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Issues & Legislative Committee Report

April 13, 2006

JCAHO / Gainsharing Update

Gainsharing Agreements

Recent comments in Research Daily commented on Gainsharing Agreements and the opportunity for success in smaller, rural facilities being greater than that of larger institutions with more physicians. Because we most often grant surgeons the opportunity to select the supply products used, especially higher end orthopedic implant devices, the opportunity to make significant advances in this area appears to be limited.

At a recent Symposium, William L. Healy, M.D. of the Lahey Clinic gave examples of the balance of hospital economics, surgeons' preference, pricing, patient outcomes, and ethics. His focus was total joint arthroplasty (TJA) as a highly successful and increasingly popular procedure. Healy explained that TJA is targeted for cost control by CMS because of increased prevalence, the high cost per procedure and it being an expensive CMS cost center. Hospitals are struggling to make a profit because the payments lag the cost increases. DRG payments from Medicare are simply not keeping pace with the costs. Hospitals attempt to influence the selection of implants by limiting choices and looking at developing programs such as Gainsharing.

Healy argued that a surgeon's priority must be the "best" patient outcome (pain relief, improved function, and durability) and secondarily, the surgeon must consider the hospital economics. Higher cost implants are not always the best, but there is insufficient evidence-based information for consensus on design, materials, fixation, bearing surfaces, etc.According to Healy, the effective methods of cost reduction he cited were:

The Orthopedic surgeons at Lahey used these methods to develop a process to buy the "best" implants for the best price and eliminate implant restrictions. They organized a competitive bid RFP with all implant vendors and provided them with historical utilization data. One preferred vendor for TJA was selected and the hospital determined a single price for each implant type.

Healy also indicated that the economics of both the implant companies and the hospitals put surgeons in a difficult position because one is trying to influence the purchase of higher and the other of lower cost products.

Source: “A Surgeon's Look at Costs In Total Joint Arthroplasty”, Research Daily, Laing Rikkers, March 31, 2006.

eCommerce and Bar Coding

The completion of the Global Healthcare Exchange acquisition of Neoforma is complete. The Neoforma name and functionality will be retained while Neoforma customers are migrated to the GHX platform in phases. The merger will bring customer value by enhancing existing services and improved business processes to include procurement, contract management, sales analysis tools an Order Center, and a new release called AP Center. 

The only disappointment is for customers who have existing relationships with Neoforma will not be able to add new EDI vendors for up to a year as this function is transferred over to the GHX exchange. Neoforma is managing this by region, and due to limited resources managing this transition, new members can only be transitioned one at a time.

Quality & Medication Errors/Benchmarking

Patient Lifting Law for Patient Safety in Washington State

Washington Governor signs patient lifting law for patient and worker safety. It requires each Washington Hospital to establish a “safe patient-handling program” that develops policies covering all shifts and all hospital units. There are many other provisions and the law provides tax credits for hospitals that invest in lift equipment.

Source: Joseph Conn, Modern Healthcare Daily Dose, March 27, 2006.

New Benchmarking Company

Benchmarking Excellence LLC has been formed to provide hospitals with a blend of data, research, content, and supply chain expertise to assist hospitals in reducing the cost of their in-house materials management operations. Visit the company’s website at www.benchmarkingexcellence.com.

Source: Healthcare Purchasing News Online April 5, 2006.

Group Purchasing Organizations (GPOs)/Code of
Conduct Principles

Senate Judiciary Subcommittee Meeting on Antitrust, Competition Policy and Consumer Rights

On March 15, 2006, Senator DeWine (Subcommittee Chairperson) opened the meeting with his comments including, “The purpose of this hearing is to evaluate where we stand today. Is this industry competitive, or is legislation required to inject competition into this industry? As we have discussed before, GPOs are, simply, organizations that manage purchasing of medical equipment and supplies for most of our Nation’s hospitals. Their ability to combine the purchasing power of the hospitals makes them an important part of the healthcare market.”

Testimony was presented from Richard J Bednar, Coordinator of Healthcare Group Purchasing Industry Initiative. His comments focused on history of the industry and the hearings, formation of HGPII, its core principles, and the plans for self governance. He said, “Additionally self-governance keeps GPOs focused on best practices, not minimal compliance with regulations. Unfortunately, it is an unavoidable outcome of regulation that the focus tends to shift to satisfying the letter of the law rather than its spirit.”

Testimony next came from Mark B. Leahey, Executive Director of the Medical Device Manufacturers Association. His comments centered on historical industry perspective, and genesis of the hearings. He alluded to anticompetitive and exclusionary practices of GPO’s (in general). Leahey finished by saying, “If you repeal the GPO “safe harbor” that Congress created 20 years ago under entirely different circumstances, you will restore competition in the healthcare market and ensure that patients and caregivers have access to the best products at the best prices.”

Testimony was heard from Mina Ubbing, president and CEO, Fairfield Medical Center. Her comments focused on her experience as CEO of a healthcare provider and as Chair of the Ohio Valley Hospital Consortium as well as her positive experiences with GPO’s. Ubbing stated that hospital purchasing decisions are made based on a variety of factors. She said, “There isn’t a GPO in the nation that can dictate what we buy, or whether can get access to a medical technology that our clinicians believe is beneficial and needed in our system.”

Finally, Senator Charles Schumer spoke about the history of the hearings, the industry, and progress made. The hearing was adjourned with no final resolution. There were subsequent questions sent to the participants and as of this date, no further action or hearings are scheduled.

Source: http://judiciary.senate.gov/search_testimony.cfm?testimony=March+15%2C+2006

Ethics/Pharmaceutical and Vendor Gifts

One March 2, 2006, the “USAToday” reported that nine states are considering bills that that would require drug makers to reports what and how much they give to physicians and other clinicians every year. Massachusetts is considering a bill to ban all gifts to medical professionals from the drug industry.

The Executive Council of the Pharmaceutical Research and Manufacturers of America adopted a voluntary code to govern the pharmaceutical industry’s relationships with physicians and clinicians on April 19, 2002. This was the predecessor for the AdvaMed code for the Advanced Medical Technology Association, which was released in 2003. The pharmaceutical code is similar, as it details with cost limits of such events as meals, travel, or entertainment that should be offered to the healthcare professional. It defines the boundaries under which grants, scholarships, subsidies, support, consulting contracts, and educational/practice-related items can be provided, stating that, “Nothing should be offered or provided in a manner or on conditions that would interfere with the independence of a healthcare professional’s prescribing practices.”

However, there are concerns that this voluntary code and federal guidance are not enough. IN January, 2006, JAMA published an article written by a group of prominent physicians that called for an end to physicians receiving any gifts or financial benefits from pharmaceutical or medical device companies. There is a concern that the relationships developed in this manner present a conflict of interest that has a direct effect on patient care. The voluntary codes of ethics adopted both by the medical device manufacturers and the pharmaceutical industry are not adequate to protect patient best interest. The accepted practice of allowing healthcare practitioners to accept “modest” gifts is not well enough defined, and studies have shown that opinion can be swayed even by small gifts. The JAMA article proposes that small gifts, pharmaceutical samples, physician travel funds, speakers bureaus, ghost writing and consulting contracts be eliminated or modified.

Hospitals for a Healthy Environment (H2E)

Minnesota now has a new waste category called "Minnesota Lethal" designed to give stricter control of the disposal of hazardous pharmaceutical waste.H2E also reminded us to recycle everything possible, including old cell phones, magazines, telephone directories, and toner cartridges.