Contracting for the OR

Rapid changes in technology keep contracting professionals on their toes.

What’s new in the operating room? That’s what supply chain executives want to know – literally, that is. “Our biggest challenges with regard to the OR is [evaluating] new technology and sorting out whether it truly is new, or whether it’s simply a twist on an old technology,” says Karyn Gattermann, corporate vice president for supply chain at Continuum Health Partners, New York, N.Y.

Often, new technology includes expensive disposable parts, and supply chain executives must stay on top of this, says David Hinkle, FACHE, CMRP, senior director, VHA Supply Chain Custom Services. “Robots are a prime example,” he says. “The DaVinci robot has disposable supplies that are very expensive.” Hinkle names several other issues, which he feels impact supply chain directors in their efforts to contract for the most effective and efficient products for the OR. For instance, just as materials managers must work closely with physicians to gain their perspective on devices and products, “the OR [must] involve materials managers on the front end of identifying requirements, participating in negotiations, validating acceptable terms and conditions, and actually signing the agreement on behalf of the organization,” he says.

“[Hospital] administration is often out of sync with the contractual obligations of the institution,” he continues. “New doctors are not made aware of the existing contractual agreements that may limit their access to certain vendors. [At the same time], “the financial stressors that hospitals face require different approaches to bringing in and keeping surgeons satisfied. Hospital administration wants to increase surgical cases and boost revenue, and [in doing so] many acquiesce to surgeon demands. Then [administrators] turn to materials managers to minimize costs. This issue consistently pops up [with regard to] physician preference items.”

There continues to be “a lack of any standardized approach to contract database management, contract resource allocation and to engaging OR leadership,” notes Hinkle. “And, vendor management and access to the surgeons is still not always under control.”

Pricing continues to be an issue as well, particularly as rising petroleum costs drive up the cost of raw materials used to produce surgical devices, notes Gattermann. “Every time I pull up to a gas pump and have to pay more for gasoline, I know this impacts the cost of transporting products,” she says. “Suppliers feel this pressure as well, and they want to pass the [increased] expense along to providers, whose reimbursement is shrinking at the same time.”

Gattermann finds her team often evaluating competing products that accomplish the same or similar results. “So, it boils down to, ‘Can the same clinical outcome be achieved by using a product that costs less?’” she says. “Some things can be more objectively analyzed than others, and it may be harder to do this in the operating room compared to other hospital departments. In areas [such as the OR], where there is fast paced innovation in technology, it can be more difficult to balance expenses with clinical outcomes.”

Best tools, best care
Still, Continuum’s top priority is ensuring its hospitals have the best tools for providing the best patient care, she adds. In order to do so, value analysis teams continue to play a leading role in assessing the value of new technology. “Our clinicians have honed their attention to forums where they can come together and discuss or share information,” she explains. “They can compare what works in one hospital within our organization vs. another.”

Indeed, the recent explosion of new and/or improved technologies and digital equipment has motivated supply chain experts to develop and use more sophisticated tools of their own, such as benchmarking tools, to learn about and evaluate new surgical devices. “Having access to objective information through benchmarking and clinical outcomes studies is a big issue in the operating room,” she points out. And, given the complexities of medical technologies, “benchmarking tools can continue to improve,” she says. “While product studies are useful, we look at them to determine whether they have been funded by the vendor or run in an independent, objective environment.”

ORs today are run more like businesses. “Some positive changes we’ve seen in the last few years include improved inventory turns, reduced obsolete items and controlled flow of new products into the OR,” says Hinkle.

For Gattermann and her team, positive changes involve creating stronger ties with vendors. “Our policy is to work to establish partnerships with our vendors, such that both [parties] benefit from the relationship,” she says. “We need to provide equipment that our patients require, and we must do so at the best cost possible. But, we recognize that this must work for the vendor as well.” If the vendor is successful, it stays in business to serve the hospital’s needs, she adds.

So, while she believes physicians are basing their decisions on objective research, and hospitals are getting better at basing their contracting decisions on what will lead to the best patient outcomes, she credits some vendors as well. “I give some vendors credit for better partnering to assure that the physician’s and hospital’s goal of best tools for best patient care at optimal cost are met, as well as their own goals for sales,” she says.

Women in surgery
As the percentage of female surgeons grows, contracting professionals and device manufacturers hear more and more that certain tools, particularly laparoscopic instruments, are poorly designed for smaller hands (including that of male surgeons with smaller hands). “With regards to the issue of laparoscopic surgical instruments, it is true that they are not made for the small hands of most women surgeons,” says Mary Hooks, M.D., MBA, FACS, professor, department of surgery, East Tennessee State University and president of the Association of Women Surgeons.

“This really does need to be the focus of the most innovative equipment manufacturers, and it does surprise me that they haven’t embarked on this sooner,” she continues. “[Perhaps] they don’t think there is a critical mass yet that needs to be taken into consideration in the design of these tools. However, 25 percent of surgery residents are now women, and this number is rising, so they need to get going to appeal to this emerging market.”

Gattermann finds her surgeons are very vocal on this topic, and that surgeons with smaller hands do, indeed, express frustration handling certain designs of instruments. “But, I don’t think vendors are ignoring this in their design,” she says. “They are more dynamic than many realize. All of them take feedback from physicians, whether female or male, and evaluate it in their product design.”

Indeed, Covidien (Mansfield, Mass.) has made ergonomically designed instrumentation a priority, according to Linda Richetelli-Pepe, director of professional affairs, professional affairs and surgical education. “There are a multitude of issues that female surgeons face, both in and out of the operating room. These issues become even more complex as we consider the climate of changing demographics in the United States.”

Lesson learned
Gattermann “likes to think” that supply chain executives are constantly developing and refining their relationships with their physicians and staff. “Supply chain management must be a collaborative process with physicians and clinicians,” she says. “They must have what they need, when they need it and in the right place.”

Hinkle agrees. It is important for supply chain executives to get the OR leadership involved, he notes. “Become knowledgeable about their issues, participate in their meetings and focus on assisting them in all ways possible,” he says. “Become a valued resource, so that they turn to you for advice and expertise, rather than function outside of your knowledge. Being visible and accessible to clinicians will prove beneficial to you as you work toward contract and product awareness.”

From a contracting perspective, Gattermann has also learned that the devil is in the details. “We must read the fine print and ensure that whatever is agreed upon is in writing,” she says. “We must cross the ‘t’s and dot the ‘i’s in a contract, and we must pay great attention to contract details.

“New technology will continue to evolve at a rapid pace, and we are going to need the right tools to evaluate it,” she adds.

About the Author

Laura Thill

Laura Thill is a contributing editor for The Journal of Healthcare Contracting.