Kevin Weeks ought to get combat pay.
The Premier Health Alliance official last month began his tour of duty trying to persuade surgeons to order orthopedic implants under a new Premier contract. The battle is bloody.
"I'm not going to let some (obscenity) from the Midwest tell me what to put in my patients," one New York City surgeon told Mr. Weeks.
The Premier contract (Oct. 31, p. 12) illustrates the struggle that lies ahead for the hearts and minds of surgeons as hospitals try to cut supply costs.
It also is a sign of the growing sense of power that hospitals and their buying groups have in negotiations with vendors. They demand lower prices as they ask for help in using products wisely. This is a marketplace that has adopted both the rhetoric of war and the rhetoric of cooperation.
Westchester, Ill.-based Premier represents more than 200 hospitals. Their purchases through the buying group will top $1.5 billion this year.
Premier's orthopedics program encourages hospitals to standardize hip and knee implants, buying from one or two firms, a popular tactic for leveraging better prices and services. Cutting the cost of orthopedic implants in particular can make a real difference. Premier members lose an average of $1,300 on each implant procedure but spend an average of $4,000 on the implants involved.
Orthopedic implants, however, are products historically selected because surgeons see advantages in one manufacturers' brand or service.
"The leading manufacturers tell me they `own the docs,'*" said Mr. Weeks,director of operating room programs at Premier. "We're telling them, `The status quo isn't good enough."'
For the Premier program to work, Mr. Weeks and executives at individual hospitals must, in many cases, persuade surgeons to abandon the companies they've worked with for years. DePuy, Howmedica and Zimmer-which analysts estimate sold two-thirds of the $1.5 billion in orthopedic implants bought by U.S. providers in 1993-aren't on the contract.
Money is Premier's talking point. Under its contracts, the lowest prices will go to hospitals that spend the greatest share of their implant budgets on one company's products.
For example, Millard Fillmore Hospitals in Buffalo, N.Y., a Premier member, will cut $500,000 from its $2.5 million annual implant expenditures if it makes 80% of its purchases through one vendor, said Kevin Connor, director of materials management.
Unfortunately for the 600-bed hospital, 60% of the implants its surgeons now use are Zimmer products. Almost none are bought from the five companies in the Premier contract: Johnson & Johnson Professional; Intermedics Orthopedics; Osteonics Corp.; Smith & Nephew Richards; and Wright Medical Technology.
"This is like the final frontier for us," Mr. Connor said.
Orthopedics makers sell their products based on their advantages over competitors' products. Advocates of standardization programs contend that manufacturers' products are basically the same. The issue is still being debated.
"There is a difference in cars, a difference in tires, a difference in televisions," said Richard Tarr, vice president of research and development at Warsaw, Ind.-based DePuy. "There's definitely a difference in implants."
Some surgeons, however, are placing less importance on those differences as their concerns about healthcare costs grow, said Avrum Froimson, M.D., director of orthopedics at 360-bed Mount Sinai Medical Center in Cleveland. "A comparable part can be obtained from anybody," Dr. Froimson said.
Mount Sinai, a Premier member, was one of the first hospitals to standardize orthopedic implants when it selected DePuy and Wright products four years ago. It will think hard before switching vendors. Surgeons perform procedures faster and with better outcomes when they use the same implants each time, Dr. Froimson said.
In negotiations with Premier, DePuy and Zimmer balked at granting the discounts it requested-up to 45% off list price-without a guaranteed volume of purchases. A Howmedica spokesman declined to comment on the contract.
"We want to be partners with these people," DePuy's Mr. Tarr said. "(Under Premier's terms) we were going to take a loss, and that's not a win-win."
Premier, however, opted to contract with any manufacturer that would meet its terms because it's seen the orthopedic programs of other buying groups fail, Mr. Weeks said.
The contracts are valued at a total of $100 million over three years, a market worth more to small firms than large ones. Accepting Premier's terms is necessary "guerrilla warfare," said Shirley Engelhardt, an independent industry analyst in Chagrin Falls, Ohio.