Odd Man Out

Physicians’ relationships with their vendors often leave little room for the contracting professional.

ORLANDO, FLA – Two’s company, three’s a crowd. In a triangle whose points are the physician, the vendor and hospital administration, the “winner” is the one that controls two of them. Unfortunately for hospitals, in the area of physician-preference items, at least, the physician and vendor are usually the ones who are aligned, says Eileen McGinnity, president, Aspen Healthcare Metrics, Englewood, Colo. And that leaves the hospital as odd one out.

‘I pledge allegiance…’
“The relations between hospitals and their physicians usually aren’t that great,” says McGinnity, whose company provides consulting services and benchmarking data. “And that gives the vendor an opportunity to develop an allegiance with the physician.” In fact, hospital executives simply can’t be as close to their physicians as vendor sales reps, she adds. “That vendor can be in the OR every day, and take the doctor to lunch or golf after that. But the hospital administrator doesn’t have time to do that.” Nor does the contracting professional.

The reasons are well known. Medical students are too busy looking at textbooks and slides to learn about such things as running a practice or how to maximize reimbursement, says Sears. But they do develop an affinity for their vendors, because their vendors’ products form an integral part of their medical education. They often retain that affinity throughout their careers, but at some peril to the hospitals in which they practice, says Sears.

The results are predictable. Roughly 40 percent of a hospital’s supply expenses are spent on physician-preference items, and that percentage could easily rise to 55 or 60 percent, says Sears. Unless physicians hand over new-technology decisions to a technology assessment team, and stay removed from contracting and purchasing activities, hospitals will continue to flirt with financial disaster.

Changing relationships
Recent litigation may be hastening the separation between vendor and physician. McGinnity cited a recent settlement between spinal implant manufacturer Medtronic Sofamor Danek and the U.S. Office of the Inspector General, in which the manufacturer agreed to pay $40 million – without admitting any wrongdoing – to settle a whistleblower suit, in which Sofamor Danek was alleged to have paid kickbacks and other inducements (such as trips) to doctors to induce them to use the company’s products. The manufacturer was also required to sign a corporate integrity agreement, in which it agreed to educate its sales force about the Medicare anti-kickback statute, record all of the company’s relationships with physicians in which money changes hands, and record whether in fact the physician rendered the services for which he or she was paid. Where Sofamor Danek has gone, other companies may follow.

Just as the government has demanded that Sofamor Danek document its relationships with physicians, so too should hospitals demand that its doctors document their relationships with vendors, says McGinnity. “Every hospital should know all the influences on a physician who may be a leader in purchases,” she says. “I don’t think you can totally eliminate conflicts of interest. But everyone needs to know what’s going on.”

If hospital administrators can’t cajole physicians to use the low-cost item, they may simply lean on them until they do, says McGinnity. “Hospitals will be required to be more transparent [about their prices] than they have in the past, and they’ll have to defend their prices in the marketplace,” she says. Don’t expect administrators to suffer in silence as implant prices take up a greater and greater percentage of the cost of high-price procedures.