Are physician preference items getting squeezed again?

Is it time to rethink our strategies about which hospitals to target? Sure, IDNs are a juicy target, but getting them to convert to a competitor’s products just took on a whole new layer of complexity. According to a report in Modern Healthcare, [1] hospitals can save $25.4 billion/year if they improve their supply chain operations and harness the data within their systems. The report indicates that high performing hospitals utilize data-savvy physicians to classify and regulate physician preference items (PPI) with the goal to yield clinically equivalent patient outcomes at lower costs. These physicians work side-by-side with hospital quality team members to examine data that tie the costs to patient outcomes.

The numbers estimated in the article (n=2,300 hospitals) suggested that supply costs in top-tier hospitals (per adjusted patient day) as compared to with the total cost per all hospitals led to an approximate 17.7% supply chain expense reduction, or, on average, approximately $11 million a year per hospital.

How do we avoid getting our products knocked off the PPI list?  

An ounce of prevention is worth a pound of cure. Eliminating products from the PPI list requires organization to get physicians, administrators and nurses engaged and to agree to create thresholds for their choices to standardize care.

Physician preference is still heavily influenced by technology factors and sales/service factors [2]. Other considerations are:

  • Vendor reputation

  • Financial relationships with the vendor

  • Device costs

Vendor reputation is the key

When medtech companies present a well-articulated economic value proposition of their device or service, they have significantly higher loyalty and advocacy in hospital systems [3]. These medtech manufacturers collaborate closely with multiple stakeholders within hospital systems to understand their goals and objectives, fit their offerings to clinician and administrator needs, and develop a compelling message about the total value delivered.

Health systems will continue to try to standardize purchasing. But accomplishing this requires a certain level of sophistication. It is no longer only about negotiating for the same type of equipment and supplies to gain better pricing. Hospitals are standardizing vendor contracts, device sourcing and the proposal process, as well as unifying their ERP technology and item masters. And, for-profit hospitals require extra effort to overcome the obstacles in maintaining your position on the PPI list.

Contact us to find out where your product stands on the PPI list. Then, let us help you to make sure the reputation of your company and the value proposition your products is crystal clear, to keep your medtech device on the PPI list.

How can we help you? Our last three projects were:

  • Medical device strategy development for a legacy product in a commodity space

  • Medtech price sensitivity analysis

  • M&A third party analysis