Helping Hospitals Cut Marketing Costs from Medical Device Procurement

Qmed Staff

November 7, 2013

3 Min Read
Helping Hospitals Cut Marketing Costs from Medical Device Procurement

With lower reimbursement levels from insurance companies, many healthcare facilities are looking for effective ways to contain costs. In the past, group purchasing organizations (GPOs) have worked to drive down device costs through high-volume purchases. However, CorCardia, a healthcare startup based in Minnesota, is taking on this issue in a unique way. Through the use of a cloud-based healthcare supplies purchasing system, CorCardia hopes to eliminate extraneous marketing and sales expenses, allowing these cost reductions to be passed on to healthcare facilities. According to data from the company, hospitals may be able to save up to 22% on expenses that aren't tied to patient healthcare.In an interview with MedGadget, CorCardia co-founder, Sam Awad explored some challenges and opportunities associated with hospital supply chain management. Since reimbursement rates are shrinking, many hospitals are pursuing more value-based outcomes. In addition, medical device manufacturers face high SG&A expenses that drive the price of devices upwards.For example, over $90 billion dollars are spent on implantable devices like hips, knees and pacemakers every year. Out of this $90 billion, up to 40% comes from marketing and sales expenses.In one example, Awad explores the role of a sales rep and a clinical and field tech. While a sales rep can pull a salary of up to $500,000 (including commission and bonuses), a field tech salary usually maxes out at $150,000 annually. However, both field techs and sales reps perform many of the same functions. For example, both conduct educational sessions and provide training for devices. Since the salary of these device company employees is worked into the price of a medical device, healthcare providers are stuck with a significant bill.On top of this, many providers have indicated that the sales expense that comes with sales reps doesn't provide value to physicians or patients.In addition, many hospitals face efficiency issues when it comes to inventory management and procurement. Aspects of this include inventory turn, management of product expiration dates and system aggregation.In many cases, nurses who work in healthcare facilities will count inventory and check product expiration dates. Since nurses command higher salaries, it's often more efficient for healthcare facilities to ensure that nurses are seeing patients instead of conducting these tasks.CorCardia uses a specialized platform, dubbed InnovaCor. With this platform, the company hopes to minimize unnecessary costs through Lean Acquisition. With an open, cloud-based market, hospitals can find the best therapy for a patient at the lowest cost. By combining procurement into a single aggregated system, healthcare facilities can manage multiple vendors, physician preferences, contracts and other inventory demands with ease. In addition, InnovaCor provides real-time product management to give providers a real-time view of their inventory.The system is also designed to capture serial / lot numbers and expiration dates to manage product recalls / disposals."We also identify and reduce unneeded supply chain expenses and can drill down by procedure type. We provide real-time access to contract compliance by hospital, procedure or even physician. Our intuitive dashboards allow hospitals to see clinical utilization and financial benchmarking down to the procedure level. Essentially, we are able to follow that therapy or product from the time it is ordered all the way through to the time it is delivered to the patient," states Awad.

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