SAN FRANCISCO – The best decisions about purchasing supplies and equipment for a hospital or medical practice come from administrators and physicians working together as a team, speaker after speaker reiterated during the session on supply chain purchasing decisions at the 2015 AGA Tech Summit, which was sponsored by the AGA Center for GI Innovation and Technology.
“In this era of cost constraints, how can physicians and facilities align purchasing decisions so that everybody’s working together to provide the right service for the right patient in the right setting, in the right amount, and at the right time?” asked session moderator Dr. Joel V. Brill, a board-certified internist and gastroenterologist who is medical director of FAIR Health Inc. “Does that mean reducing inventory and suppliers of items? Reducing choice of equipment? Not being able to provide a new technology or procedure to patients? Even of more critical importance is that, if physicians and facilities don’t work collaboratively to address these issues, if you’re not providing a high-quality, value-driven product, you’re in danger of being priced out of the marketplace or deselected from the provider network.”
Dr. Joel V. Brill
Kenneth Strople, a health care consultant with more than 25 years of experience as a hospital COO and CEO, advises administrators and physicians to consider a key question: “What is the desired device or equipment going to do for patient care? Is it going to improve the quality of care provided in the facility? Patient care is No. 1; that’s why we do what we do. The latest and greatest is not necessarily the best for your organization and patients.”
He shared three examples of purchasing decisions that can go awry, the first being a surgical robot, which creates increased operating room time and a significant increase in consumables: “$3,500 per case for which there is no additional reimbursement,” said Mr. Strople, who is managing director of California-based Palisades Healthcare Solutions LLC. Buying a surgical robot may enhance marketing efforts and reputation of your hospital or health care group, he acknowledged, but if it’s going to cost your organization additional funds every time the device is used, “my question is, why?,” he said. “Margins in hospitals are quite small. In California, for example, if you’re making 4%-5% on revenue you’re doing great. So when the cost per case increases substantially [hospital administrators] have a problem, because you can’t lose money on every case and make it up in volume.”
The second example he discussed was cardiac stents for balloon angioplasty. When first introduced to the marketplace there was minimal ability for hospitals to receive reimbursement for stents (which cost about $3,000 each), due to the fact that no DRG existed for them. “Commercial contracts didn’t account for the new technology, so hospitals ‘ate’ the cost of stents for a protracted period of time until the contracts could be adjusted,” Mr. Strople said.
Another key purchasing decision involves variation in cost among medical devices on the marketplace. For example, is the $15,000 total knee implant from company A better than the $9,000 implant from company B? “Maybe in some cases, but the sales rep will tell you the one from company A is better, and the rep is in the OR to coordinate things,” Mr. Strople said. “In fact, the rep’s commission may actually be more than the physician fee for the procedure.” He noted that reference pricing and purchaser transparency initiatives are beginning to impact patient behavior, “especially when the additional $6,000 cost is 100% patient responsibility.” The best way to approach such a purchasing decision is to call a meeting with all of the clinicians who use the device or equipment being considered. “Show them what the devices cost, and then you get them to make the responsible decision,” Mr. Strople said. “If you provide them the appropriate data and they believe the data, they’ll make the right decision. They’re not interested in causing the hospital to go out of business.”
Mr. Strople emphasized the importance of putting politics aside when making important purchasing decisions. For example, Dr. Jones may wield more political clout in a hospital than Dr. Smith does, but “a smart hospital administrator isn’t going to go out and just buy that device for Dr. Jones. He’s going to do the analysis, treat everybody the same, and say, ‘bring me the patient-related data and bring me the financial data. I will validate the financial data. I will evaluate cost, revenue, and the feedback I get on the patient care side.”
