Physician Preference Item Customization is More Important Than Ever
We all realize that our physician preference items (PPI) can represent as much as 40% of our supply spend, but despite our industry’s best efforts, over the last few years to hold our PPI costs down, they are still going up every year — not down.
The reason for this PPI inflationary spiral every year, even though most hospitals have slowed their PPI price increases, is two fold as I see it. The first cause of this PPI cost proliferation is that new technology is being introduced into our healthcare organizations faster than we can measure their efficacy. The second reason is that we aren’t doing a good enough job of “value justifying” what our surgeons are implanting.
What can you do about this? The first solution is very straight forward, every hospital, system or IDN needs to have a technology value analysis committee, with broad and deep physician representation, to evaluate and then select the most effective new technology that makes economic sense. Healthcare organizations that have followed this path have greatly reduced costly mistakes that are made when one or two individuals make — behind closed doors –these decisions on their high-cost/high-impact technology purchases for their healthcare organization.
The second answer to this challenge, and the most important in my opinion, is for you to CUSTOMIZE all of your PPI implants to the exact medical indications of all your patients. I can say this with full authority, since we have observed over the last 10 years that most hospitals are losing millions of dollars a year because their surgeons are selecting the highest cost implants without any regard to what is “medically indicated” for their patients. It’s like buying a thorough bread race horse that you only ride for weekend recreation. What a waste of money!
We can only assume that surgeons who insist on implanting these value mismatches are ignoring their patient’s medical indications by selecting their implants either out of habit, due to a sales rep influences or a lack of knowledge. This situation, we have found, can easily be remedied if a hospital employs a “PPI Medical Indication Checklist” to select the right implant for their patients.
To recap, our PPIs are the fastest growing and largest expense category in our supply spend and need to be controlled in an organized, systematic and scientific manner. Just ratcheting down your price at the pump won’t get the job done efficiently or effectively.
On the other hand, if you employ a filter (value analysis technology committee) to hold back your unnecessary and/or unproven technology expenditures and then customize your PPIs to their exact medically indications you will be going a long way to finally bending the curve on these considered necessary, but ultra expensive medical devices.
Incentivize Your Physicians to Save on the Cheap
There has been a lot written about “Pay for Performance” (PFP) programs to incentivize your physicians to save, but very little has been written about how successful it can be while spending very little money.
That’s what I’m hearing from the marketplace; it doesn’t take a lot of money to incentivize your doctors to save. All you need to do is to find out what products, equipment, training, technology, staff, etc., that they desire to do their work more effectively and productively, but don’t have these resources now. Then offer to purchase or obtain one or more of these “wish lists” items as an inducement for them to save money for your hospital, system or IDN on a particular initiative that you are proposing, such as, orthopedics, neurosurgery, cardiology, etc.
The operative words here are that these incentives must effectively and productively improve your hospitals operations. You don’t want to give away incentives that are just NICE to have but are not required. They must actually be beneficial to your hospital and your physicians to be a win-win scenario for all involved parties.
Naturally, these “Pay for Performance” programs can’t be arbitrary, ill-defined or unverifiable. To the contrary, they must be highly organized, truthfully measured and value-based. For example, you might find that your cardiologists have been requesting a new piece of equipment in their capital budget valued at $28,396, but it has been denied for years. Your task then is to have your cardiologist agree — in writing — that they will be required to save three times ($85,188) the value of this equipment by assisting you in the evaluation of your hospital’s pacemakers and difibrillator’s cost, product mix, and applicability for this new equipment to be approved for purchase.
Considering you would have a minimum return-on-investment for your hospital of 200% for this hypothetical project, I believe that this is what I would call “savings on the cheap” when you consider doing nothing is costing your hospital hundreds of thousands of dollars a year in lost opportunity costs.
So don’t be apprehensive about incentivizing your physicians to save (it’s a good business practice), since it is one of the best investments you can make with your hospital’s money. Keep in mind, your physicians have no incentive to save money today — unless you give them the incentive to do so!
