Tag Archives: physician preference items

Intalere Member Best Practice Spotlight-Woodlawn Hospital Cost Reduction on Orthopedic Implants


Woodlawn Hospital was incurring a cost increase on orthopedic implants every year while their reimbursement remained the same. The facility needed to find a way to reduce their cost of implants.


Woodlawn tried to negotiate directly with their supplier and to also “piggy back” onto a contract with another local hospital. While the supplier would not allow the facility to be added to the other hospital’s contract, they did offer a 10% reduction on their own contract. Although this was a savings, Woodlawn felt that too much money was still left on the table. Woodlawn’s Intalere representative introduced the facility to the Intalere Clinical Advantage Program (ICAP), which offers a proven strategy for reducing costs of physician preference items. After meeting with the ICAP representative, Woodlawn determined that this program was the solution to their issue.


With the help of ICAP, Woodlawn Hospital was able to reduce costs for orthopedic implants by 24%. The Materials Management department monitors the invoices with new current pricing and if a discrepancy occurs, the invoice is held. To date, pricing has been correct.


Woodlawn Hospital is a 25-bed critical access hospital located on 33 wooded acres in Rochester, Ind. Along with the hospital it has five different outreach clinics.

View the Woodlawn Hospital page in the 2017 Intalere Best Practices Compendium.

Solving the PPI Problem

Lori Pilla

By Lori Pilla, Vice President, Supply Chain Optimization and Intalere Clinical Advantage, Intalere

The costs and inherent issues of physician preference items (PPIs) in hospitals and surgery centers have been challenges in the healthcare setting for many years. But as providers are faced with shrinking reimbursements and service line contribution margins in this era of healthcare reform, finding innovative ways to align with physicians and reduce costs while maintaining high standards of quality care takes on even greater importance.

With 10,000 people each day turning 65, and the reality that this portion of the population will grow to 20% by 2030 and that 1 in 12 of the population will have total knee replacements, this device cost issue will continue to escalate.

But just recently, the need to act on this issue reached a new level of critical urgency when the Centers for Medicare and Medicaid Services (CMS) proposed a mandatory bundled payment model encompassing total joints, called Comprehensive Care for Joint Replacement (CCJR). Specifically, CCJR is a bundled payment model that covers care for joint replacement patients from admission through 90 days following discharge including physicians services, inpatient services, long-term care, rehabilitation, skilled nursing, durable medical equipment, pharmacy and more.

The model will be implemented beginning January 16, 2016, for five years in 75 cities that cover approximately 35% of the country’s population. Hospitals in these areas will be required to participate in CCJR under the current proposal. The areas are a mix of large cities, which include New York City and Los Angeles, medium cities and smaller cities.

Prior to the start of each performance year, CMS will provide participant hospitals with Medicare episode prices, called target prices. The target price includes a 2% discount over expected spending and incorporates a blend of historical hospital-specific spending and regional spending. The new model is also aimed at providing incentives for improved quality of care as well. Hospitals will have to meet performance measures in three areas including:

  1. Risk-standardized complication rate following elective hip/knee replacement.
  2. 30 day all cause readmission rate following elective hip/knee replacement.
  3. Hospital consumer assessment.

Following completion of the performance year, hospitals that achieved spending below the target price and meet the quality performance thresholds on the three required measures will be eligible to earn a reconciliation payment from Medicare for the difference between the target price and the actual episode spending, up to a specified cap.

But what happens if the episode spending exceeds the target price? That burden will fall on the hospital – meaning the hospital is ultimately financially responsible for episode costs driven by physicians, skilled nursing facilities (SNFs) and post-acute providers.

Many providers will need to reduce their operating costs by 15-25% to assure continued viability in the value environment. This isn’t going to be achieved by simply reducing the cost of surgical sponges. As a result, physician alignment and post-acute partnerships are critical to success. Hospitals should closely align with high-quality, low-cost physicians and post-acute care providers. Therefore, executives need strategies for how to engage physicians in addressing hospital issues.

To learn more, including strategies you can undertake to address these challenges, download Intalere’s new briefing, Physician Alignment: Solving the PPI Problem.



Medical/Surgical Supplies and Physician Preference Items – Strategies to Improve Your Program

Pilla, Lori business shotBy Lori Pilla, Vice President, Clinical Advantage and Supply Chain Optimization, Intalere

With reimbursement and service line margins shrinking, supply chain managers need proven strategies to cut supply costs, especially in the area of medical surgical supplies, without affecting the quality of care. Nearly half of all med surg supplies used are in the area of physician preference items (PPIs), including devices and implants. PPI costs are growing by 10 percent annually.

What is fueling this growth? Currently, more than 10,000 baby boomers turn 65 every day and will make up nearly 20 percent of the population in 2030. This explosive growth in the U.S. aging population is having the same effect on orthopedic procedures, which is expected to grow by 13 percent over the next 10 years. Check out this infographic to get more information.

With this in mind, it is important to have a strategy in place to deal with PPI. What are some things that your strategy should include?

Develop a Value Analysis Team and Process – To be successful, facilities must develop value analysis processes and stringent financial review of new procedures and device adoption as part of their standard processes and policies. Projects will impact all levels of the organization, from leadership to physicians, surgeons, nurses and materials managers. They should all be involved.

Make Sure Leadership and Physicians “Buy In” – The involvement of senior leadership assists in maintaining momentum on projects and highlights the significance of them to facility employees. Senior leadership must be willing to support the process, stay with it through difficult moments and see it through to completion. It is imperative that the facilities’ physicians be engaged in the process from the outset as well, so they understand the objectives and feel engaged from the start.

Data Rules – Good data, especially relative to cost and outcomes, provides the facts and evidence needed to communicate the realities facing every stakeholder, both internally and externally. It can help drive standardization discussion and other areas to streamline procedures.

A good program, starting with these basics, will provide enhancement in clinical outcomes and quality through standardization and consistency between procedures. The impact is felt at each level as a less-is-more approach increases efficiency and decreases errors.

To learn more about how to develop a PPI program, listen to this podcast , or contact me at lori.pilla@amerinet-gpo.com.

Cost Reduction – Deeper Value Beyond a Portfolio

Wright Dale edited 9922 cropped

By Dale Wright, Senior Vice President of Contracting, Intalere and President, Intalere Choice

A healthy and sustainable operating margin is vital for every healthcare provider. In maintaining that margin, optimizing the supply chain is of critical importance, not simply through cost of products, but through identifying new revenue streams and identifying all opportunities to improve efficiency and achieve savings by prioritizing opportunities and matching initiatives to the organization’s strategic plan.

What are some of the keys to cost reduction in the healthcare supply chain to consider?

Access to a comprehensive, competitive portfolio of product and service contracts – Whether you work with a group purchasing organization (GPO) or not, the depth and breadth of contract portfolio you have access to can offer a clear advantage. Without a contract for coverage, you may be forced to:

  • Negotiate directly with suppliers – given the limitations of resources in many materials management departments, this can be a huge drain on efficiency and resources.
  • Use a different product/manufacturer, if clinically acceptable this would require time-consuming evaluations and assumes a different product/manufacturer is readily available.
  • Pay a higher price

 Not just on the clinical side, with things like:

  • Diagnostic Imaging ​
  • Laboratory
  • Medical/Surgical
  • Physician Preference
  • Pharmacy

 But also on the non-clinical side:

  • Office  
  • Environmental Services
  • Executive
  • Facility Management  
  • Financial Management
  • Foodservice
  • Information Technology (IT)
  • Telecommunications Services and Equipment

Standardization, Utilization and Volume Commitment – Identifying and eliminating duplication, in some cases helping or guiding members to use less of something or eliminating its usage entirely, is very important. Supply chain data analysis can also provide opportunities for the use of comparable products that can drive costs down dramatically. In many situations, similar products from different manufacturers can be reviewed and declared comparable. The best price then becomes a leading differentiator. Also, in some cases, the same product by different distributors can be found at different costs.

To take it a step further, if providers are willing to standardize and also commit a high volume to a supplier or distributor, they can drive further savings.

  • Custom Contracting – Health systems, integrated delivery networks (IDNs) and regional health alliances can also take advantage of custom contracting to maximize savings in high-impact areas. You can engage your GPO to handle the RFP, office and back-office activities, assist with identifying target projects, help evaluate suppliers and monitor contract compliance. Each custom contract represents a unique savings agreement that gives your organization a competitive advantage.
  • Physician Preference Items – Even more significant to the overall success of the supply chain is the effective management of clinical preference items, with their significant cost and impact to the quality of services delivered to the patient. Efficient value analysis processes will ensure that all bases are covered with regard to high tech and high touch healthcare products, including reimbursement, safety, education and clinical credentialing, product standardization, appropriate utilization, and finally, and most importantly to the organization’s cost structure, compliance with negotiated contracts and agreements. 
  • Data and Business Intelligence – Any successful supply chain initiative must be based on good data and tools that can help you  analyze daily spend and provide workable and actionable information to effectively manage costs. This can encompass every supply chain function, including the basics such as contracting and price integrity, e-procurement, inventory control and distribution efficiency that will ensure high quality and cost effective product availability and delivery.

For more insight on the importance of reaching beyond the portfolio to enhance cost reduction, view this video.