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Beating High Orthopedic Implant Costs: How to Save Money With Generics

Written by  Blair Rhode, MD, Sports Medicine Orthopedic Surgeon and owner, RoG Sports Medicine | Tuesday, 13 September 2011 18:42
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This article was written by Blair Rhode, MD, Sports Medicine Orthopedic Surgeon and owner, RoG Sports Medicine.
I am an orthopedic surgeon. I also started a generic orthopedic implant company. I often think back to the time when a surgery center informed me that I could no longer bring my patients that required shoulder surgery to their surgery center. You see, I was informed that my patients requiring rotator cuff surgery or labral surgery actually lost the center money — and these were patients with "good" insurance, such as Blue Cross and the like. Facility reimbursement was as low as $1,400 and implant costs were often more than $1,000. Something was definitely wrong. Call me old fashion, but it is my belief that all cases should pay for themselves.

I also believe that new ideas should be well compensated, and old ideas shouldn't so much. Therein lays the little secret of the orthopedic implant industry: 75 percent of all the implants we use are "old" or stable technology but still garnering huge prices. These devices based on "old" or stable technology don't have patent protection. How do I know? Well, I just started an orthopedic company that is made up of generic implants (RoG Sports Medicine). Stable technologies in other industries become value offerings. My biggest worry about buying a computer is that next week there will be a cheaper (and better) one on the market. So how do we achieve these savings in the orthopedic arena?

Keeping company and production costs low

We have made the process relatively simple: we have developed a line of generic shoulder anchors and taken out as much cost as possible. We removed all overhead. We don't have sales representatives or a fancy corporate office filled with expensive executives and streamlined instruments and product line. You might think that we had to make these things in some Chinese factory with 40 cents-per-hour workers, but that is another piece of misinformation. The cost is not in the manufacturing. While the other companies are pushing their production off to Asia, we manufacture our FDA-approved implants in the USA (Michigan) and our instruments are made in Germany. Sales and administrative costs account for 43 percent of the average implant cost. Put a sales representative in the operating room and implant usage goes up by as much as 30 percent. All this screams: Get rid of the sales rep. So we did.  

How hospitals and surgery centers can lower implant costs

What does the hospital or surgery center need to do? First and foremost, say good bye to the sales representative too. In order to do this, the center must become an owner again. This means taking over the process of management of implants and instruments. Put simply, you need to count how many anchors you have and own your instruments.  These are activities that surgery centers once did but long ago gladly gave away to the companies. Through the sales representative and consignment instruments, the operating room no longer had to think. Have a rotator cuff repair? — call the rep.   

The problem is that this comes with a huge price tag. We have shown with our company that the surgery center and hospital can save 75-90 percent by taking back ownership. Want a $49 rotator cuff anchor? Say goodbye to the sales rep and take back ownership.  

Blair Rhode, MD, is a sports medicine orthopedic surgeon from the Chicago suburbs. He formed RoG Sports Medicine in 2010 when he realized that spending $200 to $400 for shoulder anchors that had no patent value seemed absurd. You can contact him at: Blairbones@gmail.com.

Related Articles on Orthopedic Implants:

Generic Orthopedic Implants' Time Has Come

Successes and Failures: 18 Orthopedic and Spine Device Companies Battling a Tough Market

42 Orthopedic and Spine Devices Receive FDA 510(k) Clearance in August


Last modified on Monday, 19 September 2011 14:27
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