Sales versus scholarship in medical device procurement

I received an e-mail regarding the April 2005 Clinical Business Strategies column, "What can, should and does a physician preference item cost anyway?"

The e-mail's author described himself as "an educated and informed former healthcare worker" who is now a "technical consultant with a highly respected distributor in the medical/orthopedic field."

He wrote to take exception to facts quoted in the article--all fully sourced--regarding the costs of PPI devices, especially the relative costs of R&D versus sales and marketing costs. He felt that the column unfairly characterized medical device representatives--"the workhorses of the medical device industry" in his view--as salespersons. He stated, "We are an integral part of any surgery center, physician's office, hospital and patient's healthcare ... I find ... experienced representatives in the medical device field to be scholars after all."

He added that "our compensation is not always guaranteed on a daily basis because most of us are paid by commission."

Well, therein lies the problem: "Scholars"--educators--are paid salaries in this country, to the best of my knowledge. Commissions are a payment mechanism for salespersons, not scholars. Do we provide hospital access to PPI vendors to educate personnel? To allow them to sell? Both? How can we allow access for "scholarship" while limiting sales during patient procedures? Where is the line between legitimate patient care, and sales?

Maintaining quality controls

An influential factor in PPI procurement that can circumvent the materials manager's jurisdiction is vendor presence in patient procedures. Lately, materials managers are not the only ones questioning this common PPI marketing practice.

The U.S. Department of Justice (DOJ) recently issued subpoenas to orthopedic implant manufacturers requesting information about their relationships with orthopedic surgeons. While it's not known if DOJ is questioning these companies specifically about vendor presence in the O.R., this practice does tie directly to the relationship that is under scrutiny by DOJ.

With a new focus on implementation of Sarbanes-Oxley standards in hospitals, especially standards related to conflicts of interest and internal controls, sales professionals who work on commission and have access to and influence on hospital and medical staff may merit a closer look. Materials managers who are accountable for supply chain processes in their hospital may wish to work with hospital legal counsel and procedure area clinical managers to minimize the hospital's legal risk and clarify policies on vendor access to procedure areas and patient care and off-contract purchasing occurring during patient procedures.

Vendor access to surgical areas

Often the materials management department is the gatekeeper/enforcer/disciplinarian for vendor access to hospital procedure areas, such as the GI suite, O.R. and Cath Lab. But materials management staff cannot possibly be the watchdog in the clinical departments at all times. A collaborative, common-sense approach including materials management, clinical departments, legal counsel and administration works best.

There is legal risk in allowing unstructured vendor access to procedure areas, ranging from medical malpractice to HIPAA violations. Your legal counsel is an integral part of the team to decide what level of legal risk your hospital is willing to tolerate, and what policies are needed to manage the risk. Administration's role is to reinforce to physicians the necessity of compliance with established policies as a means to manage both hospital and physician legal liability. It is also the role of the hospital executive team to "back up" clinical managers and materials staff when a physician questions or even violates the policies.

In an ideal world, manufacturers would employ clinical educators that are salaried (as opposed to commission-reimbursed) personnel. This practice clears any hint of impropriety. Educators could provide technical guidance in the implantation of the medical device with patient outcomes their only motivation and reward. In this ideal world, the role of a sales representative would be to present product benefits to physicians and procurement professionals in a controlled environment, then work with purchasing on the financial exchange. Physician education during procedures would be the rote of those whose only interest is the best patient care. This happens today in the world of clinical commodities. Why not PPI as well?

Off-contract PPI purchasing

Clearly, it is the materials manager's role to negotiate pricing and implement contracts for PPI items. The hospital has control of both price and quality of on-contract devices.

But what happens when off-contract PPI items are implanted into patients? The hospital loses control of both cost and quality.

As a national clinical service line consulting company with more than a decade of experience, Aspen Healthcare Metrics has a host of "war stories" in this area. Here's one that is not an isolated incident: A hospital negotiated capped prices for orthopedic implant constructs with several orthopedic vendors. Unknown to materials management, one vendor subsequently began bringing in only implants that were not covered in the contract. The orthopedic surgeons had no idea that those products were off-contract and being billed at list price. An audit for the hospital determined that the vendor had billed the hospital $300,000+ for off-contract products.

There is financial risk in that kind of "backdoor" purchasing, but there is also legal risk. Are those implants covered by the standard warranties and indemnification? And while physicians should evaluate their own malpractice exposure when implanting off-contract devices, hospital counsel should evaluate the legal risk posed by implanting off-contract items.