Mar 1, 2022 9:59:04 AM | 11 Min Read

Revisions and the Other “Impossible” Divisions We Successfully Implemented Capitated Constructs (And Our Ambitions for Even More)

Posted By
Tim Anderson
Revisions and the Other “Impossible” Divisions We Successfully Implemented Capitated Constructs (And Our Ambitions for Even More)

We have already made it clear: we are big supporters of the capitated construct, one fixed price for a surgical procedure where implants are used, regardless of the type or number of items!

But, our friends in healthcare supply chain are split on the topic. Some find the management not worth the results, others are happy taking the realized savings despite the associated operational impacts which sometimes occur.

However, the fact remains that once implementation, enforcement, and tracking are mastered, the financial and operational impacts are significant.

Now for the mind-blowing part: the implantable divisions to which capitated constructs can be applied are also without bounds. Kermit’s ability to manage capitated constructs has allowed us to introduce the concept to divisions that many would not dare to touch.

Hip & Knee Total Revisions 

If the intent of capitated constructs is to curb variation, it makes sense to apply the constructs to surgeries that have high implant use variation and significant cost variation.

Historically, hip and knee revision cases have had the most unpredictable price tag for any physician of the total joint reconstruction surgeries performed in your operating rooms. Revision surgery in this area frequently has many clinical approaches that can accomplish the same outcome. Because of this, cost variability is common and actual costs are always greater than the primary reconstruction surgery.  

A comprehensive capitated construct solution for hip and knee revisions could create a multitude of capitated constructs to accommodate item combinations. The implementation, management, and enforcement of this would create complexity and force hospitals to find a different solution. 

A purpose-built spend management application like Kermit changes all of that. Kermit has successfully helped clients implement and manage capitated constructs in hip and knee revisions, and big savings along with that. A powerful rules engine is the underpinning of making this work, easing the complexity of the constructs administration and management. Removing the manual and painstaking checking and rechecking of parts and prices means that contract administrators and negotiators are free to create complex and even service-level based agreements to bring true spend management into play. 


Supply chain professionals have described the task of applying capitated constructs to the spine division as “cumbersome” and in some cases impossible. 

Spine cases present some of the most significant physician preference challenges to cost containment, as 5 surgeons may have 5 different approaches to implant selection yielding the same outcome for the patient. This makes spine a shining candidate for a capitated construct approach, if only it were that simple.

Kermit believes that if your hospital has implemented capitated constructs for hip and knee, the same can be done in spine. And we want to help you do it.

By digitizing the implant bill sheets and categorizing items properly in an automated way at the point of use, Kermit can bring to life effortless implementation of a fixed price per procedure in spine, regardless of the vendor, type or number of items used. As cases are entered by vendor representatives through our proprietary mobile application, Kermit’s software aggregates and stores procedural data and product utilization. This means pricing variation can be easily monitored, and procedure trends can be identified for capitation.

With Kermit’s experience with spine constructs, pricing and contracts, our ability to measure procedure analytics, and apply price benchmarking, a capitation project in spine can be built for immediate cost savings and long-term success. 

Upper and Lower Extremities 

When capitated constructs became a popular method for curbing costs, most institutions started with knee and hip. They were the obvious candidates being the most mature orthopedic category and one with significant spend and surgical volume.

The challenges of managing capitated constructs discussed in our previous post prevented some supply chains from going further with their implementation. Because of that, the area of upper and lower extremity– including foot, ankle, and elbow – were never addressed.

Tackling extremities is a good way to level up in your cost reduction and spend management using capitated constructs, especially if the implementing these in spine and joint revision give you pause.

Our Plan to Bring Capitated Construct Pricing to PPI Divisions 

In total, Kermit helps hospitals with spend management across more than 20 different physician preference divisions. For many of these divisions, capitated constructs have never even been considered.

Kermit already manages capitated constructs for our client hospitals in many of these divisions. Our roadmap includes plans to manage capitated constructs in each one of these divisions:

  • Bariatric 
  • Biologics 
  • Cardiovascular - PCI 
  • Cardiovascular - Structural Heart 
  • Cardiovascular Rhythm Management 
  • Craniomaxillofacial (CMF) 
  • Cosmetic and Plastic Surgery 
  • Dental/Oral 
  • Ear, Nose, and Throat (ENT) 
  • Gastroenterology 
  • General Surgery 
  • Interventional Radiology 
  • Neurology 
  • Neuromodulation
  • Ophthalmic 
  • Spine 
  • Sports Medicine 
  • Trauma 
  • Urology 
  • Vascular 
  • Women’s Health 

How Can Kermit Help Manage Your Capitated Constructs? 

After auditing and more than 120,000 implant bill sheets for payment, Kermit’s software has mastered the art of enforcing implant capitated constructs.

Complete the form below to learn how Kermit can help your hospital realize the savings promised by capitated constructs.


Topics: PPI Spend Management, Contract Negotiation, Vendor Management

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