A huge portion of the overall bill for surgery covers device and implant costs, and hospitals are starting to take notice. With new pressure to reduce costs wherever possible, materials managers and hospital administrators are looking for ways to reduce waste and unnecessary spending.
Hospitals and physicians are findings savings by:
• Improving room turnover times
• Shortening surgery times when possible
• Using less invasive procedures
• Shortening postoperative lengths of stay
• Cutting supply waste
• Reducing implant prices
There are several ways to realize savings on implant prices, including standardization for better negotiating leverage, using a group purchasing organization and educating surgeons about the quality/cost value proposition of different implant options. However, one Midwestern spine device manufacturing is embracing the relatively new "rep-less" model to help hospitals save.
The rep-less model eliminates the sales representative — who earns huge commission on sales — from the equation so providers purchase implants directly from the device company. However, this model also means device company representatives will not be in the operating room to support the surgeon or manage the supply chain.
Royal Oak Medical Devices in Bloomfield Hills, Mich., manufactures and distributes orthopedic spinal implants and instrumentation at 40 percent to 70 percent less than the previously-considered "lowest" nationally contracted price points, according to a Herald Online report. Here are five quick facts about ROMD and its parent company, Royal Oak Industries:
• ROMD and Royal Oak Industries are vertically integrated.
• Everything is made onsite at Michigan facilities.
• The companies have a streamlined business model to eliminate legacy research and development costs as well as multiple layers of infrastructure.
• The products are FDA 510(k)-cleared and controlled under an ISO 13485 Quality Management System.
• The products are two-dimensionally etched for traceability and inventory management.
The company has consignment and purchasing plans to help medical facilities develop programs for their individual needs. ROMD has experienced some regional success and is now looking to expand to facilities nationwide.
ROMD isn't the only device company using a "rep-less" model for cost savings in orthopedics. Other small companies are selling commoditized implants at a wholesale rate with varying degrees of success. Larger device companies are also taking note and devising strategies to accommodate providers on a budget, but haven't eliminated device company representatives just yet.
Outpatient ambulatory surgery centers have embraced the "rep-less" model as physician owners are more cost-conscious at these facilities, where reimbursements are often lower than at hospitals, and physicians are intimately familiar with the costs. Will hospitals follow suit? As pricing pressure continues, it's likely they'll at least consider new strategies for implant cost reduction, especially if their physicians come onboard.
However, continued downward pressure on reimbursements, bundled payments and accountable care organizations will push healthcare facilities toward new solutions for value-based care in the future whether the physicians are ready or not.