Using Data-Driven, Principled Negotiation with a Clinician-Integrated Approach to Achieve Best Values on Spinal Implants

Abstract

Objectives: In many health systems, the costs of surgical implants are one of the largest components for surgical budgets, and economies of scale in purchasing agreements do not always provide increased value due to lack of data transparency and administrative complexity. The purpose of the study was to determine if clinician-informed, well-defined negotiation strategies informed by market-based pricing and volume data from supply chain experts within the health system could achieve lower pricing levels for spinal implants and reduce the number of vendors.  Methods: Market data based upon pricing levels for implants were reviewed from an industry implant price database, and utilized by surgeon clinicians and supply chain management (SCM) to select benchmark pricing levels for common spine implants used at our institution. Results: Benchmark modeling to the 25th percentile among comparable institutions was used in the request for proposal (RFP) sent to all vendors. After three rounds of structured negotiation involving SCM and surgeon leaders, 20% savings over the previous year’s total spend was achieved, with a total savings upward of one million dollars; 8 of 22 vendors were excluded from the system. Conclusion: Negotiation tactics included utilizing benchmark pricing data, “economies of scale” principles, game theory principles, and strong internal communication strategies between supply chain, physician leadership, and actively practicing surgeons. These findings demonstrate that there is significant opportunity for healthcare SCM to further negotiate contracts and achieve favorable pricing on items such as spinal implants with surgeon collaboration and utilization of benchmark data.