How facilities can address medical device costs

Nov 6, 2014 | Hospital Budgets

Today, the health care landscape is largely defined by shrinking reimbursements, rising costs and extensive cost-control efforts. Both clinical staff and physicians are more conscious of the financial impact of treatment decisions, and focused more intently on keeping costs down. 

For the last ten years, medical device sales have grown at an annual rate of 9 percent, according to a recent report by HRI MD&D. Hospitals and orthopedic practices routinely use Group Purchasing Organizations, or GPOs, in order to control spending. These arrangements help reduce supply chain expenses and help give the buyer more leverage, but according to experts, even joining a GPO can not guarantee low costs. 

Global consulting organization Ernst & Young explains that medical device costs are particularly hard to control, compared to other areas of medical equipment. This is because of the large amount of research and development spending that goes into producing novel devices, and that the materials used are very expensive.

As GPOs now struggle to find lower costs, some within the industry have begin pursuing other arrangements. Some hospitals now have created direct contracts with medical device companies based on a "fixed-fee" arrangement. This helps keep prices from rising, as long as priorly-agreed upon quality standards are maintained. 

Care facilities with active orthopedic or surgical services departments may consider a similar strategy to help keep costs down. As the medical device industry begins to produce more intricate, connected and expensive devices, pursuing such an agreement now could help reduce costs in the future. 

Accounts receivable management professionals can also protect cash flow by outsourcing receivables management. This helps to reduce the number of dollars written off to bad debt, and helps provide the cushion necessary to weather financial challenges.