Optimizing Orthopaedic Trauma Implant Pricing Through a Data-Driven and Surgeon-Integrated Approach.

OBJECTIVE: To determine whether market-based pricing could be coupled with surgeon integration into negotiation strategies to achieve lower pricing levels for orthopaedic trauma implants. A secondary aim was to identify specific types of implants that may offer larger opportunities for cost savings. METHODS: Market pricing levels were reviewed from 2 industry implant databases. This information was used by surgeons and supply chain management at our institution to select appropriate target pricing levels (25th percentile) for commonly used orthopaedic trauma implants. Target price values were provided to the existing 12 vendors used by our institution with a clear expectation that vendors meet these thresholds. RESULTS: Benchmark modeling projected a potential savings of 20.0% over our prior annual spend on trauma implants. After 2 rounds of negotiation, savings amounted to 23.0% of prior annual spend. Total savings exceeded 1,000,000 USD with 11 of 12 vendors (91.7%) offering net savings. Total percent savings were highest for external fixators, drill bits, and K-wires. Plates and screws comprised the greatest proportion of our prior annual spend and achieved similar savings. CONCLUSION: A surgeon and supply chain coordinated effort led to major cost savings without a need for consolidation of vendors. LEVEL OF EVIDENCE: Economic Level IV. See Instructions for Authors for a complete description of levels of evidence.

A Stepwise Replicable Approach to Negotiating Value-driven Supply Chain Contracts for Orthobiologics.

INTRODUCTION: Orthobiologics are increasingly used to augment healing of tissues. Despite growing demand for orthobiologic products, many health systems do not enjoy substantial savings expected with high-volume purchases. The primary goal of this study was to evaluate an institutional program designed to (1) prioritize high-value orthobiologics and (2) incentivize vendor participation in value-driven contractual programs. METHODS: A three-step approach was used to reduce costs through optimization of orthobiologics supply chain. First, surgeons with orthobiologics expertise were engaged in key supply chain purchasing decisions. Second, eight orthobiologics formulary categories were defined. Capitated pricing expectations were established for each product category. Capitated pricing expectations were established for each product using institutional invoice data and market pricing data. In comparison with similar institutions, products offered by multiple vendors were priced at a lower benchmark (10th percentile of market price) than more rare products priced at the 25th percentile of the market price. Pricing expectations were transparent to vendors. Third, a competitive bidding process required vendors to submit pricing proposals for products. Clinicians and supply chain leaders jointly awarded contracts to vendors that met pricing expectations. RESULTS: Compared with our projected estimate of $423,946 savings using capitated product prices, our actual annual savings was $542,216. Seventy-nine percent of savings came from allograft products. Although the number of total vendors decreased from 14 to 11, each of the nine returning vendors received a larger, three-year institutional contract. Average pricing decreased across seven of the eight formulary categories. DISCUSSION: This study demonstrates a three-step replicable approach to increase institutional savings for orthobiologic products, engaging clinician experts, and strengthening relationships with select vendors. Vendor consolidation permits a symbiotic win-win relationship: Health systems achieve increased value by reducing unnecessary complexity of multiple contracts, and vendors obtain larger contracts with increased market share. LEVEL OF EVIDENCE: Level IV study.

Does healthcare system device volume correlate with price paid for spinal implants: a cross-sectional analysis of a national purchasing database.

OBJECTIVES: Amid continuously rising US healthcare costs, particularly for inpatient and surgical services, strategies to more effectively manage supply chain expenses are urgently necessary. Across industries, the 'economy of scale' principle indicates that larger purchasing volumes should correspond to lower prices due to 'bulk discounts'. Even as such advantages of scale have driven health system mergers in the USA, it is not clear whether they are being achieved, including for specialised products like surgical implants which may be more vulnerable to cost inefficiency. The objective of this observational cross-sectional study was to investigate whether purchasing volumes for spinal implants was correlated with price paid. SETTING: USA. PARTICIPANTS: Market data based on pricing levels for spine implants were reviewed from industry implant price databases. Filters were applied to narrow the sample to include comparable institutions based on procedural volume, patient characteristics and geographical considerations. Information on the attributes of 619 health systems representing 12 471 provider locations was derived from national databases and analytics platforms. PRIMARY OUTCOME MEASURE: Institution-specific price index paid for spinal implants, normalised to the national average price point achieved. RESULTS: A Spearman's correlation test indicated a weak relationship between purchasing volume and price index paid (ρ=-0.35, p<0.001). Multivariable linear regression adjusting for institutional characteristics including type of hospital, accountable care organisation status, payer-mix, geography, number of staffed beds, number of affiliated physicians and volume of patient throughput also did not exhibit a statistically significant relationship between purchasing volume and price index performance (p=0.085). CONCLUSIONS: National supply chain data revealed that there was no significant relationship between purchasing volume and price paid by health systems for spinal implants. These findings suggest that factors other than purchasing or patient volume are responsible for setting prices paid by health systems to surgical vendors and/or larger healthcare systems are not negotiating in a way to consistently achieve optimal pricing.