The world of spine implants is highly complex and uniquely challenging for ASC administrators and materials managers.
Maximizing savings requires a combination of product and clinical expertise, understanding the nuances among vast number of implant vendors, balancing the sensitive surgeon-rep relationship, factoring in payor reimbursement contracts, and more.
But, if you are successful in leveraging all these skills, it's possible to drive tens, if not hundreds, of thousands of dollars in savings to a spine ASC's bottom line. Here are six steps to follow to negotiate significantly lower prices on spinal implants.
1. Ignore list prices. Negotiating discounts based on percentages of list price often makes sense for orthopedic vendors. But list price is meaningless in spine. One company's list price for, say, a cervical cage may be twice as high as a comparable cervical cage from another company. High list prices allow vendors to try to impress you with a huge "percent off list" discount, but still achieve high pricing. Instead, establish capitated pricing for product categories (e.g., PEEK cervical cages, one-level cervical plates) and require the vendors to meet those price points. You'll likely find that the resulting percentages-off-list are all over the board, even within the same vendor's products.
2. Factor in disposable costs. Disposables supplied by implant vendors can comprise as much as one-third of their total charges in a lumbar fusion procedure. Disposable costs are highly variable from one vendor to the next, and challenging to put in predefined product categories. Ask reps for "all in" procedure costs — including disposables — to better analyze and compare pricing. If many of your payor contracts have implant carve-outs, unreimbursed disposable costs may be the most important factor in your negotiations.
3. Don't rely on GPO pricing. GPOs must establish pricing that virtually every vendor will meet for any facility across the country. GPO pricing — especially for spinal implants — may not be bad, but a savvy negotiator can almost always achieve a better price point through a local contract. Suppliers will almost always agree to lower pricing at your facility — it's a relatively small hit to their bottom line as compared to lowering prices across an entire GPO.
4. Challenge "premium product" claims. Sales reps have the job of trying to explain why their product is better than the competition. So it's only natural that they will claim their product is deserving of premium pricing. But the vast majority of spinal implants on the market are commoditized products that, at best, are slight variations of each other. Ask if the product was cleared by the FDA via the 510(k) process (by definition, "substantially equivalent" to other products on the market); it probably was. Ask if there is prospective, peer-reviewed clinical data establishing improved outcomes for the product versus competing brands; there probably is not.
5. Get surgeon support. Surgeons are often unaware of what pricing on implants is or should be. But their support is key. Shrewd sales reps will leverage their surgeon relationships to facilitate product approval. But you must also gain surgeon support to push back on the sales reps. Provide surgeons with a simple pricing comparison for comparable products, briefly justify the price point you're targeting and ask your surgeons to tell their rep that, although they would like to use the product, it needs to be at a particular price point.
6. Solicit third-party expertise. ASCs run a lean operation, and properly planning for and successfully executing a request for proposal (RFP) process is a time-consuming process. If spine and/or orthopedic implants are a significant portion of your facility's spend, consider outsourcing the RFP process to spine implant pricing experts. Not only this will free up time for your administrative and materials management staff, but it will ensure you maximize the profit extracted from one of your biggest expense categories.
Ryan Fredricey (rfredricey@advantien.com) is chief operating officer of Advantien, an implant management company that specializes in maximizing the value of spine and orthopedic implants.
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