24 Aug 11 questions to ask to help reduce your medical device costs
Yes, medical device companies can help you reduce costs. And not just by providing you with a lower cost option than you are currently purchasing. Device companies can actually help you reduce costs beyond line item pricing.
There are a lot of different ways to think of costs. For the sake of this article, I will define two types of costs.
- Direct costs
Direct costs are easy. These are the costs of the devices. Your warmer drapes cost X and if you can find an alternate supplier for those drapes, at 10% less, you just saved 10%. Nothing fancy. This is line item pricing.
- Indirect costs
Indirect can be a little trickier. Usually, they apply to all the costs associate with running an organization that are not directly linked to a good or service. For this discussion, think of indirect cost as all the things impacted by this device or that device.
You may have also heard these costs referred to as, “cost in use,” “total cost of use,” or even “soft costs.” I do not like the term “soft cost.” It implies an irrelevant cost. But any cost directly impacts the bottom line. Just because someone is not incentivized to save nursing time, or reduce OR downtime, does not mean that these costs are not important to operations.
With two types of costs in mind, lets look at how a device company might be able to save you money.
The first is obvious as previously mentioned, direct cost reduction for a device or line item price reduction. But, as we know that direct cost savings does not always lead to indirect cost savings. It may even lead to cost increases.
Here is an example of the indirect cost impacts that a device may have.
Every hospital uses patient drapes. There are a myriad of options for drapes from and equally large number of companies. However, not all drapes are created equal. You may be purchasing a simple patient drape for your cardiac procedures. Again, trying to keep this simple since there are so many options, imagine the simplest drape that gets the job done.
Its inexpensive and in fact saved your hospital about $20K in drape spend last year. But what you may not have noticed is that the cost for surgical towels went up. So did the number of drapes you were using. And while minimal, that increase in usage also increased your waste management expenditure. What you also may not see is that you have had to repurchase an increased number of instruments. Apparently, more instruments are being dropped than before. Lastly, there have been more accidents where OR personnel have slipped and fallen during procedures, leading to OR downtime, administrative costs associated with incident reports, and even one person who is on paid leave as a result of the fall.
Of course, this example is meant to be a little hyperbolic, but not much. Health systems have changed products and seen infection rates skyrocket, pressure injuries skyrocket, and other negative results.
The point is that there is impact from medical devices. To return to the above example, though you saved $20K on drapes, the hospital ended up paying an additional $30K from everything else. So, the “savings” cost more money in the end.
It is always alluring to look at line-item pricing. It’s the quickest win. And often purchasing is incentivized to save on line-item pricing. And frankly, it is too much to know whether a simple product substitution will have the ripple effect like the one mentioned above.
That’s where medical device companies come into play.
Its true, we all want you to buy our products. We also all think, or at least make you think that we have the best and greatest medical device that has ever been invented in the world.
The point is there is incentive for us to pitch you and say all the right things when talking about savings. To do what is best for your hospital, for you staff, and for patients, here are some questions you can ask your medical device reps to truly triangulate the indirect costs, which may have a significant impact on your business.
- Do you have any cost studies from other hospitals that show your products saved indirect costs as well as line item cost?
- What benefits does this product have other than being less expensive?
- Do you have the data that shows your product will not negatively impact other costs or clinical practice compared to what we are currently purchasing?
- Our current products help us save indirect costs in these x,y,z ways, does your product do the same?
Here are some questions to ask the clinical team:
- What impact is this going to have on your day to day?
- What was the value of the current products, why do you love them?
- Is there a significant clinical benefit to what we are purchasing today?
- Do you have the data that shows this products superiority from a clinical and cost perspective to justify keeping it?
In addition to asking questions and being proactive, it is worth asking the following of new vendors and of existing vendors:
- What do you have that’s new that can help me reduce costs?
- Have you recently launched any products or projects that you can show lead to a reduction in direct and indirect costs?
- I am having a cost issue in this particular area; can you help me look into it further and suggest how I might be able to address the cost containment issues?
It is important to note that there is a clinical component to this that underpins the above questions but is not explicit. Strong clinical outcomes are always number one. What’s interesting is that the best clinical outcomes often lead to reduced costs and increased revenues. It’s the best for a reason, even if it is a little more expensive.
Running a hospital is hard. Being a purchasing manger comes with a never-ending list of activities and tasks. Managing an OR can be like herding tigers. Asking anyone to go beyond their day-to-day is a lot to ask. However, it can be tremendously impactful to be open to the potential benefit of partnering with the right medical device company. One that can deliver on indirect cost reduction and produce the best clinical outcomes. It may not always be the least expensive from a direct cost perspective but consider the entire picture and your hospitals financials may be healthier for it.