By Julie E. Williamson

Despite ongoing attempts by original equipment manufacturers to stamp out third party reprocessing through legislation and increased pressure for greater regulatory oversight, the reprocessing industry has been anything but derailed.

In fact, representatives from the nation’s leading third party reprocessing firms generally agree that business has never been better – a fact they attribute, in great part, to healthcare organizations’ perpetual push for cutting costs and the U.S. Food and Drug Administration’s more stringent regulatory requirements, which have gradually helped ease concerns of formerly reluctant hospital executives. Add to that the growing number of healthcare organizations openly and eagerly touting the savings generated by the reprocessing, and it’s little wonder the practice that was once so controversial is thriving.

"Business is definitely booming," said Mark Salomon, senior vice president of corporate development, Vanguard Medical Concepts, Lakeland, FL. "Although some predicted that regulating this industry to the fullest extent would kill business, it has really helped to increase acceptance by adding a level of respect and trust. In fact, reprocessing has now become so mainstream that most hospitals
    Courtesy of Alliance Medical       no longer have an  issue with considering it."

Since the FDA released its survey results, Alliance Medical has added approximately 200 more hospitals to its roster, 50 of which were added in the first quarter of 2004 alone, according to Arthur Goodrich, vice president of marketing and business development for Alliance Medical, Phoenix, AZ. Vanguard Medical’s annual growth continues to exceed 50%, and Salomon said the customer roster now tops 1,000.

Executive buy-in

Recognizing that key healthcare decision-making lies at the administrative level, third party firms have stepped up efforts to engage those individuals directly when making the case for reprocessing. And their efforts are paying off.

Although the first step often involves explaining regulatory requirements and perhaps addressing concerns about the practice, sources generally agree that gaining acceptance is far less challenging now that the FDA regulates reprocessors in the same way – and in some cases, even more stringently – as OEMs.

"Executives tend to understand at the micro-level the value of an FDA 510(k)," explained Goodrich. "When they learn that we have 510(k) clearance for every Class II medical device we reprocess, they often want to reprocess everything we have with a 510(k)."

That apparent trend represents a shift away from hospitals’ more cautious approach to reprocessing in the past, whereby many would start with compression sleeves and other non-invasive devices before gradually moving into other device segments. In just one year, Alliance has seen the average number of reprocessing services (such as OR and laparoscopic devices, and electrophysiology catheters) jump from 1.2 to 3.4.

Vanguard has also noticed the shift. "It’s really about the numbers. OEMs are always couching any savings generated by reprocessing as just a flash in the pan, but our customers are seeing firsthand just how cost-effective a quality reprocessing program can be," said Salomon. "The FDA requirements have helped them realize reprocessing isn’t a closet practice. When they see the savings that can be captured with just one or two items, many want to maximize the value by adding more."

Just how much can a hospital expect to save? While the amount will vary according to hospital size and the type and amount of devices reprocessed, AMDR estimates that a small facility can save upward of $100,000; larger organizations can save more than $500,000. Because reprocessed devices typically cost 50% less than a new item by the same OEM, it’s been shown that a comprehensive, multi-department preprocessing program can shave off more than $60 per surgical procedure, while those that limit their reprocessing to compression sleeves and one or two other devices can save between $10 and $20 per procedure.

Savings associated with reprocessing EP catheters have been estimated between $300 and $500 per EP study, and reprocessed heart positioners and tissue stabilizers can cut $400 to $700 per Off-Pump Coronary Artery Bypass procedure, AMDR reports.

Outlining, surpassing goals

When University of Kentucky Chandler Medical Center, a 415-bed facility in Lexington with 17 operating room suites and one cysto room in the OR, began reprocessing with Alliance in early 2002, the savings added up quickly. By reprocessing compression sleeves, surgical devices, external fixation devices, and open and unused devices, the medical center saves more than $540,000 annually – savings that total more than $32 per procedure and more than $1,300 per bed.

Lorra Miracle, RN, UKCMC’s value analysis facilitator, credits "support from top management, buy-in throughout the facility and first-rate service and accountability from Alliance" for the reprocessing program’s success. UKCMC is a member of the University HealthSystem Consortium, which has partnered with Alliance for years to help its member hospitals reduce supply chain costs.

Marriottsville, MD-based Bon Secours Health System is also reaping the financial rewards of reprocessing. When the system of 24 acute care hospitals and outpatient surgery centers launched a supply chain initiative in 2002, hospital administrators elected to launch a reprocessing program to cut costs, improve efficiencies and support environmental safety. Just two years into program, the health system is already surpassing its initial savings targets.

Although BSHSI leaders were eager to begin reprocessing, they approached the process with due diligence, first establishing a team of representatives from various stakeholder groups across the system, including materials management, infection control, risk management, administration and clinicians. "We felt is was important to communicate the financial reasons behind the supply chain initiative. But just as important, we wanted to show that this program made sense and explain why," noted Bobbie Lohr, BSHSI’s director of contract administration. Lohr also worked with Premier, the system’s GPO, to ensure the best tier pricing and adjust contract language to allow for a remanufacturing program.

From there, BSHSI toured vendor plants and checked financial performance before finally selecting Vanguard Medical as its remanufacturing partner. The health system tested the program by launching an accelerated remanufacturing pilot project in seven of its     
   Photo Courtesy of Alliance Medical                hospitals, and then devised an action plan to decide which facilities would follow.

To further promote education and encourage communication, Lohr joined Michelle Allender, BSHSI’s director of clinical resource management, and Deborah Haley, Vanguard’s director of implementation and utilization, and visited each BSHSI facility to outline goals and discuss how the remanufacturing initiative should be implemented.

"The meetings gave the opportunity for those who had questions to speak to us directly. It also gave them a chance to see the products and packaging themselves," said Allender.

Prior to officially going live with the program, the system committee established performance goals, and project utilization committees were established at each hospital to ensure the program’s ongoing success. "We knew when we wanted each facility to be at 30%, 50% and then 80%," explained Lohr, adding that communication across the health system has been critical to the program’s success.

Tapping new potential

While supply savings are often enough to grab the attention of today’s cash-strapped healthcare organizations, that doesn’t mean third party reprocessing companies don’t have to work to gain – and maintain – customers.

Like other services, healthcare facilities will demand more from their partners. Third party reprocessing firms are meeting the challenge by offering a broader range of services and more innovative technology that boosts efficiencies and improves quality. ClearMedical Inc., the Bellevue, WA-based firm that provides high level disinfection for Class I and Class II devices, is expanding its services and offering speedier turnaround times for reprocessed items.

"One of the sore spots of reprocessing in the past has been the [lengthy] turnaround times, which in some cases could be 30 days or more," said ClearMedical’s director of marketing Kate Jackson. "To maximize savings, it’s important to have processes in place that can get a [facility’s] devices to them as quickly as possible." ClearMedical’s turnaround time is fewer than ten days.

AMDR member companies are also striving for greater efficiency. Vanguard’s new Rapid Return program takes advantage of the constant supply stream of devices from its 1,000 hospital customers and creates a ready inventory of reprocessed devices. According to Salomon, the program makes it possible to cut the time it takes to restock reprocessed device by as much as 50%.

Goodrich assured that in the near future, Alliance will be using "new proprietary technology that will help drive even greater efficiencies." To help customers better track and manage their reprocessing orders, Minneapolis-based SterilMed now offers an Internet Reporting System that provides to-the-minute receiving, packaging and shipping dates on orders, with all information coming from the same logistics management system used by SterilMed. The system also provides detailed pricing and cost information, broken down by department and device family, which helps hospitals verify invoices, distribute expenses, analyze costs for budgeting and compliance reporting, and guide future purchasing decisions.

Waste reduction and environmental factors are also weighing more heavily on the minds of hospital executives – and will likely continue to do so in light of a partnership between the Environmental Protection Agency and the American Hospital Association that aims to cut overall hospital waste in half by 2010. States are also jumping on board. As one of six recommendations for reducing medical waste, the California Department of Health Services recommended recycling of single-use medical devices as a way for hospitals to reduce the flow of medical waste into landfills.

The California guidance document focused on a new program Vanguard is implementing in the state’s hospitals, which uses 17-gallon recycling containers to collect used surgical devices for reprocessing. As part of the Advantage device collection program, Vanguard documents and reports data to participating hospitals about the weight of devices diverted from their medical streams. In 2003, Vanguard eliminated 439 tons of medical waste through its reprocessing programs nationwide.

"It’s not just about cutting supply costs. More than ever, hospitals and their vendor partners are looking at the environmental impact of the [services] they provide," said Salomon.