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Industry        Surgeon

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The Disruptive Generic Approach

Posted in Surgeon as Entrepreneur | Nov 2013 | Comments (3)

Tags: Editor's Choicerotator cuff surgerycost reductiongeneric

Generic Orthopaedic Implants
Blair Rhode, M.D., Orthopaedic Surgeon,
Rhode Orthopedic Group  
Dr. Rhode discusses the current state and future of 
generic orthopaedic implants at OMTEC 2013. 

I was just at a surgery center conference where administrators were bragging about their ability to hold the device companies’ feet to the fire through blind bidding to achieve 20 percent cost reductions. Then they patted themselves on the back for these laughable savings. Their actions were based upon stale ideas such as group purchasing organization (GPO) contracts and collective vendor bidding. The problem is that they are left with the same five companies offering their stable products at minor reductions, only to have the creative sales reps make up the reduction on their new and “innovative” offerings. If a surgery center is going to achieve the realistic 75 percent net savings on physician preference devices, they have to become disruptive in their approach. They have to stop allowing the sales reps from the large orthopaedic companies to drive the sale. Instead, they should seek out alternatives.

We recently evaluated a case series of 15 consecutive rotator cuff repairs performed using a generic, repless model compared to a similar series utilizing brand name implants with a sales rep and a consignment model. The average number of implants used per case was similar (2.221 to 2.71).

The Results

Generic, repless model: 15 consecutive arthroscopic rotator cuff surgical repairs took place between February 2013 and May 2013. The average tear size was 3.0 cm2. A total of 31 anchors were utilized (23 rotator cuff and eight knotless) to perform 15 rotator cuff repairs. An average of 2.21 anchors were used per rotator cuff repair. The cost for a generic/wholesale rotator cuff anchor was $69.95. The cost for a generic/wholesale knotless anchor was $49.95. The average cost per case for rotator cuff anchors was $143.45 ($69.95-$209.85). Rotator cuff anchors represented 40.6 percent of all surgical supply costs.

Traditional sales model: We retrospectively analyzed the surgical supply costs utilizing brand name implants with a sales rep and a consignment model in a hospital outpatient setting. The cost per implant utilizing this model was $404. The average rotator cuff anchor cost per case was $1,094.84 (2.71 implants per case). There was a $340 rental fee involved with consignment of the instrument tray. The total cost per case for surgical supplies was $2,128.19. Rotator cuff anchors represented 51.4 percent of all surgical supply costs.

Discussion

We demonstrated that significant cost savings can be achieved by utilizing a generic/wholesale model in an outpatient surgery center setting. Surgical supply costs are 6.03 times higher when performed utilizing a traditional model ($353.07 compared to $2,128.19). Our single physician surgery center performed 76 rotator cuff repairs in 2012. By using a generic alternative for these procedures, the surgery center saved (and profited) $72,305.64 for this single procedure for a single surgeon.

Our surgery center is a single physician facility that allows alignment by virtue of the fact that it is a party of one. There is no redundancy in the physician preference devices or other surgical supplies. This is demonstrated by the fact that the hospital pick list consists of 37 items compared to the surgery center pick list of 17. This efficiency has been achieved by placing most of the items within a single surgical pack that cost $88.26. By using a generic/wholesale model, a net savings of $106,210 was achieved for 76 cases ($1,397.51 net savings per case).



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Rhode 10/28/2014 01:03 PM
Linda,
This is a tough problem. I have written extensively on the alignment of the physician. As a free market person, I do believe in the "Whats in it for me" approach. This can take the form of higher income (gainsharing, bundled pricing, co-management) or other factors that are seen as benefits.
Check out the 3rd installme of the Change Management Project for some answers:
http://www.orthopreneurpub.com/component/content/article/401-the-change-management-project-part-3-managing-doctors-concerns
Linda Millington 10/28/2014 11:24 AM
Understanding the cost savings model using repless generics has been in the market for the past few years. The challenge is enticing physicians within a non-for-profit systems to engage in the utilization of these products. What is your philosophy on this?
Steve 02/02/2014 10:41 AM
"If physicians do not stand up and participate in addressing surgical costs and hopefully profit from their participation, someone (probably a 25-year-old frat boy business grad) will do it for them right before they tell their physician labor that they can go home for the day."- lol. You are hilarious. But right!