Hos­pi­tals’ cost-sav­ing ef­forts af­fect doc­tors’ choice of de­vices

Physi­cians face lim­ited choice in med­i­cal de­vice se­lec­tion as hos­pi­tals push to slash sup­ply-chain costs

Modern Healthcare - - FRONT PAGE -

Gagged by their sup­ply con­tracts, some hos­pi­tals have de­vised a sim­ple way to ed­u­cate physi­cians about the cost of pricey im­plants: us­ing color-coded stick­ers to in­di­cate the level of a de­vice’s price. Many of th­ese hos­pi­tals are barred by con­fi­den­tial­ity clauses with de­vice man­u­fac­tur­ers that limit, in some in­stances, whether hos­pi­tals in the same health sys­tem can share pric­ing data about the de­vices they pur­chase. In­stead, they mark the de­vices with col­ored tags spec­i­fy­ing high-, medium- or low-cost op­tions.

The wide­spread use of con­fi­den­tial­ity clauses—which limit price trans­parency and hos­pi­tals’ abil­ity to shop for de­vices based on price—and long­stand­ing re­la­tion­ships be­tween physi­cians and de­vice com­pa­nies are the two ma­jor fac­tors driv­ing costs higher on im­plantable de­vices such as ar­ti­fi­cial knees and hips or car­dio­vas­cu­lar stents, which are among the most ex­pen­sive items hos­pi­tals buy.

They are fre­quently called physi­cian pref­er­ence items be­cause or­tho­pe­dic and car­dio­vas­cu­lar sur­geons tra­di­tion­ally make the fi­nal de­ci­sions as to which de­vices a hospi­tal will use. Only over the past five years or so have some hospi­tal ad­min­is­tra­tors started to im­ple­ment strate­gies to re­duce the costs of th­ese items.

How­ever, mount­ing pres­sure on hospi­tal mar­gins, the in­creas­ing num­ber of physi­cians em­ployed by hos­pi­tals and the shift to new pay­ment models that align the fi­nan­cial pri­or­i­ties of hos­pi­tals, physi­cians and a pa­tient’s cost of care in­di­cate that the con­cept of a physi­cian’s pref­er­ence may soon be a thing of the past.

“This will be an area where there is a lot of op­por­tu­nity for cost con­tain­ment be­cause it’s an area that has really run ram­pant in the past and has not been well con­trolled by many hos­pi­tals,” says Dr. Kevin Bozic, vice chair­man of or­tho­pe­dic surgery at the Univer­sity of Cal­i­for­nia at San Fran­cisco. “There’s not as much flex­i­bil­ity and fat in the sys­tem. They’re go­ing to have to be much more ef­fi­cient and func­tion with the same dis­ci­pline as other busi­nesses.”

At the same time, the costs of many im­plantable de­vice pro­ce­dures con­tinue to rise. Or­tho­pe­dic pro­ce­dures ac­counted for most of the growth in Medi­care im­plantable de­vice pro­ce­dures from 2004 to 2009, with spend­ing on those pro­ce­dures in­creas­ing 8.1% an­nu­ally for five years, ac­cord­ing to a Government Accountability Of­fice report from Jan­uary 2012. There is lit­tle pub­licly avail­able data show­ing the in­di­vid­ual prices of im­plantable de­vices and whether those prices are ris­ing. But the same report found ex­am­ples of “sub­stan­tial price vari­a­tion,” with one hospi­tal paying $4,500 for a spe­cific pri­mary to­tal hip con­struct and an­other paying $8,000 for the same prod­uct.

“The cost of joint im­plant con­structs used for knee and hip re­place­ment vary widely and are ma­jor con­trib­u­tors to the vari­a­tion in the cost of care for pa­tients un­der­go­ing to­tal joint re­place­ment,” ac­cord­ing to a sep­a­rate study pub­lished last year in the Jour­nal of Bone & Joint Surgery.

With hospi­tal mar­gins un­der pres­sure, many large health sys­tems and in­te­grated de­liv­ery net­works have be­come in­creas­ingly ag­gres­sive about im­ple­ment­ing cost-cut­ting ini­tia­tives that tar­get med­i­cal de­vices. They usu­ally fo­cus on re­duc­ing prices and the num­ber of man­u­fac­tur­ers— which can lead to bet­ter vol­ume dis­counts—as well as seek­ing bet­ter uti­liza­tion prac­tices.

Hos­pi­tals have in­tro­duced gain-shar­ing pro­grams that al­low physi­cians to share in cost sav­ings. They’re also cre­at­ing de­vice reg­istries that track per­for­mance to help in­form pur­chas­ing de­ci­sions and in­sti­tut­ing bun­dled­pay­ment models that may also re­duce costs and im­prove qual­ity.

How­ever, there are no spe­cific ef­forts un­der way to ban the use of con­fi­den­tial­ity clauses.

Jef­frey Lerner, pres­i­dent and CEO of the ECRI In­sti­tute, an in­de­pen­dent health tech­nol-

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