Clinical Business Solutions Implementing vendor access policies and procedures
by Eileen McGinnity

The title of this monthly column might once have been considered an oxymoron. There was a time in healthcare when the concepts of "clinical" and "business" were completely incongruous.

My, how times have changed.

Today, the lines between the previously distinct worlds of patient care and finance have blurred. Never has the catch phrase "no margin, no mission" been so apt.

In some ways, it seems that healthcare is in a fight for its economic life. Declining reimbursement, rising pharmaceutical and device costs, labor shortages and the resultant high costs, medical malpractice costs and a virtual "arms race" of technology all combine to challenge our industry’s ability to continue the mission of providing health care to our communities.

As this column has attempted to convey in 2005, there is no substitute for a united effort between the clinical and business roles within the hospital. And with supply costs easily approaching 50 percent of hospital expense, supply chain professionals are in a position to make a huge contribution.

One of the biggest opportunities for collaboration is managing the costs of medical devices and implants. This is also where the vendor can demonstrate whether they are your partner or adversary in the healthcare enterprise.

This year we have discussed practical ways to merge the clinical and financial worlds and the importance of doing so. As the clock ticks down on 2005, perhaps it’s helpful to recap the key Clinical Business Strategies of the year:

• Understand the profitability of clinical services.

Know what costs go into a patient procedure and what the reimbursement is. Only through this analysis is it possible to know what needs to be done to help ensure fiscal health. This takes teamwork – staff from finance, clinical departments and materials management – working together to paint a complete and accurate picture.

• Benchmark your program and your costs.

Don’t be afraid to seek out "best practices" in the industry, and to compare your own practices to them. This applies to every aspect of clinical supply cost management, from what you pay for devices and implants, to how you conduct the value analysis process that determines what devices will be allowed into your hospital.

• Get good data for decision-making, benchmarking and negotiating.

This includes data on your vendors’ costs, on your own costs, hospital reimbursement for new procedures and implantable technologies, and contract compliance tracking to detect "price creep" and off-contract purchasing. It’s hard to justify purchasing technologies that the payer will not reimburse. You need this information prior to – not after – you negotiate.

• Manage the PPI procurement process.

A "shadow" sales process will drive costs higher. It also undermines the role of the purchasing professional and the procurement process. Implement vendor access policies and controls so that patient procedures do not become a forum for product sales. (I recently spent time observing cardiac rhythm management procedures in England. Rarely is there a vendor representative present during the procedure. Amazingly, those British cardiologists have learned to implant a pacemaker – all by themselves! And the hospital’s cardiac techs have learned to program the devices – with only the cardiologist there to help them do it right! No vendor rep needed. No selling while the patient is on the table.)

• Learn all you can about the clinical benefits of various medical devices. Working with clinicians is essential for learning clinical benefits of medical devices. There are surprisingly few long-term studies to support a clear choice of one product over another. Where no clear technological leader can be documented, devices move a step closer to becoming commodities. This will have an impact on how you negotiate for them.

• Determine the hospital’s position on gainsharing.

Work with hospital executives to develop a shared approach to the concept of gainsharing with physicians. Formulate the answer in advance to the "what’s in it for me" questions that physicians may pose when you ask for their support in cost management activities. This is a complex issue that requires a thoughtful strategy.

Finally, push for a more transparent environment. Hospitals are moving toward greater transparency in operations due to several factors. Rising costs of medical devices have been the catalyst for increased attention to relationships that doctors have with medical device manufacturers. Some facilities are requiring physicians to disclose relationships they have with vendors in order to be fully informed about what is driving purchasing decisions. Sarbanes-Oxley Internal Controls and Conflicts of Interest policies are gaining the attention of healthcare providers even though not-for-profits are not legally required to adhere to these standards.

Happy Holidays to you and your families! We’ll be back in 2006 with another year of Clinical Business Strategies to help your facility merge clinical best practice with a financially healthy focus. HPN

Editor’s Note: In the September 2005 column on recalls, the Web site for Mitretek Systems’ Risk and Safety Management Alert System (RASMAS) was incorrect. The correct address is http://info.rasmas.mitretek.org.

Eileen McGinnity is president of Aspen Healthcare Metrics, a national clinical service line consulting and benchmark data firm, based in Englewood, CO. Visit Aspen Healthcare Metrics’ Web site at www.aspenhealthcare.com.

December
2005