Reimbursement concerns also can undercut innovation, Martin says. While Beaumont is trying to gain a niche for reverse shoulder replacement procedures because its staff includes a top specialist, the estimated $7,000 cost for the procedure is not reimbursed any differently than a less complicated $4,000 shoulder operation, he says. "CMS governs the amount of DRG [diagnosis-related group] payment. We don't get any more reimbursement for the reverse shoulder. That's a big challenge when you want to be on the leading edge of technology. A problem is that CMS reimbursement lags behind any new technology introduction. We end up paying a premium for innovation."
As orthopedic implant costs rise, hospital leaders are finding it essential to work more closely than ever with orthopedists to ensure that devices are purchased in a manner that reduces expenses, despite doctors' long-term personal preferences for certain devices, companies, or sales representatives.
"The demand for orthopedics is projected to climb at a significant rate, with the aging baby boomers," says Gary Botimer, MD, chairman of the department of orthopedic surgery at the 789-bed Loma Linda (Calif.) University Medical Center, part of Loma Linda University Health, which reported about $1.8 billion in net revenue in 2012. "The best way for hospitals to reduce costs is to follow what all other successful industries have done to provide products at affordable rates—elimination of unnecessary expenses in their processes."
Gaining physician trust isn't easy, and sometimes contentious relationships arise, but hospitals are making inroads by establishing programs that include physician leadership, negotiating discounts with implant vendors, and capitated pricing.
"One of the most important things is you want engagement and alignment of surgeons from the get-go," says Michael R. Jablonover, MD, MBA, FACP, president and CEO for the 144-licensed-bed University of Maryland Rehabilitation & Orthopaedic Institute in Woodland, just outside of Baltimore. He acknowledges the great variation in device expenditures, but emphasizes the need for multidisciplinary team approaches to properly evaluate them, including physician input. The institute is part of the University of Maryland Medical System, a 12-hospital system of academic, community, and specialty hospitals that reported $2.29 billion in net patient revenue in 2012. The hospital specializes in advanced rehabilitation services and orthopedics, such as joint replacement surgery.
As they evaluate medical devices, hospitals are weighing different options, ranging from restricting the number of implant devices considered and ranges of acceptable costs, says Fred McQueary, MD, an orthopedic surgeon, senior vice president of clinical integration for Mercy health system, and president of the system's Mercy Clinic–North Central Communities. Mercy health system has operating
revenue of $4.6 billion.
Mercy's supply chain company, ROi, plays a role in improving relationships and reducing costs for implant devices, McQueary says. "There is a huge benefit to make these chain links tighter."
Beaumont Health System developed an implant purchasing management program "to track our implants by patient, by product, and by physician, for any moment in time," says Martin. "I know by end of that day what is happening, and I don't have to wait a month for data."
Revision procedures are becoming more necessary with aging and replacement implants needing to be evaluated, says Alan Wilde Jr., vice president of system services for the 1,032-bed University Hospitals health system based in Cleveland.
"What's happening is the stuff we put into patients 10 or 15 years ago is wearing out. For patients who are still active in their 60s and 70s, the implants are wearing out," Wilde says.
Quality will be the ultimate determinant for orthopedic care, says Wilde. For patients, "it will be like going to a good mechanic or a bad mechanic."
By 2014, device companies will be required to collect data about payments, gifts, and other transfers of value they provide to physicians. It will give hospitals and physicians an added incentive to reduce conflicts of interest or the appearance of questionable relationships.