The Orthopedic Implant Bill Only System: Bad Medicine For Everyone
Back in the 1940s, if you went to the grocery store, you would most likely hand the proprietor a list of items you needed. The store owner would proceed to gather whatever was on your list, while you waited around for him to procure the goods from the shelves. When the items were brought forward, you often paid “on credit” - you had an account at the store. The store owner would be responsible for and expect payment on an installment basis or at a later date.
This business model was pretty much lousy for all parties involved. For the store owner, it was very laborious and expensive. Running around picking things off of shelves was a time sink for him and not the best use of his skills as a business owner. It was costly as well, as he had to carry the “float” on the extended credit, and also spend a lot of time chasing customers for money. Cash flow was a bear. For the grocery customer, it wasn’t such a great deal either. His ability to shop for the best combination of price and quality was controlled by a a second party (the shopkeeper), who didn’t always have his best interests in mind. He was letting someone else control and run his grocery and goods supply chain. He took what he got and he paid whatever the store owner informed him the price was, or he went hungry.
Of course, today this model has gone the way of the dinosaur. It almost seems laughable and silly, and its inefficiencies obvious.
Would you be shocked if I told you there is a multibillion dollar industry today that still operates on something very close to this model? Look at this mess....
Welcome to the OR implant supply chain “bill only” model. It is still prevalent at many hospitals in 2018. The device sales rep/OEM is the shopkeeper, and the grocery customer is the hospital. Lets look at the similarities between the two.
The device rep chooses and orders the implants (groceries) , for the hospital, often with limited checks and balances. He manages and stocks the inventory (the shelves). Its a very labor intensive job, with almost no days off. He is also responsible for chasing down payment for the items at a later date, as the hospital receives the items delivered without a purchase order (called “PO to follow”). The rep/device industry also carries the “float” or cost of money on the credit, as items are ordered “bill only” which means no purchase order from the hospital.
As mentioned the hospital receives the implants on a “credit”. They have little control over what is ordered, and trust the rep to keep the shelves stocked. As such, they have limited influence over determining product mix or “value”. They implicitly trust the rep (the shopkeeper) to pick what they need. However, the rep/shopkeeper is motivated by HIS best interests and profit motive in determining the decisions, not necessarily choosing value for the hospital/customer. It can be an expensive conflict of interest and drive up costs and compromise best value from the customer standpoint.
The old grocery store system was costly and inefficient, and the OR implant supply chain “bill only” model is just as bad for everyone in healthcare. It’s a legacy of hospitals lacking the tools to manage complex and mission critical surgical product lines and their respective supply chains, and surgeons needing technical support in the operating room (which will never change). It simply doesn’t have a balance of market forces acting within it, however. It’s a dinosaur.
How is this changed? Automate the OR implant supply chain. In this model, the hospital can take responsibility for its own groceries, and be more free to choose value. The device rep is freed to sell value to his preferred customer (the surgeon), instead of spending long hours stocking items. The expensive proposition of extending credit and chasing bills is solved through automation of the order/bill process, which helps cash flow for the OEM. And the torrent of accurate, real time usage data (driven by point of use scanning) will be be a revelation to device company management used to guessing on both what is going on with their end users and granular details on consigned asset turns. It will be a godsend for production planning and management. In a competitive system, the savings from greater efficiency will be passed on the the customer (hospitals).
I know what model I would run my business on. Literally everyone wins.
How is the OR implant supply chain automated? Digital management of orthopedic sets and trays. Scanning at point of use and subsequent digital data management will unleash the same benefits to the OR implant industry as it did the grocery industry (and every other modern industry it touches, think Amazon for an example). It will give hospitals more control over their own “groceries”.
And how are orthopedic sets and trays digitized? I’d recommend you look up my previous articles to see who has the solution for that….and how the whole process "summates".
Summate Technologies, Inc