by Cindy Jones, MBA
Principal
12/09/20

There are five key drivers for a successful evaluation of physician preference items—executive champions, engaging physicians, reinvesting cost savings back into your programs, sharing information and openness to change. When all five of these drivers are present, health care organizations can achieve significant savings and improved quality.

While all of five of the drivers are important, engaging physicians is essential. You might find it challenging to determine which data sources are most valuable in your effort to engage physicians.

In my experience working with member hospitals across the country, there are five primary data sources that when combined, can lead to the greatest success. Focusing on only one or two of the data sources can shortchange understanding the big picture.

Item costs

Whatever the medical device is, share a baseline of reliable data surrounding its cost. Particularly with high ticket items such as implants, physicians need to see and understand the individual item cost. Consistent cost transparency alone has been shown to affect physician preference items. Physicians are often unaware of supply and implant costs and that their item of preference may cost more than a clinical equivalent used by a peer. Providing physicians with visibility into the cost helps to lay a foundation of understanding. If applicable, consider presenting costs in the context that a surgeon would use the implants. For example, the cost of a single patella may not be as meaningful or impactful to a surgeon as the cost of how their total knee construct compares with another.

Benchmarking tools can be great for harvesting item cost data but will not garner trust or a partnership when used alone. It is important to know if you are paying a fair market price for an item. However, be discerning in how you leverage this information. When cited as an exclusive point of reference, it may be limiting or misleading. I see organizations that either underestimate their potential or create unrealistic expectations when determining costs solely on a benchmark. This type of data exists in a vacuum and compares only exact items--that is not how today's health care facilities operate. There are many dynamic variables at play that should viewed in tandem with the benchmarks to truly optimize performance.

Variable costs

Physicians appreciate having access to data and information to make decisions. When you are able to present physicians with visibility into the variable costs for their individual cases—such as total implant pricing, time in the OR and other supplies used—and compare that to their peers internally and across the industry, physicians can be the catalyst for compelling discussions and collaborations. Ensure that you’re using comprehensive and reliable data.

Reimbursement and profitability

An understanding of item costs and the full spectrum of variable costs are necessary for discussions about overall profitability. Looking at each procedure, take into consideration those costs versus the associated reimbursement to determine if the case profitable. While the primary function of a hospital is to deliver the best possible care to their communities, if they are losing money with each procedure, the organization may be at risk of not having the resources needed to continue providing quality care.

Physicians want to know that their organizations are financially sound and that their service line is sustainable. With a full understanding of profitability, physicians are most likely to engage in efforts to reevaluate their preference items.

Quality measures

Quality data may be more difficult to extract from your facility’s information systems, but if available, it can be very powerful and vital piece of data to understand the full picture. Physicians may believe that that their cases may be more expensive because their patients are sicker. In some cases that may be true and in others it is not. Basic quality data can you help work through these important discussions. There may even be a device or supply that is more expensive but may actually lower other costs such as length of stay.

Transparency and communication

Ultimately, the data that you communicate to physicians will deliver the transparency into costs, profitability and quality that’s essential to evaluate physician preference items. Including physicians in the process through this full transparency and open communication is not only a best practice, it has become more and more critical as health care is under relentless pressure to improve outcomes while reducing costs. Awareness goes a long way and compels stakeholders to work together to achieve shared goals.

Market intelligence

Your hospital's item costs, variable costs, reimbursement rates, profitability and quality measures are all data points that can be extracted from the facility—usually through an accounting system or spend data. The next data point—market intelligence—can be a little trickier and it is part of the foundation of what our consulting team at Vizient brings to the table for our members: a comprehensive look at what is going on beyond the walls of your hospital.

The industry expertise garnered through engagements with organizations across the country and the nuances that exist within each category supplier base can add exponential value to your plans and your negotiating strategy. For example, while trauma may only have a few suppliers, spine has literally has hundreds who may or may not fill your unique needs. Understanding service line coverage potential and market share dynamics may also shape how you approach an initiative. This comes into play and creates a competitive advantage for organizations who access and leverage all five of the data sources mentioned.

About the author: Cindy Jones is an experienced lead for orthopedic and spine service lines and physician preference item technology with more than 30 years of experience in administrator or consulting roles. She helps drive innovation and financial sustainability for member technology committees and helps partners improve product utilization. Jones received her master’s in business administration from East Tennessee State University.