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Managers Get Tough on Implants
Surgeons who once insisted on pricey implants let facility managers hunt for the best price.
Outpatient Surgery Editors
Publish Date: October 10, 2007

Facility managers are mad as hell about the cost of implants. They think they're priced too high and reimbursed too low. They feel the game is fixed against facilities and in favor of implant companies and payers, enabled largely by inflexible physicians who insist on pet implants and undermine facility bargaining muscle.

Put a Stop(light) to High Implant Costs

Sometimes, the best solution is also the simplest one. That's what Elaine Jones, RN, CNOR, BS, manager of surgical services with the St. Joseph Health Center in Warren, Ohio, learned when she decided it was time to put a stop to her excessive total knee costs. She simply grouped the six knee implants that her surgeons were using into three price categories: high, moderate and low. She did so using a large stoplight that she posted in the doctors' lounge and orthopedic room - with the highest-priced implants in the red zone, the moderately priced knees in the yellow zone and the lower-priced implants in the green area. "It was remarkable how fast vendors started trying to get their knees down to the green light," says Ms. Jones. "And it was just as remarkable to see our surgeons realize for the first time how much of a price difference there was between one knee and another." The prices ranged from $3,800 to $8,000 per knee. By bringing costs to light, Ms. Jones saved St. Joseph about $200,000 on knees alone last year. The $8,000 knee now costs the facility just $4,200; the $5,000 knee costs $3,900; and the $3,800 knee came down to $3,700. "You can do it for vascular stents, vascular graphs, total hips, spine implants and just about anything you carry in inventory," she says.

But the balance of power appears to be shifting, according to our survey of 445 surgery facility managers (results on page 65). Managers are getting much better at alternately educating, cajoling, shaming and outwitting surgeons who insist on pricey implants. They're encountering a much more receptive audience now that many physicians are facility shareholders. Today, close to two-thirds of all facility managers who've tried to persuade surgeons to help them obtain more economic deals say they've been at least somewhat successful. The newfound support from physicians has empowered managers to get much tougher with implant companies, erecting obstacles to thwart persuasive implant salespeople and clamping down on the prices they'll pay. "We're gaining ground," says the director of surgical and anesthesia services for a Minnesota hospital.

'One of the biggest cost drivers'
Virtually all our respondents call implants pricey in relation to other items they purchase for surgical cases - 69 percent call them "very costly" and 26 percent say they're "somewhat costly." A Colorado surgery center administrator calls them "one of the biggest drivers of healthcare cost in the country."

Not surprisingly, our respondents think controlling implant prices is important to the profitability of the facility. Four out of five say it's "very important" and another 12 percent say it's "somewhat important."

The reason price control is so important is simple. Although implant prices can be sky-high, reimbursement for implants is generally awful.

Hospitals typically get carveouts from all insurers for implants, but very often they're capitated. High-priced implants exceed the cap and cut into or eliminate the profits on the case. Says a surgical services director at an Alabama hospital: "I'm not looking to gain profits by marking up an implant for resale. I'm happy to break even." But he says he often cannot because of lousy implant reimbursements from Blue Cross/Blue Shield in his state.

Who are the respondents?

Acute-care hospital

34.5%

Surgical hospital

4.7%

ASC

54.2%

Office-based surgery

1.8%

Other

4.7%

What implants do they buy?

Orthopedic (anchors, joints, screws)

78.4%

General (hernia mesh, plugs)

66.0%

Ophthalmic (IOLs, donor corneas)

60.8%

Cosmetic (breasts, facial)

47.5%

Spine (pedicle screws, rods, discs)

28.6%

Other (cochlear, GYN slings, etc.)

16.0%

How costly are implants?

Very costly

69.4%

Somewhat costly

26.3%

How important is it to control implant cost?

Very important

82.1%

Somewhat important

12.9%

Which of these techniques have you tried?

Encouraged surgeons to consolidate brands

76.6%

Informed surgeons about how their case costs compare

73.5%

Researched less expensive products and proposed trials

67.1%

Delayed or refused trials of high priced products

25.1%

Removed costly offerings from the shelves

16.7%

Other

15.9%

How successful have your efforts been?

Very successful

<12.5%/td>

Somewhat successful

49.3%

Not too successful

20.2%

Not at all successful

4.8%

Not sure or not a goal to save on implants

13.2%

The problem is even worse in ambulatory surgery centers, since Medicare pays for almost no implants other than intraocular lenses and many commercial insurers follow suit. When insurers do consent to be invoiced for implants, it's usually only for the cost of the implant, with no allowance for the "handling, prep, cleaning, sterilizing and quarantine of the implant," complains a New Jersey ASC administrator.

When payers refuse to reimburse ASCs for pricey implants, hospitals sometimes end up holding the bag. Many ASC administrators said it is within their purview to bar surgeons from doing such cases in their facilities, and so the surgeons "take the cases requiring high implant costs to the hospital," says Steve Gunderson, DO, CEO of the Rockford (Ill.) ASC. This pleases no one. "Physicians are free to cherry-pick cases for their centers, so hospitals absorb implant costs not covered in private surgical centers," says a New Jersey hospital administrator.

Why are prices so high?
The majority of our panelists say there's one main reason for the imbalance: Inflexible surgeons who are unwilling to consider alternative products, and who threaten to decamp if they can't have the implants they desire. This undercuts any bargaining power facilities have.

Many of our panelists think surgeons are sincere in their belief that more expensive implants are best for their patients, but think they're either inappropriately set in their ways or just deluded. "Many physicians fall prey to the sales reps' hyperbole and fail to notice that the research or study was sponsored and funded by the same company selling the product," says the director of surgical services at an Alabama hospital. A Mississippi hospital clinical director complains, "several physicians are on the R & D boards of companies. They use their products even if they're off-contract and not cost-effective for the facility or patient."

We asked our panelists to offer their reactions to the following statement: "You generally get what you pay for in surgical implants. Higher-priced implants nearly always produce better outcomes, better surgical efficiency or both. Lower-priced implants force trade-offs." Nearly two-thirds (64 percent) of our respondents disagreed somewhat or disagreed strongly. "Sometimes you do get what you pay for but most often times lower-priced implants will do the trick," says Debbie Hay, RN, BSN, CASC, president of the Texas Institute for Surgery in Dallas. "We have surgeons who can perform a shoulder repair using suture and we have orthopods who must use multiple fancy anchoring devices," says Dr. Gunderson. "The patients all seem to have good outcomes."

We also asked respondents to reply to this statement: "Surgeons nearly always choose their implants based on solid research about outcomes. They almost never believe promotional hyperbole about implants." Here a full two-thirds disagreed somewhat or disagreed strongly. Only 7.5 percent strongly agreed. A cynical administrator of a Missouri eyes-only ASC comments that "studies are nearly always performed by the company promoting a lens. The results never vary. Different results for different companies will benefit their product or it won't be in print." Says Thomas Boniface, MD, an orthopedic surgeon and medical director of the Orthopedic Surgery Center at Beeghly Medical in Boardman, Ohio, "Surgeons are more interested in doing the latest high-tech thing, even though it has not been shown to produce better outcomes. Older, simpler and less expensive techniques are often equally clinically effective, at a fraction of the cost." A minority of respondents say their surgeons actually do choose correctly. "The surgeons that work here do have evidence-based opinions as to the type of implant that they like to use - things such as better outcomes for patients, better range of motion and longevity," says Sandra Mizikar, RN, director of surgical services at Mercy Jeannette (Pa.) Hospital.

An Easier Way to Deal With Implants?

An ASC administrator in California is able to get her physicians any implant they want, and she doesn't lose a dime on the deal. How? She uses a third-party implant billing service that pays her implant invoices in full - no questions asked.

"I have submitted every orthopedic implant you can imagine - including tissue grafts, screws, plates, external fixators and shoulder anchors - and they have reimbursed us 100 percent," she says. According to this surgery center director, the biller, California-based Advantus Medical, invoices the insurer directly and somehow makes a profit.

Advantus didn't return our calls. But Jon Hamrich, executive vice president of Access Mediquip - a different third-party implant biller - did. The reason his company can successfully bill for implants, he says, is "economy of scale and focus."

Mr. Hamrich says his company purchases in "tremendous volume" from several implant makers, presumably letting it obtain the lowest possible prices. He says his company also has the know-how and the manpower to analyze insurance plans, verify benefits, obtain preauthorization for patients, navigate the "complexity and confusion" of billing for implants and, finally, collect.

He says the service lets surgery centers host procedures that they couldn't host previously because the implant wasn't reimbursed. It also makes surgeons happy, since they can use their implants of choice. Finally, he says, "we are contributing to better patient outcomes because of greater access to devices."

He says there are limitations. First, the service is strictly for commercial and worker's comp cases - no Medicare or Medicaid. He also says that if the facility's contract with an insurer stipulates that the implant is covered under the facility fee, Access Mediquip can't help. The California ASC administrator says the service she uses requires more paperwork than billing insurers directly.

ASC billing experts we contacted say they were unfamiliar with the services. Both a healthcare insurer and an implant maker declined to comment. Another company, Implant Purchasing Solutions, didn't reply to e-mails. Thoughts on this? E-mail [email protected].

Keep Negative Pressure on Implant Prices

At the Via Christi Health System in Wichita, Kans., everybody thinks about implant prices. The health system's value analysis committee includes financial personnel, service chairs, a general surgeon, the VP of medical affairs, the materials manager and clinical nursing leaders. The inclusion of surgeons is key, says Brian Swallow, AD, director of surgical services with Via Christi's St. Joseph Hospital, because until they joined the committee, his ability to say no was "limited." Mr. Swallow now has lots of leverage because he is part of the top-line team that takes a hard look at every new implant request. If the committee doesn't like what it sees, the requesting surgeon must make a pitch to the committee. If the request isn't a good one, the implant won't see the light of the Via Christi ORs. "Surgeons now know that if they can't use an expensive implant at their own center because there's no real benefit to the added cost, they can't use it here at our hospital either," says Mr. Swallow. Even when a product gets the go-ahead, surgeons aren't necessarily out of the woods. "If a surgeon claims a product will help him finish a case faster, then we may agree to a three-month trial to verify that," says Mr. Swallow. "Only then will we assign an ESI number needed to charge for the implant, and we will set par levels." The ESI number prevents implants from coming in through the back door, because the vendor won't get paid without one. And just the existence of the committee keeps negative pressure on implant prices. "The act of requiring surgeons to go through this process motivates them to negotiate prices directly with vendors before they come to us, or it prevents them from asking at all," says Mr. Swallow.

The approach is working. Last year, the committee replaced one brand of pacemaker with another. This large health system has already saved $1 million on this single switch alone.

Question Your Surgeons' Perceptions

As the saying goes, you get what you pay for. But do you? Not necessarily, says Lori Sterbenk, RN, CNOR, clinical resource manager at Grand Valley Surgical Center in Grand Junction, Colo. Even though her surgeons were satisfied with the quality of their shoulder anchors, Ms. Sterbenk felt that the price wasn't competitive. She summarized the cost data, which showed that the implant was a full 40 percent more expensive than other "equivalent" anchors, and she met individually with each of her surgeons. They agreed to trial the less expensive implants and they found one they liked. The high-priced vendor refused to negotiate, and now they're out. The result was a $345 savings for the average three-anchor shoulder case. "It was an eye-opener," she says. "We used the more expensive anchor for a long time and were happy with it, but we discovered that all of the vendors we evaluated offered high-quality products, too." She says this experience has led her and her surgeons to question many other product perceptions as well, and she has already found more implants to evaluate. There's another benefit, too. Ms. Sterbenk and her surgeons now see implant cost containment as part of their duty to their patients. "It can be hard to break through some of the personal relationships surgeons have with vendors, but it really helps when physicians move to the facility side of the table, because this is the patient's side of the table, too," she says. "We share our cost savings with our patients."

Physician intransigence is the main obstacle to saving money on implants, but not the only one. Among the others:

  • Possible price gouging. In an industry that has been scandalized by fraud before, some panelists suspect that it may still exist. "I believe more Office of Inspector General scrutiny should be focused upon the inflated prices of implants - especially cardiac and orthopedic implants," says Tammy Baergen, RN, director of perioperative services at Harris Methodist Southwest in Fort Worth. "The implant industry needs to be regulated just as the hospitals and physicians are. Vendor reps make more per case than the surgeon," says Dennis Lott, OR manager at Benefis Health Care in Great Falls, Mont. Several respondents who work at small office-based plastic surgery facilities complain that with only two major makers of breast implants, price negotiation is difficult.
  • It's too easy to get stuck with non-refundable inventory. One problem, says Rexene Slayton, OR charge nurse at Bloomington Hospital of Orange County in Paoli, Ind., is "the need to stock various sizes that may or may not be used and having them go out of date. Most companies don't want the implants back when nearing expiration time and give credit for them."

Another problem is fickle surgeons, says Gayle Harman, MSN, director of nursing at the Day-Op Center of Long Island in Mineola, N.Y. "Surgeons go to a conference and want a new product when they return. They try it, find problems with it, and go on to the next one. It's very difficult to get surgeons to use existing products in inventory even if it was previously requested by them."

  • GPOs gum up the works. There is "very little" room for negotiation when you're going through a GPO, says Vicki Beaton, MSN, manager of surgical services at Meritcare Health Systems in Fargo, N.D. Some respondents commented that they can actually get better prices when they go off contract.

Is the tide turning?
The good news for facility managers is that they're gaining power in the struggle. More than three-fourths of our respondents say surgeons in their facilities have been encouraged to change implant preferences for economic reasons. One in eight of our respondents say they've been "very successful" with such techniques, and another 49 percent say they've been "somewhat successful."

The most popular technique is to urge surgeons to narrow their choices down to just one or two brands in order to consolidate the purchase. Virtually every facility that has tried to get surgeons to change has tried this technique. "We reduced the number of meshes used in general surgery from eight made by different manufacturers to five made by the same one," says Anne Martin, RN, CNOR, director of surgical services at Delano (Calif.) Regional Medical Center. "We performed an extensive evaluation and had all physicians vote, and the majority ruled."

Freedom of Choice Can Be a Bad Thing

Anchors with needles. Anchors without needles. Anchors with fiber wires. Anchors without fiber wires. And so on. When nobody was looking, the High Pointe Surgery Center in Lake Elmo, Minn., had amassed quite an anchor collection. Here's how Monica Aarthun, clinical coordinator of the OR, tackled the problem. She talked to surgeons about what they liked and didn't like. She talked to the scrubs who had hands-on experience with shoulder procedures and learned more about the surgeon's real practices and preferences. Finally, she met with the vendors to negotiate prices and learn more about each product. Ms. Aarthun then summarized her findings, along with actual usage data and pulled the surgical team together. She asked them to hash it all out, and they did. The end result? "We now have five anchors instead of 15, and these anchors accomplish all of the functions our surgeons and patients need," she says. "We took $12,000 worth of inventory off of our shelves, and that's huge for a small surgery center like ours."


Curtail the Academic Free-for-all

"We are, in essence, developing a hospital formulary for implants," says Debra Runyan, SSN, MS, the director of surgical and anesthesia services at the Froedtert Hospital, a teaching hospital in Milwaukee, Wisc., where until recently surgeons felt they had free reign to try out new implants. But Ms. Runyan's Surgical Value Analysis Committee - which is chaired by the chief surgeon and anesthesiologist - reviews every request for every new item with a fine-toothed comb. "It's no longer business as usual," she says. "This process forces the thoughtful participation of all our surgeons." The surgical VAC last year saved $300,000 on implant costs. In the first four months of 2007, it has saved an additional $143,000. The surgical VAC's recommendations go up to the hospital-wide VAC, which consists of the administration, including the COO, vice president and financial personnel. Only the most valid requests reach the top, says Ms. Runyan.

Virtually every facility that has tried that has also worked to show surgeons who use especially expensive items how their case costs compare to those of their colleagues. "Informed physicians are the key to managing implant costs," says Jennifer Misajet, RN, CNOR, administrative director of surgical services for Cheyenne (Wyo.) Regional Medical Center. "Show them the data: what the facility pays for implants, prices of equivalent implants from multiple vendors."

Many ASC facility managers commented that this is particularly effective in their venues, since most surgeons get a share of the profits - or losses. "We are 100 percent physician-owned and the owners understand that controlling costs results in improved profitability for the facility," says the business manager of a North Dakota ASC. Respondents also say that younger doctors are generally more receptive than older ones.

About two-thirds of our respondents say their facilities have used the technique of researching less expensive implants and presenting the option to the surgeons. "One surgeon preferred an IOL that cost $160," says an Arizona ASC administrator. "He was encouraged to try a different IOL that cost $60. After seeing the outcome, the surgeon decided to make the $60 IOL his standard IOL."

About one-fourth of facilities have simply declined surgeon requests for consideration of expensive new implants. "We refused to trial an expensive ventral hernia mesh. We just explained to the surgeon that we did not do enough of these procedures to warrant this expensive mesh," says Debbie Coffman, RN, CNOR, director of surgical services at Covenant Hospital in Plainview, Texas.

Seventeen percent have simply removed expensive implants from the facility's shelves. Brian Swallow, AD, director of surgical services for Via Christi St. Joseph in Wichita, Kans., remembers doing this for one pricey brand of pacemaker. "Surgeons that were not on board continued to request the product, but the schedulers reminded them that we no longer provided it. The requests ended after a short time."

Facilities have used other techniques as well:

  • Recruit physician champions. At Community Mercy Health Partners in Springfield, Ohio, one physician in each service trials new, more economic implants first to judge whether the product is equivalent to products the facility is already using. If so, he spreads the word. A physician champion also serves on the Surgical Services Expense Management Team, which must approve all new implants, helping with buy-in. If that doesn't work, hire a consultant to be the "bad guy" with surgeons and with implant companies.
  • Limit rep access to physicians. "We no longer allow vendors to appear in our department unsolicited by the hospital," says Debra Dunn, RN, MBA, CNOR, nurse manager at St. Joseph's Wayne Hospital in Wayne, N.J. At the West Branch (Mich.) Regional Medical Center, a rep was in-servicing his endoscopic hernia tacker and "took it upon himself to introduce new mesh" without a P.O. number, says Don Thorne, BSN, RN, manager of surgical services. "He cannot come to our hospital anymore."

  • Reward good behavior. Give surgeons who cooperate on implants special consideration for capital equipment they want the facility to buy, says a perioperative nurse clinician at a West Virginia hospital.
  • Publicize prices. Post prices for the various implants in the lounge and put price stickers on the implant boxes themselves to heighten awareness. Thus informed, "some surgeons will choose the least costly product," says Joanne Stone, BSN, administrator of the Crystal Clinic Surgery Center in Akron, Ohio. Not only surgeons but also staff need to understand the pricing and the reimbursement, adds Greg DeConciliis, PA-C, CASC, administrator of the Boston Outpatient Surgical Suites in Waltham, Mass.
  • Obfuscate. Some facilities have approval processes that are so daunting and evidence-intensive that surgeons are basically afraid to try. For example, to get a new implant into one Alabama hospital, the surgeon must obtain buy-in from the director of surgery, the chief nursing officer, the hospital administrator, the department manager, the team leaders and the specialty technicians. If the implant successfully runs that gauntlet, it must gain approval from the Surgical Value Analysis Team.
  • And other ideas. Limit space for storage of implants, making consolidation necessary. Swap unwanted implants that are about to go out of date with other facilities that do need them. Make sure staff don't open implants until they're asked for that item, says Mr. DeConciliis.

Playing hardball with suppliers
The acquiescence of surgeons has let many facilities push implant companies much harder.

Several facilities say they had capped implant costs. "We established a cost ceiling of $180 per implant. If the pricing is higher and there is enough physician demand, then it is brought before a finance committee," says a North Dakota ASC business manager.

Many facilities are now insisting that companies place implants on consignment so that they don't get stuck with unused inventory. A director of perioperative services for a San Antonio hospital says her facility insists on consignment and buy-backs of competitive and outdated implants as well as drills, batteries and other items that are no longer useful as a condition of doing business.

Some facilities negotiate for freebies as a condition of a volume buy. Ms. Harman says she can negotiate free instruments or a free 11th implant with the purchase of 10.

Several facilities ask implant companies to lower their prices when the patient's insurer won't pay, as with Medicare. "Have reps willing to share in the risk of cases that don't or won't pay well or at all," suggests Sean Guetlein, vice president for operations at Earnhart & Associates, an ASC consulting company. You can also ask reps to donate about-to-expire implants for such cases, suggests Alison Kirkpatrick, RN, materials manager for the Newark Surgery Center in Newark, Ohio.

Facilities haven't beaten the implant price problem yet, but they're making progress and expressing optimism. Says Barb Elliott, RN, OR manager at Community Mercy Health Partners in Springfield, Ohio: "It can be done."

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