Alan B. Kravitz, MD, a general surgeon and investor at Montgomery Surgery Center in Rockville, Md., and an advisor for Surgical Care Affiliates' supply chain team, discusses seven ways to reduce the costs of surgical supplies.
1. Forget about being loyal to vendors. Don't keep on being loyal to familiar vendors when other vendors may be offering a comparable product at much lower prices. "Your loyalty is factored into the higher price," Dr. Kravitz says. "In effect, you are paying extra to be loyal." One way vendors preserve loyalty is by sending a representative around to schmooze with staff, but then that rep's salary becomes part of the price. "You don't really need sales reps for a lot of minor supply items," he says. "If you see these people walking down your hallway, it could be time to switch."
2. Start Googling. Dr. Kravitz was unhappy about buying sutures from Ethicon, which dominates the market and was tying its discounts to purchase of a relatively high volume of products. "Ethicon encouraged compliance without deviation," he says. Simply by searching Google for companies selling sutures, Dr. Kravitz found B. Braun was offering markedly less expensive sutures to build its U.S. base. "B. Braun has a very small presence here and wants to expand," he says. "Although it commands a significant part of the European suture market, B. Braun is an unfamiliar player in the suture market here."
By switching its suture vendors from Ethicon to B. Braun, Montgomery Surgery Center will save thousands of dollars a year, and if all centers within Surgical Care Affiliates made the switch, they could potentially save hundreds of thousands of dollars a year just for sutures, Dr. Kravitz says. "The price of sutures doesn't need to be high," he says. "After all, it's just a piece of string, without any moving parts." Other products are also basically commodities that do not require high prices.
3. Go on eBay to buy supplies. Dr. Kravitz has personally gone on eBay and bought unopened supplies at about one-third the regular price. For example, he bought mesh from hospitals and secondary suppliers in packages that were nearing their expiration date but still had enough time for use. "The mesh may have two months left before it expired, which is enough for me," he says.
4. Management companies can help. Montgomery Surgery Center can buy supplies alone or through Surgical Care Affiliates. "One surgery center does not have the leverage to command a large volume discount with most payors, but SCA has the volume to negotiate larger discounts for all its centers." Dr. Kravitz says. Representing the combined volume of supplies for all its surgery centers, "SCA has been successful soliciting proposals from vendors to get a good price," he says.
5. Focus on high-volume items first. Dr. Kravitz decided to research prices for polypropylene mesh for hernia surgery because it is one of his highest-volume products. "I need a lot of mesh because I do a lot of hernias," he says. "In one day I can have 7-8 hernia operations, so a savings of even $50 a case can add up." Based on price, Montgomery Surgery Center changed mesh vendors from Bard to Atrium, and it may eventually move on to yet another vendor, he says. "By keeping track of the offers and reacting to them, we've been able to save many thousands of dollars on mesh for hernia surgery," Dr. Kravitz says. "After all, mesh is a piece of plastic screen. It can't cost very much to make."
6. Physicians can promote awareness. One on-staff physician like Dr. Kravitz can do a lot to promote awareness among colleagues about the cost of supplies, he says. Surgeons using less costly products, he says, should be asking peers with higher-cost products, "Is there something the rest of us don't understand about why you're using this item?"
It's not so easy for some physicians to come around. "The hard part is making the pitch to physicians," Dr. Kravitz says. "If they aren't investors, they may not care if the center is profitable or not." Even some physician-investors can be holdouts. Often enough, higher-cost physicians succumb to peer pressure, but "sometimes you just have to suck it up and just give them what they want," he says.
7. Compile data on supply ordering. Use practice management software to crunch data on supply orders to show payors what it costs to provide a procedure and to show physicians how the cost of their supplies compares with that of their colleagues. "When you present surgeons with a list itemizing what they are using, it changes their perspective," Dr. Kravitz says.
To compile data for payors, Surgical Care Affiliates calculates benchmarks on the cost for each case at its ASCs. "A high cost per case means we have to find a way to lower the cost or raise the reimbursement," Dr. Kravitz says. For example, SCA used data on the cost of laparoscopic hernia surgery to show its ASCs needed higher reimbursements. "We presented this information to the payor and received dramatically higher reimbursements," he says.
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