Rethinking value-added premium services
Increasing costs, declining reimbursements and narrow profit margins represent factors that are leading hospitals to reassess their options for long-term financial viability. While continuing to seek ways to improve efficiencies and reduce costs, it is essential to understand the importance of value-added premium services.
For a long time, one service considered a value-added premium benefit has been the presence of implant manufacturers’ reps in the OR. The problem, however, is that this service comes at a steep price. Many executives are surprised to learn that the traditional functions of the rep—such as preparing the OR, maintaining instruments and providing surgical consultation—can account for as much as $400 for every $1,000 spent.
Changes to instrument services and inventory management, therefore, are two areas where hospitals can quickly and easily improve workflow, and reduce costs and waste, while continuing to deliver high-quality care. The key is to train clinical personnel how to provide much of the same support as a rep—but at a fraction of the expense.
Surgical preparation
Many surgeons rely on sales reps to make sure the OR is running smoothly through all stages of an operation. During pre-op, for example, a rep might assist the scrub technician in making sure that the correct trays are sterilized and ready and that all the instruments are in order according to the surgeon’s preferences and technique. Because the scrub tech and circulating nurse typically are hourly employees, the surgeon often has new faces in the OR who may not know his or her methods. The rep fills the gap, both augmenting OR support and facilitating the flow of events.
However, with the right training and certification, hospitals can use existing OR staff to support the operational needs of surgeons just as well. Hospitals could even offer opportunities for professional growth by creating new positions at slightly higher wages. A newly trained orthopedic implant coordinator, for instance, could fill the traditional functions of the rep but at a much lower cost than those typically built into a vendor’s implant fees. Having additional avenues for professional growth not only increases employee satisfaction and gives them a sense of ownership in preparation of the OR, but also provides surgeons with a dedicated team—all at a savings to the hospital’s bottom line.
Inventory management
Inventory management is another way in which many implant vendors pass along charges to hospitals. Usually, implant products are not purchased by a hospital until they are actually implanted. Similarly, the surgical instruments generally are on loan to the hospital. This practice puts a variety of products on the shelves, but most are not used on a regular basis and may even be at risk of expiration. Moreover, the vendor keeps control of inventory management as well as instrument maintenance and repair – again at a steep price.
Just as with surgical preparation, hospitals can save money by training staff to perform inventory management for far less than it costs to have a sales rep execute this. In addition, associated technologies such as RFID tags and QR codes can not only automate and streamline inventory management, but also deliver efficiencies that can be replicated across other product lines for even greater savings.
Hospitals can further bend the cost curve by purchasing devices and instruments outright. Without distribution costs factored into the price, it is possible to purchase some implants at a cost reduction of about 40-70 percent. Hospital-owned equipment can also lead to rapid ROI. Past pro formas reveal that hospitals averaging 500 combined knee and hip joint replacement procedures per year could pay for their instruments in 90-120 days at the latest.
The true value of value-added premium services
While instruments and inventory oversight is one thing, surgical consultation is another. Many surgeons rely on reps to be product and procedure experts, providing support when a surgeon is performing a new technique and learning the equipment. However, reliance on the sales rep is directly related to the surgeon’s experience with a particular device and the complexity of the procedure. As a result, keeping reps on call during surgeries is expensive and, for the vast majority of cases, unnecessary. Orthopedic surgeons are usually very familiar with the devices, tools, and procedures required for the surgeries they perform, so they don’t need third-party consultation. In fact, one survey of more than 300 orthopedic surgeons found that they rarely need reps in the OR for these types of uncomplicated, primary surgeries.
In order to remain financially viable, hospitals need to make substantial cuts to OR supply chain costs. Doing so requires better analysis of service costs, including those built into implants and devices; hospitals can start by taking a closer look at whether implant reps deliver real value on the bottom line.
