Hospitals Looking to Cut Costs from Medical Device Procurement

Hospitals across the United States are facing reductions in government reimbursement and, as a result, are looking to trim costs and waste. One target in those cuts is high cost of selling medical devices. For an average orthopedic device, anywhere from 18 to 40% of the cost to the hospital is from selling expenses, says Kenneth Morris, president and CEO at CorCardia Group (Arden Hills, MN), which makes a cloud-based platform that handles supply-chain operations for hospitals. Many hospitals are transitioning away from manual-based order entries to automated systems to manage their supply chain. Ultimately, systems like CorCardia's will work with RFID technology to help monitor products such as medical devices. Automating the order of implantable medical devices, for instance, would help hospitals with value-driven purchasing programs.As it stands now, many hospitals lack a clear understanding of their supply costs, which is part of the reason that the costs of hospitals vary wildly, as pointed out in a recent New York Times piece.Automated supply-chain technologies could prove disruptive to the market as they provide an alternative to the traditional medical-device sales-rep model. "Arguably, it could cause some heart burn for the market leaders who have been able to form relationships with physicians and convinced them to use their products," Morris says. "Now, it changes the balance of power more to the supply chain side as well as the physicians who can see what makes the most sense for their patients and what is the true cost benefit analysis here."