"Doctors were doing their own thing, calling ortho implant reps and telling them they had a case the next morning and needed a certain product," Jackson said. "The rep would bring the product to the OR, bypassing Mr. Alba, and then give Mr. Alba the invoice after the procedure. We had no choice but to send it to purchasing, which issued the purchase order for the bill to be paid."

Jackson noted that "the situation was fairly typical and out of control, not to mention being out of compliance with statute-based procurement policy." Representing the county hospital district Thomason General must follow certain rules and regulations defined by the State of Texas. "We do have the authority by the state to act on our behalf, such as to work with a [group purchasing organization] and have some latitude, but we have guidelines for procurement that all county hospital districts must follow."

The first step required surgeons to order implants only through Alba at least one business day prior to the scheduled surgery so that he can requisition the products from purchasing. "We don’t pay for anything until we get approval on what was used," Alba said, "and then we okay the payment [to the vendor]."

Jackson, Davis and their team also developed a call schedule so that purchasing specialists, armed with mobile telephones, could expedite surgeon requests after hours and on weekends. In fact, Jackson deputized Alba an "ex-officio" member of the purchasing staff so he could authorize purchase orders with the rest of the buyers. Plus, the sterile processing department carries an inventory of commonly used trauma implants to support Thomason General’s Level 1 Trauma Center designation, according to Jackson.

If surgeons fail to give Alba a day’s notice for whatever reason or an impromptu surgical procedure is added to the mix, it’s not a problem, according to Alba. "If that happens we follow the same procedures," he said. "What we’ve found is that this process means less work for us because we don’t have to backtrack locating data and information about anything. All of it is provided up front."

O’Beirne indicated that reps seem to be more cooperative. "Reps are more up to submitting their invoicing right after the procedure is completed," she said. "Before [we initiated this process] they would just leave and file the paperwork a day later."

Thomason General’s materials management-OR team drew a line in the sand and issued a warning if their new procedures were flouted. They notified vendors that "implants delivered without approved purchase orders would be considered donations and that no payment would be made," Jackson noted. He credited the OR’s "courageous leadership" and "strong executive support" for standing firm against any challenges. Jackson admitted that there have been a few but by and large, "the vendors have been very cooperative about this."

From left: Carrie O’Beirne, manager of perioperative services; Randy Jackson, senior director of materials management; Melva Davis, R.N., director of adult medical/surgical/perioperative services; and Ralph Alba, OR materials manager.

The second step was equally as challenging, if not more. The team tackled the pricing issue. Under the old process, Thomason General was paying list price for joint, spine and trauma implants, expending approximately $6 million per year, Jackson noted.

Four primary vendors and several secondary vendors divided up the hospital’s market share. Thomason General used Synthes almost exclusively for trauma implants, Stryker Howmedica and Smith & Nephew split fairly down the middle almost exclusively for joints and DePuy and Medtronic Sofamor Danek for spine, according to Jackson. Of the $6 million, about 12 percent accounted for spine, about 37 percent for joints, about 37 percent for trauma with the remainder (14 percent) a "catchall" for everything else, Jackson said.

With surgeon support, Thomason General narrowed the vendor choices to Synthes, Stryker Howmedica, Smith & Nephew and DePuy. More accurately, however, the vendor ranks narrowed themselves because Jackson and Davis wanted to steer clear of implementing a standardization program.

"It’s important to emphasize that we didn’t do a standardization program here," Jackson said. "We did an open slot program. Any vendors who were willing to meet our target pricing are welcome. This strategy certainly worked for us."

Alba agreed. "When you talk to doctors about standardization they get turned off," he said. "[With this strategy] everybody has to give a little bit, which changed the whole aspect of the process. Everybody’s willing to work with this."

But the team faced some initial resistance to the pricing solution because doctors feared the worst.

Davis led the process by gathering supporting data, working with the hospital’s new GPO MedAssets Inc. and its Aspen Healthcare Metrics group and scheduling meetings with the orthopedic leaders. They rebuffed the efforts because they felt Davis was trying to tell them how to practice medicine, Jackson recalled.

"We met with each of the doctors individually and then collectively after that. We had 100 percent in attendance," Davis said. "We assured them we weren’t trying to tell them how to practice medicine but we asked them to look at the pricing data to help the hospital district financially. Aspen pulled and provided the data and presented it with us to the surgeons. When they saw the data they became very supportive of this program."

Davis and Aspen’s Erik Axter showed the surgeons evidence of "better pricing" elsewhere. "We worked diligently to educate them to the point that they became willing to support our position that all vendors were welcome, providing that they met the target pricing we established with Aspen’s assistance," Jackson noted.

"Before we did this we would talk to vendors about pricing and just hit a brick wall," O’Beirne said. "Now we’re able to show the surgeons they can keep using the products they’re used to so long as the vendors meet the pricing we’ve set with Aspen. We were not telling them which products to use so long as we were paying the price we wanted. They initially thought we were telling them to standardize on vendors."

Since the new pricing process was initiated in early 2007, Thomason General has reduced its annual orthopedic implant expenses by 20 percent or $1.2 million, according to Jackson. Furthermore, in three years, the turnaround administration has converted a $25 million loss to reporting a $50 million surplus, Jackson added.

"One of the things that helped us – and we capitalized on it – is that we’re a teaching facility for Texas Tech University School of Medicine," Jackson said. "We have an orthopedic residency program that may have 8 to 10 doctors learning here. What [products] these doctors learn with follows them throughout their career. For example, if they’re trained on a certain vendor’s product they’ll likely use that product in the future. We used that argument as leverage."

Thomason General’s ambulatory surgical unit has four operating suites, two endoscopy suites, one bronchoscopy and a separate pediatric suite. The unit is fully computerized and equipped with imaging programs that allow a patient’s X-rays and other diagnostic tests to be referenced on monitors during surgery as the doctor asks for them. The voice-command computer system gives doctors complete control of the camera view, gas glow, light source and other elements without diverting attention from the procedure.

Just say no

Some implant vendors have been requiring hospitals and other healthcare facilities to sign contracts that include strict confidentiality clauses that restrict them from revealing pricing information, specifically to third-party consultants hired to help providers squeeze pricing concessions from vendors. In fact, Aspen and MedAssets was involved in a high-profile legal scrimmage in mid-2006 with Guidant that reached a settlement.

Jackson admitted that it wasn’t a problem for Thomason General because the legal department empowers them to resist such measures.

"We have a structured contract review process here that involves the legal department and follows state law," he said. "I initiate the review process. If I find overly restrictive confidentiality clauses I strike it out of the contract. It’s up to the legal department here to work with the legal departments of the various vendor companies to come up with something we both can live with. We ended up with fairly innocuous confidentiality agreements." Because of this, Thomason General was able to share pricing with Aspen or any other consultants, he noted.

"We won’t execute an agreement that has a very restrictive confidentiality component," he stated matter-of-factly. Of course, operating under state regulations means that all information is subject to the Texas Public Information Act anyway, he added.

While Jackson believes the new orthopedic implant process has been successful for the hospital it might not work for everyone. "The process of obtaining info and distributing it is essential to being able to do this," he said. "Information is power. If another hospital wants to undertake a program like this I’d be hard-pressed to see how they could do it without some external help. The ability to obtain information is crucial. It’s pivotal to success. The additional resources that Aspen brought to the table, collecting, accumulating, analyzing, preparing and presenting to surgeons was very valuable. That a nationally recognized firm was saying this had an impact on the doctors."

O’Beirne concluded that success requires a team effort from the top to the trenches. "The OR and materials management can work together but if the doctors can’t champion it, and administration doesn’t support it, it won’t happen," she said. "Everybody has to work together on this."