280 anchors in a rotator cuff repair and still break even.

Ms. Jeremica offers another way to work around thresholds. Let's say you submit a bill for 4 separately reimbursable hand procedures and the carrier will only pay for the one or two with the highest reimbursed values. The cases involved screws, plates and fixation devices in the $800 to $1,000 range, for which the carrier won't pay. To help offset the implant costs, get the insurer to pay for the third and fourth procedures as well, she says.

Do the math first, says Stuart Katz, executive director of the Tucson (Ariz.) Orthopaedic Surgery Center. Are you better off, he asks, accepting a contract that pays you 160% of Medicare for every procedure but won't reimburse you for implants, or one that pays you 140% of Medicare and all implants?

4 Use third-party billers. Purchasing an implant you might not get reimbursed for is a risk you might not want to take. This is where implant billing companies come into play. You're probably aware of how they work: Typically they buy the implants, charge the insurance carrier directly for all devices used during the procedure and assume the responsibility and risk of obtaining reimbursement, letting you essentially host expensive cases worry-free. "They absorbed all of the costs and I never saw the bill," says Mr. DeConciliis. "It was a very easy process." Other times you buy the implant, the biller reimburses your invoice cost and then charges the payor.

Either way, before they agree to take on a case, billers will pre-certify the patient (meaning you'll need to send them all patient and insurance information) to make sure the insurer will pay for the implant — hopefully for more than what it costs. As one implant purchasing executive put it, "When things go well, we get more from the insurer than the cost of the implant."

What's the turnaround for pre-certifying patients? This is a question you should always ask, says Jean Small, RN, BAM, the director of nursing and operations at Soncy Surgery Center in Amarillo, Texas. Ms. Small says too many times she was forced to wait 2 or even 3 weeks to get an answer back — too long of a wait for surgeon and patient.

Also find out how many vendor contracts the company has. Ms. Small was dismayed to find out that her billing service had very few contracts signed with the implant manufacturers her surgeons preferred. "It was really of no benefit to us," she says.

Yet another reason to negotiate implant carveouts is that some third-party billers can only work with your facility if you've negotiated a carveout for implantable devices in your contract with the insurance payor. "Of course, if all insurances gave carveouts, there'd be no need for [third-party billers]," says Ms. Espenschied. "The insurance companies are obviously paying more to them than they would be for paying us invoice cost."

For some, using a third-party biller isn't a matter of choice. Mr. DeConciliis says a major carrier insists that he use a particular biller for implants, a biller that doesn't contract with one of his major implant vendors. "The concept of not having to worry about implant costs is great," he says, "but you can't dictate to physicians what implants they can use."

5 Appeal denials. Coleen De Leon, BSN, MBA, director of the Modesto (Calif.) Surgery Center, went back through 2 years' worth of denied implant clams and wrote appeals letters to insurers. "They kept saying it's all bundled. I keep showing them what the cost of the case was," says Ms. De Leon, who estimates insurers reimburse her implant costs half the time. The appeals are beginning to pay dividends, as checks ranging from $700 to $2,000 have started to roll in. "That's the difference between making money on a case and not," she says.

A good way to prevent denials is to refuse bundled contracts. Carveout or not, when Cape Fear Hospital renews payor contracts, it insists on separate numbers: what it's to be paid for the procedure versus what it's to be paid for the prosthesis. "We take the implant out of the procedure," says Ms. Wheeler.

Finally, know when to refuse to do a case involving implants. "We're very selective as far as cases that require a lot of implants," says Mr. DeConciliis. "When that case comes through the door, make sure the insurer will pay for the implant. We'll do a case with 1 rotator cuff anchor. But we won't do a $5,000 knee replacement on a Medicare patient where the reimbursement is $850."