LeAnne Smith Maria C. Hernandez, MBA, BSMT(ASCP)Kathey Leibold, RRT Lee Barnhart, RN

Understanding the Impact of

Consumable Costs that Exceed

their Capital Investments

2

– Joined MD Buyline in 2001

– Consumable team leader

– Previously served as Project

Manager at HELP

International

LeAnne SmithConsumable Analyst, MD Buyline

Presenters

– Joined MD Buyline in 2007

– 18 years in the clinical

healthcare field

– MT(ASCP) certified

– Member of American Society

of Clinical Pathologist

– Member of American

Association for Clinical

Chemistry

Maria C. Hernandez,

MBA, BSMT(ASCP)Clinical Analyst, MD Buyline

– Joined MD Buyline in 2002

– Over 35 years in the clinical

healthcare field

– Registered Respiratory

Therapist

– Member of American

Association of Respiratory

Care and Texas Society for

Respiratory Care

Kathey Leibold, RRT Senior Clinical Analyst,

MD Buyline

– Joined MD Buyline in 2005

– 22 years in the nursing field

– Currently practicing RN

– Clinical Juror for the

Certification Commission on

Health Information

Technology (CCHIT)

– Member of Emergency

Nurses Association

Lee Barnhart, RNClinical Analyst, MD Buyline

3

The Impact of Consumable Costs

• Projecting true costs for a new technology include considering:

– Capital

– Labor

• Outside of capital cost and labor, consumables present the next

largest line item for hospitals.

“In some instances, these [consumable] costs

may be equal to or even exceed the initial

capital outlay.” Todd Nelson, HFMA Technical Director,

hfm magazine, August 2013

– Consumables

– Overhead

– Service

4

Clinical Laboratory: Example

5

Clinical Laboratory: Consumables

• Laboratory consumables have a different meaning than they do in the general

healthcare setting; it is important to understand the terminology used by

laboratory product vendors

• Vendors may often exclude the

largest/most expensive portion of

the material needed to run the instruments

(reagents, calibration and control materials)

– Lab consumables typically include

pipettes, slides, collections cups,

stirrer sticks, tubes, filters, tubing,

etc.

– Reagents, calibration and control

material are typically not grouped

with other consumable items

The Clinical Laboratory

6

Chemistry

Hematology

Microbiology

Coagulation

Blood Bank

Point of Care

Molecular Genetics

Immunology

Source: Caris Life Sciences

7

Clinical Laboratory: Chemistry Analyzer

*Source: MD Buyline

• This profile is a routine test ordered by almost all healthcare providers

in nearly all settings for determination of a patient’s health status

• A chemistry analyzer uses many reagents, consumables and quality

control (QC) material

Vendor Average Purchase Price*Procedures to

Breakeven

Vendor 1 $166,683 18,850

Vendor 2 $388,000 35,666

Vendor 3 $227,000 20,827

Vendor 4 $265,000 18,454

Vendor 5 $359,000 33,000

8

Clinical Laboratory: Consumable Cost

Discipline Capital Cost* Consumables Cost per year*

Hematology $301,100.00 for 3 analyzers $87,666.65

Chemistry $210,000.00 for 2 units $1,109,278.00

Molecular

Diagnostics

$67,998.40

3 units and components$494,274.31

*Source: MD Buyline

Core Lab

Discipline Capital Cost* Consumables Cost per year*

Glucometer$1,625,390.00

300 units and components$2,092,424.70

Chemistry$61,567.27

6 analyzers and components$342,032.16

Point of Care

9

Clinical Laboratory:

Purchasing Considerations

• Reducing consumable costs in the laboratory requires a unique

approach

• Most clinical laboratory setting vendors offer three types of purchasing

options:

– Direct Purchase

– Reagent Rental

– Cost per Reportable

10

Purchasing Considerations:

Direct Purchase

• The facility outright owns the instrument and related accessories

– Purchase can be paid upfront or financed from a vendor or a third party lender

• Direct purchase scenarios are broken down by:

– Instrument(s)

– Service

– Reagents

– Consumables

– Financing fees (if any)

Pros

• Details facilitate negotiation

• Higher observed savings

• Negotiating future purchases

Cons

• Time intensive negotiation

• Upfront capital requirements

• Outdated equipment

11

Direct Purchase Example

12

Pros

• Easier to budget for

• No upfront capital investment

• Updated equipment

Cons

• Difficult to negotiate pricing

• Penalties for decreased

reagent usage

Purchasing Considerations:

Reagent Rental

– Fair Market Value Lease

– $1 Buyout Lease

– Simple Rental

• The instrument is “free” with the purchase of reagents

– Vendors often tack on an upcharge for all reagents or consumables to

compensate for lost revenue

• Reagent rentals can be priced as:

– Cost per Test

– Monthly Payment

• Reagent rental offers several types of pricing structures (simple,

moderate and complex)

13

Reagent Rental Examples

• Types of pricing structures

– Simple pricing structure can be seen

in systems that require a kit to run a

test or panel of tests

– Moderate pricing structure is seen in

microbiology, molecular diagnostics,

hematology, and other esoteric areas

of the laboratory

14

Reagent Rental Examples

– Complex pricing structures are seen in chemistry, immunoassay, special

chemistry and blood bank

15

Purchasing Considerations:

Cost per Reportable

• Facility pays set price per patient result obtained using the instrument

• Cost of equipment and service typically rolled into the cost per test

• Often gives purchasers a false sense of low pricing

– A few cents difference here can mean the difference between hundreds of

thousands, if not millions, of dollars in additional costs to a facility

– Know what is rolled into the cost per reportable amount

Cons

• Itemization typically not given

• Difficult to negotiate pricing

• Difficult to compare quotes

• False sense of low pricing

• Penalties on Usage: Higher volumes

results in higher costs

• Pricing seldom easy to understand

Pros

• Easier to budget for

• No upfront capital necessary

• New Instrument at end of

contract

16

Cost per Reportable Example

Reportable

Category

Price per

Reportable

Quantity per

Year

Annual Dollar

Amount

CMP $0.060 1,296,333 $77,779.98

Gen. Chemistry $0.096 438,811 $42,125.86

Esoteric $0.540 88,945 $48,030.30

TDM $1.620 25,993 $42,108.66

DAT $0.840 248,292 $208,565.28

Proteins $1.980 51,738 $102,441.24

Specialty $2.550 12,788 $32,609.40

Electrolyte $0.042 1,279,722 $53,748.32

Indices $0.018 430,355 $7,746.39

Minimum Annual Commitment: $615,155.43

What type of purchase option does your lab typically utilize?

• Direct Purchase

• Reagent Rental

• Cost per Reportable

• A combination of two or three

• Don’t know

Poll Question

17

Respiratory: Pulse Oximetry

18

• Pulse oximetry offers a noninvasive measure of oxygen saturation of

arterial blood (SpO2)

• Considered part of the basic standard of care along with heart rate,

respiratory rate, blood pressure and temperature measurements

• Used over the continuum of care in areas such as:

– Critical care

– Emergency Department

– Labor & Delivery

– Surgery

– Post-Anesthesia Care Unit

– Central monitoring on post-surgical floors

– Recommended uniform screening panel

guidelines for newborns

Source: Schiller

19

Pulse Oximetry: Types

• Handheld

– Lightweight without elaborate alarms or wave forms

– Designed for spot checking, short term or when a quick view of a SpO2 is needed

– Includes fingertip, wrist-worn and handheld models

• Bedside or Table-Top

– Most common type; ideal for continuous or long-term monitoring

• Multimodality

– Combines the measurement of additional parameters

– Examples: capnography, methemoglobin, carboxyhemoglobin, etc.

• Module

– Integrated into patient monitors, OR anesthesia monitors, defibrillators, infusion

pumps, portable vital sign units and mechanical ventilators

• Central or Remote Monitoring System

– Composed of a central station and bedside oximeters

– Utilized to monitor patients on a general care floor

– Hardwired or wireless RF systems

20

*Source: MD Buyline

Pulse Oximetry: Pricing by Type

Type of Pulse Oximeter Price Range*

Handheld Finger-tip: $300 - $600

Handheld: $1,200 - $4,000

Bedside or Table-Top $1,600 - $6,000

Multimodality An additional $2,000 - $6,000 on bedside pricing

depending on additional parameters

Module Physiological monitor module: $2,000 - $3,500

Infusion pump module: $3,400

Central or Remote Monitoring

System

$20,000 - $50,000, depending on bed

configurations

Additional cost for bedside pulse oximeters

21

*Source: MD Buyline

Pulse Oximetry: Pricing by Vendor

Vendor Handheld* Bedside* Central Monitoring*

Vendor 1 $450 - $845 $2,500 - $5,000* $20,000 - $112,000

Vendor 2 $500 - $900 $1,500 - $4,000 $28,000 - $90,000

Vendor 3 $200 - $600 $1,000 - $2,000 N/A

22

Pulse Oximetry: Sensor Types

• Single use disposable sensors

– Expensive

– Offer superior performance and accuracy

– Exert less pressure on the surface of the skin

– No risk of cross contamination

• Two piece sensors

– Lower cost

– Same performance of a single use sensor

– Small risk of cross contamination since cable is reused

• Reprocessed

– Cost per sensor is low

– Performance can be compromised

– No risk of cross contamination

• Reusable

– Cheapest and often most durable

– Low accuracy

– Possibility of cross contamination

What type of sensors are you mostly using at your facility?

• Single use sensors

• Two piece sensors

• Reprocessed sensors

• Reusable sensors

• An even mix of two or more different sensors

Poll Question

23

24

Pulse Oximetry: Sensor Pricing by Type

Type of SensorStandard

Adult/Pediatric*

Standard

Neonate/Infant*Specialty*

Single Use

Disposable

Sensors

• Min: $3.91

• Max: $15.90

• Average: $8.72

• Min: $4.23

• Max: $20.32

• Average: $11.45

• Min: $17.36

• Max: $29.70

• Average: $22.44

Reprocessed

Disposable

Sensors

• Min: $6.00

• Max: $6.92

• Average: $6.46

• Min: $6.50

• Max: $7.42

• Average: $6.96

• N/A

Reusable

Sensors

• Min: $90.00

• Max: $196.46

• Average: $139.12

• Min: $199.00

• Max: $245.00

• Average: $207.97

• Min: $184.50

• Max: $195.00

• Average: $189.75

*Source: MD Buyline

• Patient body weight

• Skin integrity

• Perfusion

• Duration of monitoring

• Patient activity level

• Infection control concerns

25

Pulse Oximetry: Sensor Selection

• Competitive bids

• Market share commitments

– Provide good leverage to reduce sensor price

– Commitment level is negotiable and can be spread across multiple vendors

• Volume commitment

– Only useful for single use or reprocessed disposable sensors

– Volume of sensors should always be determined and set by the facility

– Ensure there is no price increase during the length of the term

– Vendor may agree to provide the equipment at no charge/reduced charge when

provider agrees to a set dollar amount in sensors

Determine upfront if the volume commitment required is sustainable

• Rebates

– Complex contracts that require a significant number of hours to ensure compliance

– We strongly discourage these type of contracts, if a vendor can afford to offer one

then it is likely that they can afford to reduce the cost of the sensors

26

Pulse Oximetry: Purchasing Considerations

Respiratory: Bronchial Thermoplasty

27

• Used to treat patients with severe asthma when it is not controlled well

by inhaled corticosteroids and long-acting beta agonists

• Currently, only one system is FDA approved

• System is comprised of:

– Controller unit

– Single patient use catheter

• Three disposable catheters are required for

each patient during a single treatment session

• Patients are treated through multiple sessions, targeting identified

areas of the lungs

Source: Asthmatx

Respiratory: Bronchial Thermoplasty

28

• At $7,500 per treatment, the cost of the consumable catheters

exceeds the price of the system ($48,999) after 6.5 treatments

• Typical consumable cost overall per patient treated ~$22,500

Pricing for Vendor 1*

Bronchial Thermoplasty Controller

Min: $48,999

Max: $59,999

Average: $56,384

Single Use Catheter

Min: $2,500

Max: $2,500

Average: $2,500*Source: MD Buyline

• Bundle programs

– Associated with consumable agreement offering a discounted price

for the system with a commitment to purchase a set volume of

catheters

29

Bronchial Thermoplasty:

Purchasing Considerations

Is your facility currently offering bronchial thermoplasty treatment?

• Yes

• No

• Unsure

Poll Question

30

• Temperature management systems are widely used as a

neuroprotectant and cardioprotectant

• Need for temperature management systems is expected to grow in the

next ten years

• Studies continue to validate the significant clinical impact of

temperature regulation and induced (therapeutic) hypothermia

31

Nursing: Temperature Management

Therapeutic hypothermia is most often used to lower a patient’s

body temperature in order to help reduce the risk of ischemic

injury to tissue following a period of insufficient blood flow.

• Strong clinical evidence for use in cardiac arrest patients, those

suffering from hemorrhagic shock and several forms of severe brain

injury

• Several major U.S. cities require ambulances to transport cardiac

arrest patients only to hospitals with hypothermia capabilities

• Temperature management is recognized as part of the standard of

care for critically ill or surgical patients by:

32

Temperature Management :

Clinical Evidence

• Strong

33

Temperature Management : System Types

Temperature

Management SystemsDifferences

Endovascular/Intravascular

Requires physician involvement

Potential for bleeding complication

Studies indicate a more rapid cooling rate

Surface Management

Accomplished by nursing personnel, quick to apply

Potential for skin burns

Two types: conductive and convective

What type of temperature management systems are you using at your facility?

• Endovascular/Intravascular

• Surface Management

• Don’t currently use any temperature management system

• Don’t know

Poll Question

34

• The outcome for both types of temperature management systems is

related to reducing mortality and providing better neurological

outcomes at discharge

• This can be considered a soft dollar reimbursement

– Clinical evidence associated with temperature management shows a direct

correlation with improved outcome and recovery

– This can be linked with a reduced length of stay and complications

– This offers a financial benefit to hospitals through the Affordable Care Act

Hospitals are measured by the quality of care they provide related to decreasing

“never events” and hospital readmission

35

Temperature Management:

Soft Dollar Considerations

36

Temperature Management:

Pricing by Vendor

Vendor Price Range*

Vendor 1 $34,436 - $34,856

Vendor 2 $33,372 - $40,639

*Source: MD Buyline

Endovascular Surface Management

Vendor Price Range*

Vendor 1 $12,355 - $14,535

Vendor 3 $38,000 - $41,000

Vendor 4 $6,950

Vendor 5 $4,500 - $4,795

• Price differences between high and low end systems based on:

– Graphical user interfaces

– Color displays

– Type of data tracked and trended over time

*Source: MD Buyline

• Careful patient selection is critical to help control cost since items are

single patient uses

• Clinical evidence suggests patients who should potentially be

excluded from using the devices include these characteristics:

– Greater than 6 hours after cardiac arrest

– Major head trauma

– Major surgery within 14 days

– Systemic infections

– Patients with ongoing bleeding

– Patients in a coma from other causes (e.g., drug intoxication)

• By limiting patient selection to those patients that have shown benefit

from induced hypothermia, hospitals are able to control costs

37

Temperature Management:

Other Financial Considerations

38

Temperature Management:

Consumable Cost

Vendor Description Average Price*

Vendor 1

Catheter A triple lumen $858

Catheter B triple lumen $750

Catheter C triple lumen $550

Vendor 2 Catheter A single lumen $1,322

Vendor Description Average Price*

Vendor 2Flow channels for water

circulation

$595

Vendor 3Hydrogel coating mimic water

immersion

$1,122

Vendor 4 Water circulation $300

Vendor 5 Water circulation $308

*Source: MD Buyline

Catheters

Surface Products

39

Temperature Management:

Purchasing Considerations

• Catheters and surface products are vendor specific

• Vendors do not typically offer pricing discounts based on committed

volume or market share

– Consumable items are routinely left off purchasing contracts

• Best practice: Negotiate consumable costs at the time of capital

purchase

– This is when you have the most negotiating power

– Lock in pricing for at least three years

• Large hospital systems using more than one device should negotiate

jointly for consumables if possible

• Cardiac ablation is used to correct heart rhythm

disorders, often when medicine is not effective or

appropriate

• Ablation uses two different types of energy to

destroy diseased or damaged tissue in the body

– Radiofrequency (RF)

Utilizes heat, which is created from radio waves is the most

commonly used ablation technique in cardiac indications

Energy is a low-voltage, high-frequency form of electrical energy

– Cryo

Utilizes extreme cold, which is produced by a coolant, such as argon or nitrous oxide

• Ablation affects cells closet to the catheter tip, which results in scar

tissue, this disrupts the electrical current, and, in most cases, causes

the heart to return to a natural rhythm

40

Cardiology: Cardiac Ablation

Source: The Mayo Foundation

Which type of energy are you using for your cardiac ablation procedures?

• Radiofrequency

• Cryo

• Don't know

Poll Question

41

- Improved outcomes can now be linked to soft dollar considerations under

the Affordable Care Act

- Current clinical evidence suggests cardiac ablation can decrease the

likelihood of recurrence in patients anywhere from 44-87%

• Atrial fibrillation (AFib) is the most common heart rhythm disorder treated

with cardiac ablation, leading to blood clots, stroke, heart failure or other

complications

• Cardioversion is the first line of treatment, followed by ablation

– Recent prospective randomized trials have indicated that catheter ablation might

offer better outcomes over traditional anti-arrhythmic medications for some patients

• In 2010, European Society of Cardiology guidance supported the use of

catheter ablation without first attempting anti-arrhythmic drugs

• Soft dollar considerations:

42

Cardiology: Cardiac Ablation

43

Cardiology: Pricing of Generator

Vendor Generator Price*

Vendor 1 Cryo Based System: $7,000

Vendor 2

RF Based System: $25,000

Cryo Based System A: $17,500

Cryo Based System B: $170,000

Vendor 3 RF Based System: $33,000

*Source: MD Buyline

44

Cardiology: Probe / Catheter Cost

Vendor Probe / Catheter Cost*Cost for 20

Procedures/Year*

Cost over Life of

Generator*

(assumed 7 years)

Vendor 1 Cryo Probe – $2,995 - $3,000 $59,900 $419,300

Vendor 2

RF Probes – $1,695 - $3,495

Cryo Probe A – $2,795 - $2,900

Cryo Probe B – $1,700 - $4,800

$33,900 - $69,900

$55,900 - $58,000

$34,000 - $96,000

$237,300 - $489,300

$391,300 - $406,000

$238,000 - $672,000

Vendor 3 RF Probe – $650 - $1,500 $13,000 - $30,000 $91,000 - $210,000

*Source: MD Buyline

• There are no third party sources for supplying the catheters

• Once you purchase a generator, you are essentially locked in to purchasing

the consumables from the specific vendor

45

Cardiac Ablation: Purchasing Considerations

• Two different types of purchase options:

– Outright purchase of the capital equipment

– Capital equipment offered at no charge, based on an annual

commitment of catheter or probe purchases

Negotiate consumable costs prior to purchasing the generator

Ensure catheter or probe cost is clear from the beginning

Remember: Consumables are tied to vendors, there are no third

party options

• We recommend considering the outright purchase of the capital

equipment

Conclusion: Understanding your Purchase

46

• There are commonalities with regards to cost management, purchase

negotiation, facility considerations, and hurdles across ALL departments:

o Choose the Equipment that is right for your facility

o Determine your annual procedure volumes

o Choose the length of the agreement that best fits your facility

o Know your expected cost increases

o Ask Questions before you agree to anything