Take the guesswork out of medical device costs with a team approach

Wednesday, March 13, 2019

Managing medical device costs are a wild card for many organizations. With so many variables and poor communication between clinical and financial departments, revenue integrity has their work cut out for them. Particularly when it comes to spinal fusions, the variety of devices on the market available at a wide range of costs mean making the best choice is a challenge. But a collaborative approach and open communication can take the surprise out of supply chain costs for medical devices.

Surgeons who perform spinal fusions may not have access to the cost data for the implant and other materials used in the procedure. Surgeons know what works clinically, but they don’t always have a way to tie that back to the cost. So, if surgeons can be included in the conversation, they’re usually willing to discuss ways to increase value and save money, says Edward P. Hu, MD, CHCQM-PHYADV, executive director of physician advisor services with the UNC Health Care System in Chapel Hill, North Carolina, and president of the American College of Physician Advisors.  

According to Hu, spinal fusions is one area where he has seen the most success at getting clinicians involved in making more informed decisions. “Working with the surgeons and working with the supply chain has really been quite rewarding in helping to bring awareness to the cost of some of the implants that surgeons are using,” he says. “There’s high cost to a lot of the items, and it’s also associated with a lot of choices that are available on the market to fulfill certain niches that are required in that type of surgery.”

Many products used in spinal fusions come to market through an FDA clearance process, which is not as rigorous as the premarket application required of some other medical devices. For medical devices to be legally sold in the United States, they generally must be cleared or approved by the FDA. Cleared medical devices are those that the FDA has determined are substantially equivalent to an existing legally marketed device, whereas approved medical devices are those that have premarket approval, which is a more rigorous review process than cleared medical devices. Devices that go through the clearance process as opposed to the premarket approval process are generally cheaper.

All of this means that spinal fusion is an area that’s ripe for education and exploration, says Hu. There are two components to work on from a revenue integrity perspective.

First, try to negotiate better contract prices, Hu says. This can be accomplished by changing the amount the organization pays for a particular item by working with the supply chain using methods such as direct negotiation with vendors and shifting market share to various vendors.

Second, encourage transparency to foster innovation and reduce unnecessary variance, adds Hu. For example, a surgeon may be taking a different approach to a common problem and reaching a solution that’s equally as effective but less expensive than other surgeons. By sharing this information among surgeons, the organization may reduce the variances for spinal fusions.

These methods have proven effective at Hu’s facility. “We’re actively engaged on both fronts, trying to bring down the cost of our supplies but also to use the supplies that we do buy more wisely,” he says.

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