Richard A. Kube, MD, CEO of Prairie Spine & Pain Institute in Peoria, Ill., explains how commodity implants, which are simpler and less expensive than premium implants, can yield big savings for orthopedic and spine surgery.
1. Costs can be cut in half. Prices of commodity implants are typically less than 50 percent of the average market cost of premium implants. For example, the commodity implant for a one-level lumbar fusion costs $2,500-$3,000, compared with $14,000-$15,000 for full invoice price for the premium version for a savings of $12,000 on one case. Even with typical hospital and provider discounts, the surgeon can still save $5,000-$7,000 per case. "A spine surgeon who uses commodity implants for most of his surgeries could realize a half million dollars in savings a year," Dr. Kube says.
2. Many procedures can benefit. The commodity implant can be used for a variety of cases, such as one-level lumbar fusion, basic rotator cuff repair or a basic suture anchor. But complex cases, such as those with a spinal deformity or massive rotator cuff tear, which require versatility in the OR, will likely need premium vendors.
3. Why price can be so low. Costs are reduced because the implant set is limited to standard sizes and tools, the sales rep has been eliminated and the ASC is buying the inventory rather than invoicing it.
4. Simpler versions involved. Many surgery cases only use a small portion of the trays for a premium implant. The commodity Implant comes with some basic elements and a couple of back-up options in the box. "The cost drops because you are not paying for 50 types of hooks and screws or what have you," Dr. Kube says.
5. No sales reps take part. Makers of these implants have eliminated the costs of sales reps, who are present for every case involving premium implants. The commodity implant makers offer factory-direct distribution, which is much less costly. "Elimination of the sales force is the biggest reason for the discount," Dr. Kube says.
6. Cash payments lower the costs. While sales reps for premium implants send an invoice to be paid in 30-90 days, the commodity device company generally requires cash on delivery, which allows for a discount. "The more money that can be paid up front, the heavier the discount is," Dr. Kube says.
7. Volume purchasing helps, too. Savings rise for surgeons who order commodity implants in bulk. What constitutes a bulk purchase and the amount of the discount are different for each company.
8. A big advantage for ambulatory surgery centers. The low cost of these implants allow ASCs cover a greater variety of procedures, adding to case volume. Procedures that were once too costly to perform in an ASC are now feasible. Furthermore, a physician in an ASC has more ability than a hospital-based physician to hold employees accountable for monitoring inventory, which is essential for commodity implants.
9. Hospitals may use them, too. Commodity implants can also be useful in hospitals. "Surgeons who use the implant can propose sharing the savings in a gainsharing agreement with the hospital," Dr. Kube says. "Hospitals can minimize Stark and anti-kickback issues by putting the savings into a purchasing budget for devices the surgeon will use in the hospital."
10. Initial training required. Since commodity implant companies don't have sales representatives, they often send out trained technicians to assist the surgeon and his team for the first few procedures to get them started. "The surgeon pays nothing for this initial training," Dr. Kube says. "It is a service some vendors offer to get you started and verify comfort level with the product."
11. Strict inventory control required. While surgeons who use a sales rep never need to worry about inventory, because the rep brings the implants with him, commodity implants require tight inventory management. The surgeon must depend on the facility to make sure all supplies are available. "You don't want to need four screws when the back is open and find out you only have three," Dr. Kube says. To make sure the inventory is there, he suggests offering a bonus to the employee who manages the implants.
12. Same OR team needed. Since surgical techs must be proficient with commodity implants without a rep to back them up, the same team trained by the company should be involved each time. "You don't want the surgeon working with an inexperienced team or the work will be inefficient and deter usage of commodity implants," Dr. Kube says.
13. Premium makers still have a role. Since premium implants are more versatile, they will still be needed in many procedures involving deformity, revision, poor bone quality and other issues. Surgeons who have switched to commodity implants can still get cooperation from premium implant makers. "They won't turn you down," Dr. Kube says.
14. Good for a litigated case. Lower-cost implants are a good fit when payment has to wait for successful litigation, such as an auto accident with the victim suing for damages. Since the surgeon is not paid until the case is settled, the lower-cost commodity implant is easier to keep on his books.
Learn more about Prairie Spine & Pain Institute.
Read more ways to improve orthopedics and spine profitability:
- 5 Steps to Profitable Spine in Surgery Centers
- 6 Questions Workers' Comp Programs Ask Orthopedic Surgeons
- 7 Ways to Make and Save Money in Surgery Center Orthopedics