Key Learnings

In a flat and declining reimbursement environment you must learn to manage your costs…

What are you doing to lower your costs 60-80%?

  1. The US Medicare and Medicaid system will be out of money to fund the healthcare needs for the emerging baby-boomer generation by 2017… Medicare is broke!
  2. Hospitals cannot sustain their overhead on flat, declining reimbursement rates.
  3. Reimbursement payments to surgeons have declined, while commissions paid to implant sales people have increased.
  4. Implant costs are as much as 50-80% of the total Medicare hospital reimbursement (DRG).
  5. The pressure on Providers is growing; third party buyers (like Blue Cross/Blue Shield) are motivating policyholders to go to low cost facilities.
  6. Provider must: 
    • Be willing to remove reps from the Operating Room.
    • Be willing to purchase products and no longer take consigned inventory.
    • They need to think like an owner verses a renter…
    • Take the responsibility of ownership
  7. Hospital leadership and surgeons must understand and accept the fact that many implants used today are quite similar.  Functionally speaking, most of the products have not changed significantly for some time, so we were able to demonstrate their equivalency easily.  We will refer to this as stable technologies.
  8. The leaders of tomorrow need to demonstrate “early adopter” tendencies.  The supply chain shift is already underway, the present model is NOT sustainable.
  9. Leaders recognize sales representatives are not necessary to support stable technology products.  They understand the cost of traditional representatives’ support paid for in the higher price of the implant.  Further, they are aware that if they are committed to reducing implant costs, they must begin to do the work that previously the sales reps had done.
  10. Hospital leadership must develop surgeon alignment.  This is critical for a successful transition.
  11. Providers using alternative suppliers should insist on purchasing direct and not pay middlemen commissions.
  12. Providers, who are willing to change, can make Medicare cases profitable and not compromise quality or service.
  13. Facilities wanting to take back cost control in managing their orthopedic service must be prepared to:
    • Train their OR staff to do tasks currently performed by sales reps.  Service and support will not be compromised with a fully trained, qualified staff.
    • Consider purchasing assets rather than relying on other companies to consign the instruments and implants.  A provider has the most control when they are both owner and manager of assets.

The Market