Dive Brief:
- A small handful of hospitals have begun training their own employees to do the job of an orthopedic implant sales representative. The "rep-less" model is being used to cut costs and reduce the influence of device manufacturers on surgeons.
- The savings to hospitals can be dramatic. The sales, general and administrative costs of these devices can run from 40% to 50% on the price of implants. Half-off reductions go a long way in reducing supply chain costs. Hospitals most likely to undertake the model are academic medical centers (because of policies on reps in the operating rooms), those that have risk contracts or safety net hospitals.
- Device manufacturers are giving up their relationships with surgeons, but they can benefit in other ways. Manufacturers can gain market share and cut costs by reducing the number of sales reps. It also allows smaller manufacturers to compete more equally with some of the larger players in the industry.
Dive Insight:
As healthcare has been reshaped by the Affordable Care Act, hospitals have looked to cut costs anywhere they can. Because supply-chain costs are the second-highest next to labor, it is natural that this area is a place they looked to make changes.
But businesses like device manufacturers (and pharmaceutical companies), which have long been sacred cows in medicine, can also use this opportunity to rethink their business model. This year, they began paying a 2.3% tax through the ACA. They will be forced to cut costs and innovate and hospitals can be the beneficiary of these changes.