Carson - Tahoe Hospital, Carson City, NV

In the fall of 2003, not-for-profit Carson-Tahoe Hospital in Carson City, NV., took a long, hard look at its skyrocketing orthopedic surgery costs. The 128-bed acute-care facility conducted 132 total hip and 199 total knee replacements in 2003. Implants alone accounted for more than 50 percent of Carson-Tahoe’s surgical supply expenses, which were running significantly ahead of budgeted projections.

O.R. administration, nursing administration and materials management recognized an increasingly serious problem, which was costing the hospital tens of thousands of dollars each year and diminishing its ability to fulfill its not-for-profit mission.

"We were far over budget in orthopedic supplies, specifically joints for total knee and hip replacements," says Cathy Dinauer, RN, MSN, officer. "And we were not receiving competitive discounts from any of our suppliers."

At the same time, surgeon preferences for specific knee and hip implant devices caused discrepancies between individual orthopedic surgeons. With four different suppliers providing knee and hip implants, there was not enough volume to secure meaningful discounts from any of them.

The challenge, then, was to convince the orthopedic surgical staff to adopt use of a limited variety of implants and leverage this enhanced buying power to secure discounts from implant suppliers.

Selecting the right project champion
Obtaining consensus among the orthopedic surgeons would be difficult. Carson-Tahoe had failed in the past to gain their buy-in for reducing the variety of implants and the number of suppliers. The first step to succeeding this time around was choosing the right person to champion the project. The hospital needed someone whom the surgeons respected, and who understood and respected the challenges they faced in performing difficult replacement procedures. Hospital administration turned to me, Stephen Panter, BSN, CRNA.

"A nurse anesthetist, Steve has been practicing at Carson-Tahoe Hospital for more than 30 years, and is respected by surgeons and staff alike," said Dinauer.

My plan was to pull all the surgeons together in a joint meeting where they would discuss the economic realities and reach some agreement on how to move forward. But to do this, I wanted to present them with irrefutable data on the escalating surgical costs and how it affected the hospital’s bottom line.

Building consensus with data
Carson-Tahoe’s chief financial officer, Michael Blair, suggested Amerinet as a partner for the project after he met with Karen Barrow, vice president of the Amerinet Clinical AdvantageSM program. She introduced him to the program’s collaborative approach to winning staff support and reducing costs related to orthopedic and cardiovascular procedures that utilize high-dollar implants. The program draws on Amerinet’s expertise as one of the nation’s most innovative and effective group purchasing organizations. Its data-driven process fit my plans perfectly.

With assistance from the O.R. and other departments, Amerinet’s team compiled the figures that clearly supported our case. "We examined the data for 12 months of procedures, every knee and hip procedure performed at Carson-Tahoe, coding it by physician," said Laura Nolan, Amerinet regional manager. "We also benchmarked it against regional and national data."

The results spoke for themselves. At nearly $5,800 per procedure, the hospital’s average cost for total knee replacement was more than $2,300 greater than the national average1. Total hip replacements were even worse, costing an average of $6,700, compared with the national average of $4,0202.

The analysis also revealed that one orthopedic surgeon’s costs were particularly high, due to his use of high-cost implants from a specific supplier.

Getting results through collaboration
The personal relationship – identifying the person to champion the cost-reduction effort – is a critical aspect of the Amerinet Clinical Advantage program. Most often, the champion will be another physician, a well-respected peer who performs a high volume of the targeted procedures.

According to Karen Barrow, "It is the champion’s responsibility to introduce the project to the other physicians before senior management and the materials manager deliver their formal presentation." In this way, the project is not perceived as a management directive, but, rather, as coming from the physicians themselves.

With Amerinet’s team helping to facilitate the discussion, Cathy Dinauer and I sat down with the hospital’s orthopedic surgeons for an earnest meeting.

The process was very much of a two-way street. The surgeons were able to advocate the vendors they wanted and play a key role in determining which implant was most appropriate for each type of patient.

"It helped that Steve has a great relationship with the surgeons," Dinauer says. "There were a few who actively supported our plan and they, in turn, were able to put some peer pressure on the others."

Despite my long-standing relationship with the Carson-Tahoe orthopedic surgeons, reaching consensus was not an easy process. At one point, the orthopedic surgeon whose costs were particularly high threatened to take his practice elsewhere, and Carson-Tahoe Hospital was prepared for him to leave if it came to that.

"The bottom line was that we were losing too much money and we had to correct it," says Blair.

In the end, with the hard data showing the significant amounts lost on many total hip and total knee replacements3, the surgeon came around.

Custom contracting for savings
Once the surgeons were on board, the process proceeded quickly. Utilizing the Amerinet Clinical Advantage program, the Amerinet team worked with O.R. and materials management staff to prepare an RFP that was sent to the four implant suppliers, seeking their bids on a dual-source contract for the hospital.

Only two of the four suppliers responded to the RFP, expediting the decision-making process.

The outcome
The new, one-year contracts for the Carson-Tahoe Hospital knee and hip implants took effect March 1, 2004. Negotiated by Amerinet on behalf of Carson-Tahoe Hospital, these contracts with Stryker and Smith & Nephew will result in savings of approximately $740,000 on primary total knee and hip replacements, and include access to all new technology, such as Oxinium™ and ceramic-on-ceramic coating.

Amerinet was key to the project’s success. "We needed a partner who knew the market, and who knew what was accurate in terms of pricing," says Blair. "We didn’t want to ask for contract prices that were unreasonable, but we also wanted fair pricing."

Support from the hospital’s administration was also essential. "If not for the support of Ed Epperson, CEO, Michael Blair, CFO and Cathy Dinauer, DON and their dedicated staff, this type of savings would not have been achievable," says Barrow.

Carson-Tahoe is now tracking the savings and monitoring the use of the new implants. Through July, the hospital had already conducted 100 total hip and 127 total knee replacements in 2004.

The project has been so successful that they have invited the Amerinet team back in 2005 to assist with custom contracting initiatives for spine and trauma care.

"This project has given us the opportunity and the tools to begin examining other O.R. procedures," says Dinauer. HPN