14 Statistics for Device-Intensive Procedures

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Written by Stephanie Wasek

Friday, 27 June 2008

Device-intensive procedures are core procedures for hospitals in terms of the revenue per procedure they represent and the high margins they can offer, especially from private insurers. However, it is essential that hospitals overcome challenges in cost management, revenues and pricing and physician relationships in order to ensure the profitability of these procedures, which also provide opportunities for hospitals to brand themselves as "high-tech and high-touch," over the long term, according "Pursuing Value for Medical Devices, Hospitals and Manufacturers."

Here are 10 interesting statistics from the presentation, given by James C. Robinson, PhD, a professor of health economics at the University of California Berkeley, at the recent IHA CHA Medical Device Conference.

1. The average hip/knee implant represents 51 percent of the DRG for those procedures.

2. The average hip/knee revision implant represents 45 percent of the DRG for those procedures.

3. The average lumbar spinal fusion implant represents 50 percent of the DRG for the procedure.

4. The average cervical spinal fusion implant represents 38 percent of the DRG for the procedure.

5. The average pacemaker implant represents 41 percent of the DRG for the procedure.

6. The average defibrillator with catheter implant represents 68 percent of the DRG for the procedure.

7. The average coronary stent represents 28 percent of the DRG for the procedure.

8. The average contribution margin for lumbar fusion procedures (DRG 498) was -$1,727 for Medicare FFS, -$1,118 for Medicare HMO and $19,414 for HMO/PPO.

9. The average contribution margin for total hip replacement procedures (DRG 544) was $1,002 for Medicare FFS, $13 for Medicare HMO and $6,271 for HMO/PPO.

10. The average contribution margin for cardiac defibrillator implant procedures (DRG 515) was $2,477 for Medicare FFS, -$4298 for Medicare HMO and $12,487 for HMO/PPO.

In order to keep costs for implants within reach for these device-intensive procedures, hospitals are employing several industry best practices, as Dr. Robinson also reported in the presentation the results of the CHA IHA Medical Device Strategy survey, which polled 83 California hospitals. The results:

1. Eight-four percent of hospitals share device prices with physicians; 55 percent use technology-assessment committees; 47 percent disclose physician conflicts of interest; 36 percent require pre-approval before a vendor receives payment; 36 percent invest savings from lower-cost procedures in the OR; and 20 percent limit physician conflicts of interest.

2. When it comes to current purchasing strategies for total joint replacement implants, 69 percent say they limit the number of vendors; 45 percent set a price cap on devices; 44 percent employ kit pricing; and 44 percent obtain premium-use rebates.

3. When it comes to current purchasing strategies for cardiac implants, 74 percent say they limit the number of vendors; 45 percent set a price cap on devices; 36 percent employ kit pricing; and 5 percent obtain premium-use rebates.

4. When it comes to current purchasing strategies for spine implants, 65 percent say they limit the number of vendors; 43 percent set a price cap on devices; 36 percent employ kit pricing; and 8 percent obtain premium-use rebates.

Download the PDF of the presentation slides for more information, including further explanation of challenges facing hospitals and device manufacturers and a discussion of potential solutions for ensuring quality and value.