If you are old enough, you may remember the iconic scene from the 1979 horror film “When a Stranger Calls.” A young babysitter receives a series of increasingly threatening calls from prank caller/serial killer and eventually learns that “the calls are coming from inside the house!”
When it comes to managing your spending for implantable medical devices, many of the threats to your spend management efforts are coming from “inside the O.R.” and, in this case, the caller is your medical device supplier. These reps have time-tested methods to subvert the pricing and contract terms that you have worked so hard to negotiate. Savings can quickly be eroded leaving managers of budgets scratching their heads about what happened.
What can’t you see in your O.R.?
Once the surgery clock starts, the access and influence a device supplier has is unparalleled. The reps work in close partnership with the surgeon and operating room staff to ensure that the proper device is used for the specific patient need. However, the close relationships that they develop with your surgeons and the deference often given to the rep can lead to unintended consequences for the hospital. Its why many hospital leaders have come to regard the reps presence in the OR as a “necessary evil.”
One notable impact of the surgeon-rep dynamic is the introduction of new technology and non-contracted items, a driver of price creep that can erase your negotiated price savings. Whether it be the use of high-cost items with no clinical indication, or the use of a new “cutting-edge” product with a hefty price tag, your device reps can easily drive up your case costs just by their presence in the O.R.
And this is not the fault of your internal team, especially your surgeons. Your surgeons are at the top of their respective fields, working hard to ensure the best outcome for their patients. They trust the reps to provide the assistance to achieve those outcomes and do not question the pricing or validity of the product. Can you blame them?
Beyond the O.R., once bill sheets are completed and submitted, additional price creep can often occur. Capitated constructs get broken (with no reasonable justification) or contracted items are billed at a price higher than the contracted amount. While most hospitals have a process for reviewing vendor bills, the paper-based process naturally lends itself to oversight and price creep. The reps know this and will often “test the system” to see what they can get away with.
Like your surgeons, your team isn’t at fault. Implants are a complicated segment of supply chain. There are hundreds of thousands of products, all with varying components, pricing, and contract rules, all complicated by the aforementioned paper-based process.
This all serves as a reminder that vendor negotiation and spend management does not stop once the contract is executed.
On average, hospitals are overpaying in PPI by 30%
Kermit’s analysis of over 100,000 bill sheets and hundreds of thousands of implant purchase orders shows that hospitals are spending on average 30% more than necessary on medical devices. For many health systems, this translates into tens of millions of dollars in overspending, and it cuts deeply into already strained margins.
The overspend is a combination of not negotiating the price you deserve coupled with the waste, fraud and abuse of the existing process.
What would cutting your PPI spend by 30% look like for you and your hospital?
Improving your bill-only process can lead to immediate savings
How can you fix the issue now and support your team to ensure the best financial outcome and efficient use of your resources?
The answer is simpler than you might think: digitization. Nearly everything in your hospital has been digitized, leading to process improvements, better allocation of resources, and improved data capture. Why is your bill-only process still paper-based, especially for such a large spending category?
Kermit has streamlined the digitization and auditing of PPI bill sheets, leading to tens of millions of dollars of savings across our partner hospitals, all without changing your processes or limiting surgeon choice.
Backed by a proprietary and secure mobile application, your vendor reps use a HIPAA-compliant smartphone app to upload digital copies of the paper bill sheets, much like you would use your bank’s mobile app to deposit a check. From there, the rep provides demographic information and submits the case (often in less than 90 seconds). Kermit’s best-in-class artificial intelligence automates the price audit and contract compliance to ensure your hospital pays only what it owes. Within two hours of surgery, the case is presented to your hospital ready to build a requisition and issue a purchase order with complete confidence that the price you pay is accurate. If compliance issues are found which prevent the case from receiving a purchase order, an encrypted message is sent to the device representative and the perioperative team to address.
An encrypted photo of the paper bill and its accompanying clinical and patient demographic information is stored in Kermit and rich data visualizations across spend categories, surgeon cohorts and your various hospitals are presented in easy-to-read key performance indicators and dashboards to track real time savings, average case costs, and more. Advanced analytics allow you to compare costs of like cases across surgeons, create pivot tables, and export graphs for your presentations. In addition, our proprietary classification system allows for in-depth drill downs for products and surgery types. All of this levels the playing field in a dramatic way the next time you go to bid.
Want to learn more about Kermit?
Kermit is helping hospitals save millions in PPI spend every year. Fill out the form below to learn how Kermit can help your hospital.