The relationships between medical device manufacturers and healthcare professionals will be subject to new restrictions beginning July 1 when AdvaMed's revised Code of Ethics on Interactions with Healthcare Professionals goes into effect.
The new Code eliminates gifts to healthcare professionals, prohibits entertainment and recreation, and provides more guidance on proper consulting and royalty arrangements. These and other restrictions are designed to help eliminate even the appearance of impropriety in medical device manufacturers' interactions with healthcare professionals. In addition, the Code recommends that companies certify their compliance with the Code and AdvaMed will post contact information for the compliance officer and company compliance hotline on its Web site.
The new Code "will lead the industry to safer ground," says Andrew Van Haute, Esq., assistant general counsel for AdvaMed. "(The changes are) really about making sure there is not an inappropriate cloud over a decision."
The revised Code provides a reference for all medical device manufacturers and gives them a sense of general practices in the industry, including safeguards that mitigate risk under the Anti-kickback Statute, says Gina M. Cavalier, Esq., a partner in Reed Smith's Washington D.C. office.
"Release of the new Code draws attention to compliance overall and presents an opportunity for companies to revisit their compliance policies and procedures, potentially update them, enhance them, and that type of exercise is always helpful," says Cavalier.
Overview of the Code
The revised AdvaMed Code:
Prohibits providing entertainment or recreation to healthcare professionals
Prohibit gifts of any type, including all non-educational branded promotional items
Provides guidelines for royalty agreements between medical device manufacturers and healthcare professionals
Sets parameters for providing demonstration and evaluation products
Addresses the provision of objective reimbursement, coverage, and health economics information to healthcare professionals
Includes a section under which a list of companies that certify their adoption of the Code will be available for public review on AdvaMed's Web site
Background on the Code
A large work group of people from member companies from almost every sector of the industry put together the revision, according to Van Haute. The revision process began in March 2008 and AdvaMed released the revisions on December 18.
The medical device industry has come under increasing scrutiny from federal prosecutors and government regulators in recent years. That scrutiny, including proposed legislation mandating the disclosure of payments to healthcare professionals, informed the direction AdvaMed took with the revisions and the decisions it made, according to Van Haute.
"I think the industry as a whole has a desire to demonstrate their commitment to ethical business practices," Cavalier adds. "While outside forces—and the current enforcement environment—impact this, there really is a genuine desire in the industry to showcase compliance efforts and a dedication to ensuring ethical interactions with physicians."
AdvaMed Code v. PhRMA Code
Some of the revisions echo those in the revised Pharmaceutical Research and Manufacturers of America (PhRMA) Code on Interactions with Healthcare Professionals, which went into effect this month., while others are specific to the medical device industry.
"We knew we were going to land in similar places to where PhRMA did in some of the sections," says Van Haute. "We did really think that where it was appropriate there was good reason to align with PhRMA, but we didn't take a lockstep view because there are ways that medical device companies' interactions with healthcare professionals are different from pharmaceutical interactions."
Greg Levine, Esq., a partner in Ropes and Gray's Washington D.C. office, believes some of the most important revisions are those that adopt PhRMA's position. Levine cited the ban on providing entertainment and recreational activities to healthcare professionals, as well as the prohibition on providing branded, non-educational items as two key areas taken from the PhRMA Code.
"Another area that is analogous to the changes in the PhRMA Code is the focus on not just having a paper policy, but complying with it," Levine says. "Both revised codes have provisions that try to foster compliance with the compliance programs and policies companies have established."
The ways in which medical device sales representatives interact with healthcare professionals differ from those of pharmaceutical sales representatives. AdvaMed tried to emphasize those differences in the Code's preamble, according to Van Haute. Healthcare professionals often need training on new or complex medical technologies and medical device sales representatives are often the ones providing that training.
AdvaMed also included additional information on when royalty payments are appropriate, but Levine believes this will continue to be a challenging area for device manufacturers.
"The royalty provision creates some kind of a baseline to work from, but how you actually implement them in practice, determining whether a particular royalty payment to a particular doctor for a particular service is acceptable, is something that is going to be very challenging to implement as it is today," Levine says.
AdvaMed also added a section on demonstration and evaluation products in part because of questions it received from member companies over the years, Van Haute says. The Code states allowing healthcare professionals to evaluate devices at no charge can benefit patients. Healthcare professionals can assess the appropriate use and functionality of a product and determine whether to use it. Evaluation and demonstration devices can be either single use devices or capital equipment.
"The Code section on evaluation and demonstration products is one good example of where the device industry is different from the pharmaceutical industry," Cavalier says. "This section of the AdvaMed Code recognizes what is a common industry practice and distills practical guidance for device manufacturers."
Compliance with the Code
Levine points out that the Code still contains exceptions and gray areas, which remain open to interpretation by individual companies. For example, the revised Code states that a meal provided in association with an educational or informational presentation may be provided in an office setting. The Code also describes situations in which the in-office setting may not be feasible, such as when the medical technology cannot easily be transported to the healthcare professional's place of business. Determining whether a device is easily transportable is naturally open to interpretation.
"In borderline cases, you could even come to a different conclusion based on the physical strength of the person who would be carrying the device," says Levine.
AdvaMed plans to work with member companies to provide training on the revised Code, Van Haute says. When the Code was last updated five years ago, AdvaMed produced a trifold brochure outlining all of the changes and is currently working to produce something similar.
Signing on to the Code helps companies in a number of ways, Cavalier says. Adherence to the Code lowers a company's risk under the Anti-kickback Statute. It is also a good overall ethical business practice. The Code will also help companies comply with state laws in California and Nevada. The July 1 implementation date also coincides with Massachusetts' deadline for certifying companies have a compliance program.
"When companies focus on compliance up front, it avoids potential problems down the road and we always think that is the best approach," Cavalier says.
This story first appeared as a breaking news item from the editors of Device Regulation Alert, a weekly e-newsletter from HCPro, Inc.
The business of healthcare will be focused on streamlining and cost containment in 2009, experts predict. Because so many Americans get their medical care through employer-supplied health plans, the industry has been stung by the ongoing recession and is scrambling to stay ahead of its problems. As a result, employers are likely to become more, not less, involved in healthcare policy debates this year, predicted Becky Cherney, chief executive of the Orlando-based Florida Health Care Coalition.
Birmingham, AL-based HealthSouth Corp. said it expects to add 65 to 75 beds at its hospitals in 2009. The inpatient rehabilitation provider plans to expand organically in 2009, according to Securities and Exchange Commission filings. HealthSouth operates 93 rehabilitation hospitals and outpatient departments across the nation.
The daily news is destroying the myth that hospitals are recession-proof. Yes, there is job growth, even during tough times. The Bureau of Labor Statistics reports that 372,000 healthcare jobs were created in 2008.
If your hospital has recently undergone layoffs, don't expect "surviving" employees to work harder or pick up the slack out of sheer gratitude for not getting canned. Washington, DC-based consultants Leadership IQ found in a new survey that 74% of 4,172 surviving workers at 318 companies that had undergone layoffs in the last six months reported a drop in productivity. In addition, 69% of those surveyed survivors say the quality of their company's product or service has slipped since the layoffs; 87% say they are less likely to recommend their organization as a good place to work; 64% say the productivity of their colleagues has declined; 81% say customer service has declined; 77% say they see more errors; and 61% say they believe their company's prospects will worsen.
When asked to describe their feelings following the layoffs, the LIQ survey found that "guilt," "anxiety," and "anger," were the most commonly used nouns. "This study shatters a few myths," says Mark Murphy, chairman of LIQ. "Most CEOs and organizations have operated under the idea that if you lay some people off the people who remain would be grateful that they still had a job and would double their efforts."
Murphy says most organizations do a pretty good job of softening the landing for laid-off employees, but they're not so quick to assuage the fears of the employees who remain. "What gets missed is that when an organization does a layoff there is a huge impact on the folks who remain," he says. "They are feeling anxiety and anger and wondering 'if my good friend got laid off do I believe that this is the end or am I a couple months away from being in the same boat?'"
That's particularly true of hospitals because most hospital administrators have no experience with the agonizing process. A botched layoff, however, can have tremendous impact on a hospital, where quality and productivity lapses are measured in lost lives and other potentially catastrophic health outcomes.
"Hospital employees have unbelievably long memories," Murphy says. "A one-time mistake where they believe the organization's priorities are not in the right place, and they will harbor resentment for decades to come."
So, what do you do?
1. Be honest, accessible, candid, compassionate, and as transparent as possible with surviving employees, especially in the anxious days immediately after the layoffs. "The biggest thing leaders have to do after a layoff is engage," he says. "Too many feel shamed or embarrassed or nervous, and they hide out in the executive suite. You can't pretend the layoffs didn't take place."
2. The LIQ survey found that workers who gave their managers high scores for visibility, approachability, and candor, also were 72% less likely to report a decline in their own productivity, and 65% less likely to report a decline in the quality of their company's product or services.
That means that front-line managers must be briefed before the layoffs are announced, so they can address the barrage of questions they will face from the workers they supervise. "Otherwise you will waste any potential cost savings from the layoff on lost productivity, quality problems and service breakdowns," Murphy says.
3. In the days immediately after the layoffs, schedule group meetings with your employees. Let them vent, but structure the meeting for more than a carping session. Employees aren't necessarily looking for the feel-good answer. They're looking for the truth. "Everybody recognizes now that these are tough times," Murphy says. "What has always bugged them is transparency. They want to know how the leaders made the decision. How did they come up with that particular plan? What are the metrics they are going to use to determine if another layoff is necessary? Help them understand."
Schedule meetings every month or two to update employees, depending upon the pace of developments at your hospital.
4. Don't leave 100% of the workload for 90% of the surviving staff. "That's really where quality suffers," Murphy says. "You have to get rid of the waste and efficiencies, even if it's only something symbolic like getting rid of a particularly inefficient meeting."
Solicit employee suggestions about "dehassling" their jobs and eliminating waste. "We're not talking about throwing out insurance forms or government regulations, but it may be the 20 minutes they spend looking for an IV pole," Murphy says. "When employees are engaged in helping solve the problems it gets them through this survivor guilt."
5. Finally, if you're planning capital improvements in the midst of layoffs, you'd better be ready to either justify them, or cancel them if you can't. "If you can make the case that you have to upgrade the surgical suite because it will have a direct impact on the patient experience and safety, you're in great shape," Murphy says. "But if the argument is 'we want a new atrium or fish tanks in the lobby," that's a little dicier."
John Commins is the human resources and community and rural hospitals editor with HealthLeaders Media. He can be reached at jcommins@healthleadersmedia.com.
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While many hospitals have long operated with slim margins and careful expense management, today's worldwide financial crisis raises the pressures to unprecedented levels. In the long term, hospitals may need to restructure their financing mechanisms and capital plans, but new and creative ways to manage expenses can help to weather the storm. Short-term measures to reduce discretionary and supply spending and closely monitor labor productivity can bring more money to the bottom line, and counteract some of the effects of the tempest brewing around us all.
Approaching the high-water mark
Hospitals already face limited access to and increased costs of capital, along with decreased returns on investments. One of our hospital clients has seen its interest rate on short-term demand notes quadruple, moving from less than 2% to almost 8% in fewer than three weeks. This challenge to financing comes at a time when many hospitals have significant building and renovation projects in process. Acute-care projects, including new hospitals, expansions, and renovations, exceeded $251 billion nationwide last year.
Healthcare providers must also deal with the same declines in investment income that all of us face in our individual portfolios. But given the "trickle down" payment structure of healthcare, many providers must also brace for payment delays from state-funded programs and from insurers seeking to retain short-term cash.
Providers are also concerned about patients delaying treatments and thereby increasing their severity of illness and cost of care. A recent survey of 112 hospitals by Citi Investment Research found September 2008 inpatient hospital admissions to be down by 2% to 3% from 2007. Suppliers are also passing on cost increases, and many hospitals are bracing for a reduction in charitable giving as philanthropies also struggle with a decreased return on investment. But the biggest impact may stem from debt financing bonds, which require that certain performance targets be met. Decreases in revenues and increases in costs may call into play these debt covenant ratios and trigger potentially draconian measures by bondholders to assure financial viability.
Seek new sources of savings, with an eye on productivity
While one obvious solution is to reduce the financial burden by holding off on major capital projects, you might try a creative look at expense and productivity management. In times of struggle, labor costs often take top priority. But a recent analysis of expense data found new and surprising opportunities to save.
We performed a detailed analysis of three years of expense data from recent client engagements to uncover the real trouble spots in expense management. Our analysis showed that salaries, benefits, and supplies, as a proportion of total expenses, decreased or remained steady, while discretionary spending crept upward. When each expense category is reviewed against the number of patient discharges, the compound annual growth rate (CAGR) puts the spotlight again on discretionary spending.
Discretionary spending can represent a "black hole" for hospitals, as data is limited on the exact nature of some expenses. But hospitals that clarify program-specific costs by category find themselves better equipped to determine the strategic importance of each program and their related costs.
Hospitals should trend spending by account over time, determining which accounts have experienced the greatest increases and targeting the understanding of the decisions that drove those increases. In addition, hospitals can review comparative data from hospitals of similar size and complexity, and use this analysis to trigger discussions about the changes needed to reduce costs further.
Supply costs should not be overlooked, even though our analyses showed them to be a steady cost. A client recently achieved $300,000 in savings by eliminating one-time use disposable supplies. While savings was the goal, the staff also appreciated the reduction of the facility's environmental impact.
In addition to expense management, many hospitals have benefited from increased attention to productivity. By monitoring the variable workload standard of each department on a bi-weekly basis, leadership can get a better grasp on demand.
Department managers should be accountable for flexing staffing to meet the variable workload demand, and senior leadership should review all vacant positions with an eye toward eliminating or redistributing the workload.
While the upheaval in the financial markets has created a crisis for hospitals by limiting access to capital, decreasing investment income, and increasing operating costs, hospitals can be equipped to weather the storm. By addressing the full array of operating expenses on the income statements—and looking beyond the usual saving suspects—hospitals can better prepare the bottom line for changes that they cannot control.
Mary Ann Holt, RN, MSN, is a senior partner at IMA Consulting with more than 25 years experience in healthcare management and consulting. She can be reached at maholt@ima-consulting.com.
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A big pay boost proposal for Salinas, CA-based Natividad Medical Center's top administrator received a thumbs-up from the hospital's trustees during a special meeting. The hospital board unanimously approved a recommendation to increase the annual salary range of the Natividad Chief Executive Officer by nearly two-thirds, not counting benefits, to between $283,500 and $387,000. The recommendation seeks smaller pay boosts for other top hospital administrators, and would cost the hospital nearly $490,000 more this fiscal year alone. Supervisors will have the final say on the proposed pay boost.
The first class of the Michigan-based Henry Ford Health System's nursing recruitment program for displaced auto workers is underway.
In partnership with Oakland University, Henry Ford developed the program to assist those seeking a career change and to address the nursing shortage. Oakland University offered places for up to 100 displaced auto workers to qualify for a pre-nursing program. Those who completed the prerequisites and who met the grade requirements then started the first nursing class in September at Henry Ford. Fifty-one students are enrolled in the program.
Jack Waterman, DO, a nephrologist, has been elected to a two-year terms as chief of medical staff by his medical colleagues at Jupiter Medical Center. He succeeds Chester Maxsom, MD, a gastroenterologist.
Terry Newmyer has been named CEO of both the St. Helena Hospital in Napa County, and the St. Helena Center for Behavioral Health in Vallejo, effective in early February. Newmyer is currently the senior vice president for business development at Adventist Health System's Florida Hospital Orlando. He replaces JoAline Olson, who has been CEO at St. Helena for the past three years.
Southwest General Hospital promoted from within and has named Sergio Farrell as its new CEO. Since 2007, Farrell has served as CFO at the 327-bed hospital. Before joining Southwest General, Farrell was senior vice president and chief financial officer at Grady Health System in Atlanta.
