Orthopedic Implants and Cost Dynamics
Explore the challenges and market dynamics surrounding orthopedic implants, including pricing, vendor selection, surgeon choices, and cost implications. Learn about opportunities for cost savings and the impact of purchasing decisions on healthcare expenses.
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Presentation Transcript
Orthopedic Surgery Shouldn't Cost an Arm and a Leg!!
Topics Market Dynamics How buying decisions are made and the implications of those decisions Supply Chain/Distributor Dynamics Markups and Net Cost Identification Opportunities for Cost Savings
Key Industry Challenges Market Dynamics Medical Device Spend US demand for implantable medical devices is forecast to increase 7.7 percent annually to $52 billion in 2015. Orthopedic implants will remain the largest segment and be one of the fastest growing. $60.00 $50.00 $40.00 $30.00 Other implants expected to experience exponential growth include neurostimulators and drug implants* (widely utilized in Workers Compensation procedures) $20.00 $10.00 $- 2013 2014 2015 *Freedonia Group, Implantable Medical Devices to 2015
Vendor Selection Most implants are Physician Preference Items Fellowship Support Training Impediments to change; Relationships with sales reps, Time required to learn new systems, Little difference in outcomes for average patient population New Surgeon Acquisition Strategies New Product Hire Key Sales Rep
The Implications of Surgeon Choice Hospital/ASC responsibility to negotiate pricing, purchase, manage inventory, bill and collect for surgical implants Surgeons (vendor customer ) are detached from the financial implications of their choices (with exceptions being some physician owned facilities) This detachment can lead to vendor rep influence in the OR
Materials Management Vendor Direct Distributor Model Inventory Management Impact of GPO s
What is Cost? List Price- Highest Possible Price Point True Net Cost Discounting and Rebate Structures Markups Reimbursement Methodologies
True Cost and Reimbursement $2,450.00 $2,500.00 $1,960.00 $2,000.00 Average 3.5x Markup $1,500.00 $875.00 $700.00 $1,000.00 $500.00 $- Hospital Avg Sale Price Provider Markup Cost Plus 25% 80% of Billed Charges (PPO Rate)