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ABSTRACT
As an alternative to a limited vendor/volume discount approach, our hospital employed a physician-driven free market strategy aimed at reducing joint implant costs. Surgeons were provided with vendor pricing and peer profile comparisons of implant cost data and asked to select implants providing the best value based on patient need. Vendors were challenged to reduce prices where appropriate. Total savings based on the 19951 997 volume-adjusted cost difference were $1 ,059,1 59, a 1 7.5% decrease. These results demonstrate the possibility of reducing joint implant costs using a strategy that does not limit vendors or cap prices.
The introduction by Medicare of diagnosis related groups and fixed payment reimbursement focused hospitals on the necessity to manage the cost components of patient care. With the growth of managed care and capitation, hospitals are being pressed further to drive excess cost out of health-care delivery systems.1
At our institution, operating in a heavily penetrated managed care environment, most reimbursement from health management organizations is at less than the Medicare rate. Given that physician practice patterns directly influence the cost of providing care to patients, more is being asked of physicians with regard to controlling hospital costs.
It is estimated that the cost of primary hip and knee arthroplasties performed in the United States each year exceeds $10 billion.2 Studies have reported implant cost alone comprises as much as 17%-45% of the total cost of hip or knee arthroplasty.26 This may be the equivalent of as much as 40%50% of the total diagnosis related group payout under Medicare.7
Recognizing that reducing the high cost of implants provides the best opportunity for decreasing the cost of total joint replacement, a number of institutions have reported on efforts to reduce implant costs using a variety of strategies. These include implant standardization, limiting vendors, and capping prices.812 A major issue common to all these strategies is that they may limit the physician's choice of vendor.
After experiencing meager success with a limited vendor volume discount approach, our institution developed a physician-driven free-market approach aimed at reducing total joint replacement implant costs while preserving as much as possible the surgeon's freedom to choose from a variety of implant vendors.
MATERIALS AND METHODS
A computerized database was developed, and using...