DON'T DISCOUNT VOLUME Competition can help reduce prices for orthopedic implants, but sometimes consolidating vendors works even better.

When you run an outpatient orthopedic center, you, your surgeons and your staff have to make hundreds of decisions every day. If you make the right ones, you can turn a healthy profit. But if you make too many bad decisions, your margins can shrink into oblivion. Over the years, I've learned a lot about what those right and wrong decisions are. I've also discovered that in some cases, the prevailing wisdom doesn't necessarily hold true. Here's how we keep our costs down and our margins up at our ortho-only center.

1. Spend more with fewer vendors
For a long time, we figured the best way to reduce what we paid for implants and other supplies was to have as many vendors in the fold as possible. That's the conventional wisdom: Have them beat each other up a little and the winner gets our business. That can be a good strategy, but there's also a flip side to consider.

I've found that with a lot of companies, especially bigger ones, if you're spending more, you can reach national account levels that let you get cash rebates, rebates for capital equipment and other perks. A few of the bigger companies have done that for us: They say, Tell us what you need, and as long as you meet certain spending levels, we'll get it for you.

That consolidation also has some other benefits. If you get all the surgeons at your facility to standardize, it's easier for the staff. There's a rotator cuff that needs a metal anchor? Now there's only one metal anchor on the shelf, instead of 7. It's easier to order, easier to keep track of inventory, easier to pick preference cards and it just generally reduces waste.

GREEN MEANS GO A color-coded price-comparison chart (with real company names and products) hangs in our ORs so our surgeons can see implant and supply prices at a quick glance.

2. Hang a supply spreadsheet in your ORs
Ongoing communication — both formal and informal — is essential. Fortunately, I have a very engaged group of surgeons. They come to our board meetings and they want to know what's going on when it comes to choosing which implants and other products to use. I used to tell them, based on prices: Use this product, use that product, don't use this product. But it's hard to remember all that information. And it's even harder to put into practice when a product rep is monitoring the surgery and encouraging the surgeon to use his particular implant.

Eventually, my surgeons asked if I could provide an easily accessible list of all the products we use, along with their prices — a guide that would help them decide which items to use under which circumstances. What we came up with is a spreadsheet that hangs on the wall in the ORs. That's a mock sample chart below so you can get a sense of what yours might look like.

We list items in order from cheapest to most expensive, and to put it all in perspective, the list is color-coded. The items that are less expensive are in the green category; the ones that are a little more expensive, but maybe clinically prudent for some cases, are in the yellow category. And then there's the red category. That's for the most expensive items and for items from companies that don't want to work with us.

It's a great decision-making tool for the surgeons and very valuable when a rep is in the OR, pushing his product. Used to be they'd feel bad if they didn't use that product. But now they can say: Hey, dude, your implant's in the red, you've got to get your price down. If you guys won't play the game, you're going to stay in the red and we're going to be discouraged from giving you business.

Of course, we're talking here about products that are clinically equivalent. A metal anchor, for example, is a metal anchor, so why not use the $200 one, as opposed to the $285 one, or even the $205 one? Everything adds up. We don't always force surgeons to use the cheapest item. There might be a case where a doc likes a certain brand because he does consulting with them, or for some other legitimate reason, and where the company has gotten its prices down to a competitive level. They might not be the cheapest, but if it's only $10 more, I'd rather have the surgeon use that product, versus a much more expensive one whose rep happens to be in the room.

Occasionally, we do use red-coded items, if they're specialty-specific, but the system encourages vendors to compete. In fact, the spreadsheet might be most valuable before it even goes on the wall, because the companies don't want to find themselves in the red.

3. Waste not, want not
Little things add up to big things. I might go a little overboard at times, but when I see a suture get opened but not used, it really bugs me. Sutures can be $3 to $8 apiece, after all. If it happens on a regular basis, well, you do the math. But where I really draw the line is with what I consider high-cost items — anything $20 and above. That's not an insignificant cost. If you waste 10 20-dollar items a day, you could hire another nursing assistant with that kind of money — someone who could actually help your bottom line.

Naturally, there are hard costs that go with every case, but if you can limit those extra costs — the waste — it can really make a difference. Of course, you can't let staff use that as a crutch for not being prepared. It doesn't mean don't pull the item; it means don't open it unless and until it's necessary. Staff should prepare the way they always do. And make sure surgeons know this is your policy, because at times it means they have to wait 30 or 45 seconds for something to be opened. They need to be onboard with that.