How to Rein in the Cost of High-Value Implants

More than one million joint replacements are performed each year in the U.S., and by 2030 that number is expected to quadruple. As incidences rise, the cost of these surgeries continues to vary greatly and eat up a significant chunk of health system spending. Multiple factors influence these costs, including the price of – and lack of transparency into – high-value implants.

High-value implants include items like hip and knee implants, pacemakers, implantable cardiac defibrillators and anterior cervical fusion plates and screws.

While consumers are used to comparison shopping for everyday retail goods, many healthcare organizations lack a complete picture of all the pricing and product options to determine whether they’re paying a fair price for the implants.

Health systems are paying different prices for implants that perform an equivalent function.

The cost savings opportunity for high-value implants is too big to overlook: millions of dollars could be saved if the pricing gap were closed around total hip and knee implants alone. In fact, a Premier analysis found that 350 health systems could save $42 million on hip and knee implants if they achieved the same pricing as those in the top 25^th percentile of best pricing.

Yet, at a time when industry pressures are squeezing healthcare providers to operate as efficiently as possible, supply chain leaders are often hamstrung by a lack of actionable information around high-value implants.

There are steps healthcare organizations can take to improve transparency and reduce the cost of implants.

Many health systems currently undertake line-item benchmarking, in which they compare pricing for a high-value implant based on an exact supplier and item match using the SKU. But this can provide a limited view into all available pricing and product options based on the need. And it can leave significant savings on the table.

Knowing which implants perform equivalent functions allows providers to compare the pricing of multiple SKUs against each other and across manufacturers. For instance, a health system may be paying a fair price for implant A compared to what other organizations pay for implant A. However, by cross-referencing the implant based on its use, the health system may learn that implants B, C and D are functionally equivalent to implant A and are priced 20 percent lower – key information for supplier negotiations.

Understanding which products are functionally equivalent requires clinical subject matter expertise. Effectively tapping into the benchmarking requires access to robust data and analytics capabilities to pull and present this information. Essentially, providers need the capability to drill down to a more granular level when cross-referencing a high-value implant.

Compare pricing internally and against your peers.

Once providers know which implants are functionally equivalent, their next step is to compare their pricing. Benchmarking may reveal pricing disparity within a health system itself, and organizations should also compare their internal pricing data against national peer benchmarks with similar implant volume. Premier has seen pricing disparity vary as much as 20 percent across suppliers within a health system. And that number increases when comparing pricing to peers.

These insights increase transparency to allow providers to assess potential savings opportunities both within and across suppliers, and enable meaningful savings to be achieved without limiting product or supplier choice.

Empower physicians with transparency and evidence.

Not only can pricing transparency improve supplier negotiations, but it can also be valuable information for the group who works with these implants everyday: the physicians. Without their support and buy-in, pricing parity efforts with suppliers can be futile.

Cross-reference benchmarking based on functional equivalence provides credible, legitimate data to share with clinicians and engage them in evidence-based discussions that speak their language. When discussing pricing variation for high-value implants, it should be clear to physicians that equipping them with information about functionally equivalent implants will continue to enable them to deliver high-quality care to their patients while offering them insight into the health system’s purchasing. After all, without such conversations, physicians may have no idea how their preferred implants affect the bottom line.

There’s no doubt that significant pricing disparity exists within and across high-value implants, and without the right data it can be challenging to recognize whether it is warranted. However, not acting on the cost of high-value implants leaves money on the table. By moving beyond matching exact items to evaluating pricing based on functional equivalence, health systems can ultimately realize cost savings and better physician alignment.

Learn more about implant savings and request an assessment on your high-value implant spend today.