Shifting Implant Costs: How ASCs & Surgeons Manage Effectively
This panel discussion took place at the 20th Annual Ambulatory Surgery Centers Conference in Chicago on Oct. 25, 2014. Partner at McGurieWoods Barton C. Walker moderate the panel, titled "Implant Costs, How to Manage Shifting Costs."
"The biggest challenge to us is keeping the surgeons on board with whatever implant we select," said Dr. Bray. "We tell implant companies what they can sell something to us for — period. We tell them what we'll pay and if they want to introduce something new at a higher price point, we tell the physician it would come out of their pocket. Alignment is key to getting buy-in from physicians."
Ms. Soule works with her physicians to decide which implants to use and develops a trusting relationship with them. "I don't think it's the administrator's role to tell surgeons what they can or can't use because they know how it will impact patients," she said. "But it is my role to tell them the price and how it will impact net revenue at the end of the day."
The panel also touched on the relationship between device company representatives and surgeons. While the bigger companies are still able to support a large team of device representatives, many smaller companies are now cutting out the representatives in favor of a lower cost option for commoditized implants.
"At some point, reimbursement is going to be so low that instead of pushing products on the surgeon, it's going to be the surgeon pulling them," said Dr. Rhode. "At some point the surgeons will have to find the implants with the lower cost option or they'll go out of business."
Dr. Bray has already begun thinking about the disappearance of device representatives from his center. "I think the first disruption we are seeing is the device representatives go," he said. "Our internal staff will be responsible for supporting the surgeon. There aren't a lot of truly unique devices out there and you can't let the companies keep doing what they are doing: reintroducing things that are slightly better to mark up the price."
Dr. Rhode stressed the quality of "generic" or "commoditized" implants, dispelling the myth that they are inferior to name-brand products. Most implants, he said, are made by the same company.
"If you look at the cost structure of the big companies, 35 to 40 percent is marketing, distribution and sales," said Mr. Gallagher. "We have put together a group that doesn't have a representative; instead, we have a case manager and they don't up-sell. That can make a big difference."
Dr. Bray said that at his center, device representatives must sign a contract saying they won't "up-sell" and if they do, the center won't pay for it. Dr. Rhode sees more growth among companies that will teach inventory and product management to surgery centers and hospitals willing to forego device representatives for lower cost implants.
"A lot of surgeons haven't historically been aware of the cost implications of the implants," said Mr. Gallagher. "You have to go through an education process. When we ask them to use something that cost less, they might save $50 to $100 per implant. At the end of the day, that adds up."
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