One of the biggest expenses in orthopedic and spine surgery is device and implant costs. Providers often pay a premium for name-brand products, many of which are actually commodities, and the sales representatives that come along with them. However, downward pressure on reimbursement is forcing providers to examine healthcare costs and cut those costs wherever necessary to provide true value-based healthcare. PDP Holdings is a company that works with surgeons, hospitals and device manufacturers to provide high quality implants at a lower cost. Their business model allows surgeons to select implants — oftentimes from the same suppliers they already use in the operating room — and purchase them directly from the manufacturer, cutting out the distributor and sales rep as the "middle men" in the equation. Here are three benefits of a PDP's direct purchase implant model:
1. Hospital benefits. Joseph Truhe, senior vice president and general counsel for PDP Holdings, says hospitals can save 10 to 20 percent or more, on these surgical devices, even for the identical supplier. In one case, the company was able to save a Texas hospital 40 percent on devices on a DRG comparison, accounting for the elimination of "upselling" in the OR and the use of non-premium equivalents. Such savings are particularly attractive if the hospital is participating in accountable care organizations, bundled payments or another type of risk-sharing arrangement to lower costs and provide better care
2. Surgeon benefits. Within the company's model, surgeons partner with PDP to lower supply chain costs and control physician preference item decisions. In return, they share in the savings generated by the model. Mr. Truhe says that since physicians take real risk, maintain independence from manufacturers, and operate under strict compliance requirements, this type of venture complies with current regulatory guidance from the Office of the Inspector General.
3. Device company benefits. PDP holds an event where device companies can display their products and invites participating surgeons to examine their options and then make decisions about which devices to use. This access to surgeons is highly sought after and shows that device companies are willing to partner with physicians in their cost-cutting initiatives going forward.