Measuring for Change: How Smaller Facilities Can Get a Handle on Medical Device Costs

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The first step is to align with physicians around data that is reliable and actionable, and build a process for controlling product utilization that is rationale, patient-focused and data-driven.

Unless your hospital is part of a large, clinically aligned IDN, there’s a good chance you don’t have a good handle on what you spend for medical devices such as joint replacement and allograft bone implants—let alone how to gain pricing leverage if you did. You may not even have any local benchmarks against which to gauge your performance, or how well it might resemble “best-in-class.” In the spine arena alone, there are over 200 manufacturers and for any one surgical procedure a physician may be using hardware from four different companies. And that is to say nothing of other costs beyond the surgical suite, such as readmissions and postoperative care, for which hospitals are at financial risk under value-based payment programs.

When it comes to clinically sensitive items, the chief drivers of which devices get used during surgery have traditionally been supplier reps who enjoy a consultative relationship with physicians and may even take on inventory management responsibilities in the operating room. Physicians may neither know nor particularly care how much their utilization habits are costing the hospital. Their concern is solely on producing good outcomes, even if that means standardizing on a premium implant when a lower-cost alternative would work just as well for all but their sickest patients.

Except through an occasional risk-based contract or gainsharing initiative with a hospital, many physicians have yet to feel the financial repercussions of their care delivery behavior. Most surgeons could not accurately guess the price of products on their preference card, and would have no idea how their costs compare to their peers for the exact same procedure.

So how can you change this dynamic?

In real-world operating environments, cost-managing medical devices is best accomplished in phases based on a strategic roadmap—and starting with the quickest, easiest wins (e.g., limitation and control of osteobiologic products pulled straight from a device rep’s bag) to build morale for harder work ahead (e.g., supplier/implant consolidation around technically noncomplex procedures such as one-level cervical spine fusion). That, in turn, puts providers in a better position to more broadly reduce unwarranted variability and costs across care “episodes” that can exist largely outside of an acute care setting. The number of Medicare-eligible lives continues to climb and the most expensive procedures they require, such as new hips and knees, are being increasingly wrapped in 90-day payment bundles requiring simultaneous attention to costs and quality.

Physicians are central to these discussions, and will readily engage when hospitals tap into their competitive nature using peer-to-peer comparisons of their performance. But performance has to be measured in a meaningful way that’s easy to visualize.

Our experience across hundreds of hospitals suggests that physicians will change their preferences, often radically, when presented with the right data in the right context. We’ve had IDNs identity their “best” hospital as a starting point for getting all other facilities aligned from a cost perspective. Cost variations can be huge facility to facility, including those served by some of the same physicians in a common geography. It helps that we’re not simply handing facilities an Excel spreadsheet, but providing them with a customized, interactive dashboard allowing them to manipulate utilization data in real time to guide their decision-making.

The fact is payers are already sizing up physicians as well as hospitals, and trying to steer patients to those with the best outcomes at the lowest cost. HealthGrades star ratings was just the beginning. More Yelp-like reviews and decision support apps for consumers will surely surface as bundled payments explode over the next two years.

Hospitals of every size have to operate both smart and lean, focusing on the total cost profile of individual procedures, case by case and physician by physician, factoring in all the supplies used but also the actual health needs of those patients.

If you operate a smaller facility or health system, here are some questions worth pondering:

  1. How aligned are we with our physicians? You might get started by asking a few probing questions—e.g., Why do you pick a particular implant? Do you standardize across all of your patients? Do you change your practice when a new implant comes out? Does the device you’re using have proof of efficacy? Has it gone through the PMA process or just have 510(k) FDA approval? Does it have registry outcome data associated with it? How do you educate yourself about the products you use? Can you help us better match device use to patients?
  2. What tools are we using to measure what gets used in a procedure? Is this information readily available in an electronic health record (EHR)?
  3. Are nurses entering the right information into the EHR? Osteobiologics in 1 cc, 5 cc and 10 cc doses may all come in a blue box, but there’s definitely a price differential. And are they capturing the waste of all the unused product in open boxes because physician preference cards are out of date?
  4. Are the right products even available? Too many elective surgeries are being planned 24 hours in advance, so when required products aren’t in stock supplier reps come to the rescue with whatever they happen to be selling.
  5. What process do you have in place to manage the introduction of new technology? Do you have a committee, or just let your doctors decide? Even some large, prestigious institutions struggle to establish a robust technology review process, fearing too many roadblocks could unwind their recruitment and retention efforts. But there is a middle way that respects physician choice while acknowledging that their intellect respects data.

Admittedly, that’s a lot of new work to ask of OR directors and service line leaders, so they’re going to require your support on the front end. What’s needed is a repeatable, actionable process for controlling product utilization that outlives staff turnover. If you need assistance, look for the kind of medical device management expertise we offer hospitals—guidance on creating a roadmap, asking the right questions, and improving data visualization—in addition to a growing library of physician-vetted clinical evidence reviews in high-cost, clinically sensitive product categories.

Author Information

Chris Stewart

Chris Stewart

Chris Stewart is assistant vice president of the inSight Advisory – Medical Device Management group at HealthTrust. He has over 12 years of direct clinical implant management experience within musculoskeletal service lines, and previously served in sales and sales management leadership roles with the Stryker Corporation. Stewart holds a bachelor’s degree from the University of Tennessee, Knoxville. More Articles by This Author »

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