Although nobody knows exactly what that environment will look like in 24 months, we can be sure that the days of cost-plus contracts and risk-free implant usage are coming to an end. With the growing Medicare population and implementation of the Affordable Care Act, payers can simply not afford to sustain current reimbursement practices. We can expect to see more bundled payments, risk sharing and demands for data on the clinical efficacy of new implants.
This is why the more forward thinking medical centers are looking for alternative implant procurement strategies. Traditionally, implants have been ordered through the sales reps and distributors of device companies, at often astronomical prices. In response, many administrators have engaged with GPOs, which offer the promise of lower prices through 1-3 vendor contracts. Unfortunately, physicians do not comply with these contracts since implants are physician preference items and the nature of GPO contracts prohibit preferences.
Over the last year, we have seen several alternative implant procurement models develop some traction, such as MedPassage, which has built an Amazon-like market for implants. The company now has 450 contracted medical centers and claims to offer implant savings up to 60 percent. As a member, medical centers gain access to numerous implant vendors in one online market. All prices are transparent, requiring no contracts or negotiations with device company reps. The market also facilitates consignments, replenishment orders and product evaluations.
MedPassage prices are low because their market separates the price of the actual product from the price of the support. After reviewing the public financial records of many device companies, we have found that sales and marketing expenses often make up more than 40 percent of the implant’s total cost. However, if intraoperative support is needed, surgeons are able to add this on to their order.
It may seems obvious, but more competition amongst sellers is favorable for buyers. The current market involves very little competition, which is why devices maintain premium prices despite their commoditization. MedPassage addresses this problem by providing access to numerous device companies, big and small, that compete for business in a price transparent environment.
Several years ago, this type of procurement model might not work. With cost-plus reimbursement contracts, there was very little incentive to address implant costs. On the other side, device companies were getting much higher prices for their products, which supported sales and marketing costs that would make more efficient sales models unnecessary.
Today, in light of declining reimbursement rates, bundled payments and pricing pressures, the timing appears right for disruptive implant procurement models.
More Articles on Surgery Centers:
1st Survery With Implants From MedPassage Complete: 4 Trends to Support Future Use
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