Month: August 2014

This article appears in Modern Healthcare Magazine
Aug 16, 2014
By Jaimy Lee
To cut the price of orthopedic implants and curb the influence of manufacturers, some hospitals are training their own employees to provide technical assistance to operating room staff, displacing company sales representatives who have offered this service to surgeons for decades.
Few patients being rolled into surgery for a hip or knee replacement are aware that a sales rep is often in the operating room during their procedure, aiding the surgeon and nurses with decisions about instruments and sometimes influencing the kinds of products that will be used.
Now, a small number of hospitals around the country are collaborating with manufacturers to replace this model. One is Loma Linda (Calif.) University Medical Center, which trains hospital staff to set up the OR and assist surgeons during joint replacement procedures. The payoff for Loma Linda is a 50% markdown on the prices of implants, which cost on average about $4,320 for a total knee implant and $4,820 for a total hip. Overall cost savings data were not available.
“Sales reps have created this necessity for themselves with the surgeon, and we’re saying it’s not as necessary as everyone thinks it is,” said Justin Freed, Loma Linda’s executive director of supply chain.
Over the past two years, a few small and midmarket orthopedic manufacturers including Smith & Nephew and Wright Medical, along with distributors such as Cardinal Health in partnership with Emerge Medical, have launched “rep-less” sales models, selling certain implants at a significant markdown. In turn, participating hospitals are training employees to take over the sales reps’ former technical assistance role. The service function of the sales rep is significantly reduced and sometimes entirely eliminated.
The rep-less model is part of a broader effort by hospitals to cut medical-device costs and improve clinical quality through greater standardization in the devices used. As part of that, hospitals have worked with physicians to limit purchasing of physician preference items.
“A lot of the (healthcare providers) today are beginning to recognize that the rep is not a ‘free’ service,” said Donald Casey, CEO of Cardinal Health’s medical segment. “It’s actually part of a bundle that results in prices that they may or may not want to evaluate.”
Costs of medical supplies
But it’s unclear how many manufacturers are willing to give up their sales reps’ coveted one-on-one relationships with surgeons. That access can allow manufacturers to influence surgeons to use more costly products. Still, hospital initiatives in recent years to reduce the costs of medical supplies—which make up a hospital’s second-largest expense after labor—and a push for more transparency about doctors’ financial relationships with manufacturers have started to limit surgeons’ choices about the products they use.
At Loma Linda, about 90% of roughly 400 hip and knee replacement surgeries performed each year are handled through the direct-service model, which was started in spring 2013. Two in-house orthopedic device technicians received training on the devices at the headquarters of the manufacturers, which Loma Linda officials declined to identify. The employed technicians begin managing the implants as soon as the shipments arrive.
“We have better people servicing it who have better familiarity with the doctors and the operations and the OR,” Freed said. “They’re not up-selling. And the quality doesn’t change.”
But some observers question whether the rep-less model can be applied to most U.S. hospitals. Others worry that it could affect patient safety if not executed well. “If hospitals are not looking at safety and effectiveness as well as cost, then you might have a recipe for disaster,” said Lisa McGiffert, director of Consumers Union’s Safe Patient Project.
Sales reps long have played a major role in providing technical assistance to surgeons. Sales reps often bring implants to the OR before a procedure or suggest what devices should be used during surgery. A standard orthopedic surgery may have 10 to 15 product trays, each with hundreds of instruments.
The orthopedic implant sector of the medical device industry uses the most sales reps. It’s a highly consolidated market, with five manufacturers—Biomet, Johnson & Johnson’s Depuy Synthes unit, Smith & Nephew, Stryker Corp. and Zimmer Holdings—controlling about 95% of the worldwide market share for hips and knees, and further consolidation is underway. Experts say there are few clinical differences between the hip and knee implants or many of the spine surgery devices sold by different manufacturers.
The rep-less model is being driven by pressures on hospitals to lower costs—declining reimbursement rates, lower patient volumes, financial risk arrangements with insurers, and employers and consumers seeking lower-cost procedures. The hospitals most likely to employ this model are academic medical centers, which have some of the most stringent policies on sales reps’ access to clinicians and operating rooms. Other hospitals moving to this model include those that work under risk contracts or serve a high percentage of uninsured, Medicare and Medicaid patients.
Some hospital officials say they favor the rep-less model because they are tired of paying “selling, general and administrative,” or SG&A, costs as part of the price of an implantable device. Those costs can make up nearly 40% of the price. Another reason is that they believe sales reps have become too heavily involved in clinical procedures.
In shifting to the direct-service model, hospitals have to make an investment through additional salaries and training for the in-house service technicians taking on the role of the industry rep. But “over time you come out clearly on top with the lower costs of hips and knees,” Loma Linda’s Freed said.
Click to enlarge.
Click to enlarge.
Devicemakers have reported lower sales growth in recent years as they agree to cuts in prices demanded by healthcare providers. But hospitals say a 10% cut in price on implantable devices through standardization and stronger negotiation—two of the key cost-reduction strategies used by supply-chain managers—isn’t enough to meet cost-cutting targets.
“Traditional negotiating tactics will yield low- to mid-single digit savings,” said Gene Kirtser, CEO of Resource Optimization & Innovation, the group purchasing organization formed by Mercy, a large Catholic health system based in Chesterfield, Mo. “To get significantly north of 10%, I really think you need to change the model.”
At Mercy Hospital Springfield (Mo.), a pilot program focused on spine implants was so successful that Mercy expects to roll it out at four more hospitals this year. The hospital, which does 700 spine procedures a year, initially promised to buy 90% of its spine devices from Zimmer under a one-year contract. It hired two employees—a former device sales rep and an OR technician—to take on the service roles inside the operating room after receiving training from the manufacturer. The hospital recently switched from Zimmer to Stryker for its spine devices.
As a result of the new arrangement, Kirtser said the hospital reported double-digit savings on the price of the devices, with the SG&A costs charged by the manufacturer falling to 7% from an industry average of 30% to 40%. In addition, OR time per procedure fell by six minutes because implants and instruments were always available and on time, he said.
“Does it matter that the rep for that particular company is not in the room?” asked Dr. Alan Scarrow, a neurosurgeon at Mercy Springfield. “I can’t say that it does, provided that you have good people who know the instrumentation.”
Advocates of the direct-service model say it also has advantages for manufacturers. They can gain market share because participating hospitals often commit nearly all of their purchases for a specific product to one company. The model also lowers manufacturers’ costs by reducing their need to maintain an extensive network of well-paid sales representatives. And it can help smaller companies protect and possibly snare market share from the dominant orthopedic device firms.
During an investor call last month, Smith & Nephew announced plans to roll out a rep-less sales model called Syncera that it says will lower SG&A costs and overall prices by cutting back on marketing and training. The company’s best-selling hip and knee implants will be sold at an estimated 30% discount through Syncera. The company expects that up to 10% of U.S. hospitals and ambulatory surgery centers could use this business. “We feel the model can coexist with the traditional model,” said Stuart Morris-Hipkins, general manager of the Syncera business for Smith & Nephew.
The direct-service model
If hospitals remove the need for devicemakers to pay expensive sales reps and free them from marketing and inventory risk, “the device company can profitably provide the product for a fraction of what they currently do,” said Dr. John Steinmann, a neurosurgeon who is also CEO of Renovis Surgical Technologies, a device firm that offers a rep-less model.
Still, some experts question whether the direct-service model can be replicated successfully in hospitals across the country. Many hospitals have become complacent in accepting the traditional sales and service arrangements, and many surgeons rely on the sales rep to provide guidance during procedures. In addition, hospital supply chains sometimes are inefficient in handling the delivery, storage and selection of devices used in surgeries.
“It’s very much of a niche effort,” said Dr. Bede Broome, an associate principal for McKinsey & Co. “We don’t see widespread adoption now, (partly because) the major players have significant advantages by sticking to the rep-based model.”
On the other hand, reducing the role of sales reps in the OR could help hospitals with safety and liability issues. Removing reps may improve infection control and reduce legal risks from a lack of informed consent if patients aren’t told a sales rep was in the OR during their procedure, said Consumers Union’s McGiffert. Last year, the ECRI Institute published a report calling for hospitals to develop policies around the presence of sales reps in the operating room.
Smaller manufacturers and technology firms are developing alternative ways of providing technical assistance to OR staff without having a sales rep on-site. Bang Surgical, based in San Clemente, Calif., is establishing a network of teleconferencing sites at hospitals that allow sales reps to remotely assist surgeons during surgery. Flower Orthopedics sells surgical cubes—kits with all the sterilized plates, screws and instruments needed during foot or ankle surgery—to surgery centers at a cost savings of about 30%. OrthoDirect connects hospitals to manufacturers to enable direct purchases of orthopedic implants and equipment.
As hospitals test new ways to reduce the costs of medical supplies, it’s expected that these strategies will go through a trial-and-error process. Even with the potential of a 50% or more markdown on the prices of implantable devices, it’s uncertain whether the rep-less model will become standard. “It’s not ‘Death of a Salesman,’ ” said Rick Ferreira, who serves on the board of Flower Orthopedics.
Not yet, anyway.

This article appears in Outpatient Surgery Magazine
Aug 28, 2014
5 good reasons to partner with these physician extenders.
Surgical first assistants (SFAs) set up my instruments, communicate my needs to the surgical team and anticipate my every move during procedures, which lets me focus more of my attention on the intricacies of surgery. With an SFA by my side providing advanced, hands-on support, I’m able to reduce my procedure time and increase my procedure volume. My outcomes are better, too. Here are 5 key benefits to working with SFAs.
1. Greater efficiency
Clearly your surgeons and staff can successfully perform the procedures you host. But are they performing them as efficiently as possible?
I’m a busy general and vascular surgeon who operates in hospitals and surgery centers in St. Petersburg, Fla. I need to perform efficient surgeries to keep up with my high-volume caseload. SFAs who are familiar with how I work and what I need help me perform up to 17 cases a day and nearly 1,000 procedures a year. They anticipate the next step in procedures and have needed equipment primed and ready to place in my hand.
SFAs also close cases for me — I complete abdominal wall closures, but they close superficial skin layers — which lets me turn my attention to completing paperwork and checking on the next case’s patient. I’m able to complete carotid atherectomies in about 30 minutes, open abdominal aortic aneurysms in an hour, gallbladders in 10 to 15 minutes and hernia repairs in about 20 minutes. I run a very efficient OR, thanks to the pace SFAs help me maintain.
2. Increased case volume
Surgeons who work with SFAs can increase their elective case volume. We’re very restrictive in many of the ways we’re reimbursed, so streamlining the repetitive aspects of surgery helps generate higher volume and increases revenue. It becomes a self-fulfilling prophecy: Surgeons who produce more volume get more surgical time from facilities — at one of my hospitals I’ve had 2 ORs running every Wednesday for the past 6 years because I’ve filled the rooms consistently — letting them further increase their volume of revenue-generating cases. It’s a win-win for surgeons and facility administrators.
3. Better pre-op prep
Because I work in several facilities, SFAs help prepare the ORs and prep the surgical team about my specific needs and preferred techniques before I arrive to operate. Working with SFAs also means I don’t have to acclimate staff to how I work, which can be a slow laborious process every time I work in a new facility. Because SFAs understand and communicate my needs, I can hit the ground running, regardless of where I’m operating. SFAs are also familiar with how to set up a back table for my particular aortogram procedures, which to be honest, I have little knowledge about. I’m barely involved in the mechanics of getting a room organized, so when I arrive, the team is often ready to go. It’s a more efficient process.
4. Improved communication
In larger facilities, it’s unlikely the same nurses cover every case performed by individual physicians. They likely work procedures done 3 different ways by 3 different doctors. SFAs bridge the communication gap between surgeons and surgical teams. They’re extremely familiar with what surgeons need and how they operate, and they’re in the OR before and after each case to help expedite the set up and turnover of rooms. It’s an indirect way SFAs improve communication between surgeons and staff. That’s not necessarily what they’re there to do, but it’s a beneficial byproduct.
5. Versatile help
I’ve worked with surgeons serving as first assistants, but they don’t make the best helpers. They tend to have an urge to perform procedures themselves or have ideas as to how it
could be done better and aren’t as willing or able as SFAs to adapt to my style.
Some surgeons like to hire their own SFAs. There are definite advantages to doing so, but larger services (intralign.com, for example) let surgeons pick and choose among several SFAs who are expert in different clinical areas and have different working styles. I team with SFAs who are very efficient and very fast, but not every physician is interested in working at that pace. Services can provide SFAs that match surgeons’ clinical requirements.
I’ve worked with 16 different service-provided SFAs — nearly all have been physician assistants — since 2009. They have expertise in a wide variety of specialties, so I’m able to work with someone who’s trained in the specific cases I perform. If I were to hire SFAs on my own, it’s highly unlikely they’d have the versatility to meet my various clinical needs.
Surgeons without the significant volume needed to pay for an SFA on their own can partner with a service and still enjoy the benefits. And even if surgeons have the volume to pay for a personal SFA who might be expert is several facets of their practice, it’s doubtful they’ll end up with an assistant who’ll be able to cover every procedure they perform. Plus, if surgeons work with someone from a service who’s not a good match, they can easily find a better fit. In contrast, surgeons who hire SFAs on their own might end up in an endless cycle of hiring and firing until they find the perfect partner.