Last month, in a press release we issued about the Medical Device Excise Tax (MDET), we discussed the ramifications of the tax on the cost of surgical products.
Zachs Equity Research issued a report on 10/2 forecasting the MedTech industry stock outlook, noting that healthcare reform in the form of the ACA (Affordable Care Act) “has led to a less flexible pricing environment for these companies and may increase pricing pressure across the board. Moreover, the highly controversial tax, representing a part of the Act, will be a drag on device companies. The outlay is expected to throttle innovation as it will impact investment in R&D. Moreover, it will lead to job cuts and higher prices for customers… In response, device makers are employing several initiatives, including headcount reduction and other restructuring activities, to counter costs associated with the implementation of the new tax.”
The tax, 2.3% of the cost of medical devices – including surgical instruments – will be passed along to the consumer. It’s wider scope is already being felt. Welch Allyn plans to reduce its work force by 10% over the next three years, due in part to the tax implementation. They currently employ 2,750 people in the U.S. And hospitals are looking for ways to reduce costs, fully aware that the rise in medical device expenditures will come at a time when insurance companies are lowering pay-outs for procedures. Stryker also announced a plan to reduce its workforce ahead of implementation of the tax.
How can your facility avoid sticker shock on January 1, 2013?
- Don’t buy the cow if you only need the milk – If the instruments you require are typically part of a set, take stock of what your surgeons currently use. Not all instrument vendors will allow you to break sets but a vendor like surgicalinstruments.com will. Work with a product consultant to price out only the items you need.
- Prioritize your requirements – Sponge forceps are obviously not as critical to surgeon satisfaction as delicate eye instruments. You can save a lot of money by asking your surgeons to identify instruments of which quality is of lesser importance and by making changes in those areas.
- Don’t take your GPO for granted – In many cases, specialty surgical instruments aren’t included in the contract pricing of a GPO. Assuming that you’re getting a good deal is just that – an assumption. Take two seconds to call 1-800-600-0428 and ask for a price comparison.
- Plan ahead – Work with your facility’s finance department. Find a way to make major purchases before the end of 2012.
- Buy more durable instruments – Moving away from disposables where possible can save you a lot of money with immediate results.
- Increase your sterilization tray inventory – During the month of October, take stock of your sterilization tray inventory. Having plenty of trays on hand means that you are able to turn around instruments more quickly, helping reduce your reliance on disposables and other methods. If you need more trays, consider ordering them before the end of December.
- Be aware of return policies – Ask your product consultant to give you detailed information about the return policy for the instruments in your quote and/or order. Being absolutely certain of the return policy on each instrument can save you money by eliminating mistakes and misunderstandings.
- Repair, don’t replace – Many damaged instruments can be repaired at a fraction of the cost and most repairs are warrantied. Consider surgical instrument repairs by third-party vendors instead of the manufacturer or replacement when possible.