Getting the price right: Hospitals target variation in joint replacement (ModernHealthCare)
When HonorHealth leaders were looking for ways last year to decrease spending, the joint-replacement service line stuck out as a big opportunity.
The procedures are one of the Scottsdale, Ariz.-based system's most popular—and lucrative—service lines and make up a significant percentage of supply chain costs, which account for nearly 40% of its $1.7 billion in revenue, according to 2016 financial data from Ernst & Young. But HonorHealth was paying more for parts than its competitors.
"If you haven't been focused on the cost of your implants and the cost of your supplies, you get a natural creep up—we were simply paying too much. The prices we were paying exceeded what we believe is the market price," said Alice Pope, chief financial officer at HonorHealth, which operates five hospitals in Phoenix and Scottsdale.
The system worked with Premier, the large group purchasing organization and consultancy, to figure out how its approximately 15 implant vendors compared to each other in costs. They found a lot of variability.
Costs were "anywhere from 10% to 20% higher than we should've been a...
