Clincal Business Strategies
Spinal
implants are ripe for a formal technology review process
Otherwise, providers face back-breaking
fiscal results
by Eileen McGinnity
The velocity at which new medical
devices and implants are coming on the market (and perhaps into your
hospital) is nothing short of staggering.
Guidant, a manufacturer of cardiac
products, sums it up in their 2004 annual report: "Over the past five
years, nearly 50 percent of sales revenue has been derived from products
less than one year old." Guidant’s 2004 Form 10K indicates their gross
profit was 75.5 percent in 2004.
Spine surgery is another clinical area
exploding with new technology. Some new spinal implants, such as DePuy
Spine’s Charite artificial disc, have had questionable results: The
Charite’s success rate of 57 percent "is nothing to be proud of"
according to a surgeon who published an editorial about the implant in
the September 2005 issue of the journal Spine.
The Centers for Medicare and Medicaid
Services (CMS) have declined to create a DRG for the Charite because
there is a proposed national non-coverage decision pending; Charite is
contraindicated for Medicare-age patients. But if nonfederal payers
mimic the national average Medicare reimbursement for the DRGs into
which a Charite procedure falls (DRGs 499 and 500, reimbursed by
Medicare at approximately $6,500 and $4,200 respectively), the procedure
is a losing proposition from a financial standpoint. List price of the
implant is $11,5001.
Another new implant, the X STOP from
St. Francis Medical Technologies, is designed to treat lumbar spinal
stenosis (LSS), which typically affects patients over age 50. In this
layman’s terms, the X STOP is a bit like a rivet that is "injected" into
the spine to create space and decompress the spinal cord. It offers a
minimally invasive alternative to decompressive laminectomy surgery and
can be done under local anesthetic. Success rates of 64 to 68 percent
are being reported2.
At present, procedures using the X
STOP fall into DRGs 499 or 500 (national average Medicare reimbursement
of $6,500 or $4,200 respectively.) List price of the implant is
approximately $5,500. CMS is currently soliciting feedback on whether X
STOP meets "newness" standards and provides substantial clinical
improvement that would qualify it for improved reimbursement. In the
meantime, X STOP procedures will be marginally profitable at best and
money-losing at worst.
Value analysis vs.
new technology review
The formal process of value analysis
has been around since General Electric codified value analysis
techniques in the late 1940s. The basic premise is V =F/C, or Value =
Function/Cost.
As applied to the hospital supply
chain, value analysis is generally a mechanism to drive clinically
sound, fiscally responsible, evidence-based decisions for the safe and
effective use of supplies. It is typically used to help drive
standardization in commodity supplies and certain equipment such as IV
pumps or blood pressure cuffs, often for the purpose of optimizing group
purchasing organization (GPO) tier pricing or realizing the staff
performance benefits of reduced equipment variability.
New technology review is slightly
different. It typically aims to implement a formal process to evaluate
the clinical and financial benefits of physician preference items (PPI)
– implants and devices over a certain dollar threshold that are used by
a relatively small number of specialty physicians. (It can also be used
to evaluate new clinical services, capital equipment and other "big
ticket" decisions.)
Given the skyrocketing costs and rapid
influx of new PPI technologies – some of which may have questionable
patient benefits despite FDA approval – it is a multidisciplinary "gatekeeping"
initiative on which service line financial viability may depend. It is
especially important to manage prospectively the flow of PPI into the
hospital and ensure that products have real value and are not mere
novelties.
Pillars of success
Both value analysis and new technology
review are supported by organizational elements that enable success:
1. Prioritization of limited
resources. Keep the focus on initiatives that will drive the highest
benefit with the most economical expenditure of effort. Target the 20
percent of items that make up 80 percent of clinical supply spend.
2. A collaborative team approach, with
the appropriate business and clinical disciplines represented, team
member roles defined, and a clear statement of goals.
3. Senior leadership support, which
empowers the team to make decisions, supports those decisions, removes
barriers and allocates the necessary resources to the process.
4. Data-driven decisions, including
data to prioritize the high-spend items, estimate product uptake,
identify comparable products in the marketplace, evaluate product costs,
identify coding and reimbursement mechanisms, and evaluate clinical
benefits versus cost.
5. A tracking mechanism so that
clinical and financial outcomes can be tracked against specific goals.
6. Structured processes around how
products are "nominated" for review, how decisions will be made,
disclosure of conflicts of interest, role of vendors in the process,
protocol to provide immediate access to products in a "pilot" program
under provisional approval, and an appeals process.
7. A stakeholder engagement plan to
convey to physicians and others the benefits of the process and to
address concerns regarding loss of control, impact on physician-vendor
relationships, etc.
Building your new technology review
process on these pillars will take time. A culture change may also be
needed, if controls on PPI have been minimal or nonexistent. But fiscal
and clinical stewardship dictate close management of this important
source of supply cost. HPN
Eileen McGinnity is president of
Aspen Healthcare Metrics, a national clinical service line consulting
and benchmark data firm, based in Englewood, CO. Aspen is a subsidiary
of MedAssets Inc. Visit Aspen Healthcare Metrics’ Web site at
www.aspenhealthcare.com.
1. "Orthopedic Network News," Find A
Part, http://www.orthopedicnetworknews.com
2. X STOP Interspinous Implant for
Lumbar Spinal Decompression. Brussels International Spine Symposium,
November 18-19, 2005. James F. Zucherman, Patrick Simons, Jake
Timothy.
http://www.spinedr.com/site/surgery/surgery
_x_stop_BISS.html
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