justin freed, executive director of supply chain gary botimer, md, chief of orthopedics ilsa nation,...
TRANSCRIPT
![Page 1: Justin Freed, Executive Director of Supply Chain Gary Botimer, MD, Chief of Orthopedics Ilsa Nation, RN, CNOR, Director of East Campus O.R. Taking Back](https://reader035.vdocuments.net/reader035/viewer/2022062318/551c428e5503467b488b4b82/html5/thumbnails/1.jpg)
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Justin Freed, Executive Director of Supply ChainGary Botimer, MD, Chief of Orthopedics
Ilsa Nation, RN, CNOR, Director of East Campus O.R.
Taking Back the O.R.Introducing a Rep-less Model
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(Justin to insert pic of LLUMC and speak to the Mission of LLUMC)
Faithful to Our Mission:
To continue the teaching and healing ministry of Jesus Christ.
Founded in 1905.
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UniversityHospital
90 ICU281 Acute371 Beds
Children’s Hospital84 NICU99 ICU
165 Acute348 Beds
East Campus Hospital
8 ICU65 Acute61 Rehab134 Beds
Behavioral Medicine
Center
89 Behavioral89 Beds
Heart & Surgical Hospital
4 ICU24 Acute28 Beds
Murrieta
12 ICU94 Acute106 Beds
297 ICU Beds629 Acute Beds
89 Behavioral Beds61 Rehab Beds
1076 Total Licensed Beds
Loma Linda University Medical Center
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Region in Focus: Inland Empire
LLUMC
Serving the Inland Empire for Over 100 Years
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LLUMC Health Payer Mix
Note: all data excludes normal newborns.
Source: OSHPD, 2012, LLUMC.
27%
39%
26%
1%7%
LLUMC
Private Coverage
Medi-Cal
Medicare
Self Pay
All Other
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Healthcare Pressures
External Internal
• The “Knowns” and Unknowns of Obamacare
• CMS Initiatives• Value Based Purchasing
• Stewardship and Financial Health of LLUMC
• Demographics• Competition in the Market
place• Preservation of one of the
last U.S. Christian Medical Schools
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Obamacare
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Healthcare Pressures
External Internal
• The “Knowns” and Unknowns of Obamacare
• CMS Initiatives• Value Based Purchasing
• Stewardship and Financial Health of LLUMC
• Demographics• Competition in the Market
place• Preservation of one of the
last U.S. Christian Medical Schools
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Overcoming Healthcare’s Pressures…
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BACK TO SCHOOL
LLUMC Goes …
“Disruptive Re-engineering of the Orthopedic Supply Chain”
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Understanding the Traditional Ortho Supply Chain
Inefficiencies & Hidden Distribution Costs
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Traditional Supply Chain Model
TRADITIONAL MODEL
Contract Manufacturer
OEM (Zimmer, Biomet)
Distributor or Agent Sales RepGPO
Hospital or ASC
Traditional P&L of KneeSelling Price $5,000 100%
COGS - $1,250 - 25%
SG&A - $2,000
- 40%
R&D - $250 - 5%
Operating Profit $1,500 30%
Copyright © 2014, OrthoDirect USA, LLC. All rights reserved. Do not duplicate content or graphics without permission.
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COGS of Traditional vs. Direct-Access™ Supply Chain Model
Copyright © 2014, OrthoDirect USA, LLC. All rights reserved. Do not duplicate content or graphics without permission.
TRADITIONAL MODEL
OEM (Zimmer, Biomet)
Distributor or Agent Sales RepGPO
Hospital or ASC
Traditional P&L of KneeSelling Price $5,000 100%
COGS - $1,250 - 25%
SG&A - $2,000
- 40%
R&D - $250 - 5%
Operating Profit $1,500 30%
Contract Manufacturer
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SG&A of Traditional Supply Chain Model
TRADITIONAL MODEL
Contract Manufacturer
OEM (Zimmer, Biomet)
Distributor or Agent Sales RepGPO
Hospital or ASC
Traditional P&L of KneeSelling Price $5,000 100%
COGS - $1,250 - 25%
SG&A - $2,000
- 40%
R&D - $250 - 5%
Operating Profit $1,500 30%
Copyright © 2014, OrthoDirect USA, LLC. All rights reserved. Do not duplicate content or graphics without permission.
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Commoditization of Orthopedic Implants
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Commodity Structure of the Ortho Industry
New Models of Implants Not Better, Study FindsBy BARRY MEIERAPublished: December 22, 2011
“New study suggests that the recent technology for artificial hips and knees did not perform any better than older, less expensive designs.”
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Culture of Subjective Decision Making
Relationships
Brand Loyalty
Rep Influence
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On the Outside Looking In
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Traditional vs. Direct-Access™ Supply Chain Models
Hospital or ASC
TRADITIONAL MODEL
Copyright © 2014, OrthoDirect USA, LLC. All rights reserved. Do not duplicate content or graphics without permission.
Sales RepDistributorOr AgentGPO
OEM(Zimmer,
Biomet, etc)
ContractManufacturer
DIRECT-ACCESS™ MODEL
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Direct-Access™ Supply Chain Model
Direct-Access™ P&L of Knee
Multiple Manufacturers
Selling Price $1,250 100%
COGS - $450 - 36%
SG&A - $100 - 8%
R&D - $62.50 - 5%
Operating Profit $637.50 51%
Hospital or ASC
DIRECT-ACCESS™ MODEL
Copyright © 2014, OrthoDirect USA, LLC. All rights reserved. Do not duplicate content or graphics without permission.
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Recap of Traditional vs. Direct-Access™ P&L
Copyright © 2014, OrthoDirect USA, LLC. All rights reserved. Do not duplicate content or graphics without permission.
Selling Price $1,250 100%COGS of Lean Manufacturer
- $450 - 36%
SG&A - $100 - 8%R&D - $62.50 - 5%Operating Profit $637.50 51%
Selling Price $5,000 100%COGS + (Lg. Ortho Overhead)
- $450($800)
- 25%
SG&A - $2,000 - 40%R&D - $250 - 5%Operating Profit $1,500 30%
Traditional P&L of Knee Direct-Access™ P&L of Knee
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Recap of Traditional vs. Direct-Access™ P&L
Copyright © 2014, OrthoDirect USA, LLC. All rights reserved. Do not duplicate content or graphics without permission.
Selling Price $1,250 100%COGS of Lean Manufacturer
- $450 - 36%
SG&A - $100 - 8%R&D - $62.50 - 5%Operating Profit $637.50 51%
Selling Price $5,000 100%COGS + (Lg. Ortho Overhead)
- $450($800)
- 25%
SG&A - $2,000 - 40%R&D - $250 - 5%Operating Profit $1,500 30%
Traditional P&L of Knee Direct-Access™ P&L of Knee
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Recap of Traditional vs. Direct-Access™ P&L
Copyright © 2014, OrthoDirect USA, LLC. All rights reserved. Do not duplicate content or graphics without permission.
Selling Price $1,250 100%COGS of Lean Manufacturer
- $450 - 36%
SG&A - $100 - 8%R&D - $62.50 - 5%Operating Profit $637.50 51%
Selling Price $5,000 100%COGS + (Lg. Ortho Overhead)
- $450($800)
- 25%
SG&A - $2,000 - 40%R&D - $250 - 5%Operating Profit $1,500 30%
Traditional P&L of Knee Direct-Access™ P&L of Knee
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Recap of Traditional vs. Direct-Access™ P&L
Copyright © 2014, OrthoDirect USA, LLC. All rights reserved. Do not duplicate content or graphics without permission.
Selling Price $1,250 100%COGS of Lean Manufacturer
- $450 - 36%
SG&A - $100 - 8%R&D - $62.50 - 5%Operating Profit $637.50 51%
Selling Price $5,000 100%COGS + (Lg. Ortho Overhead)
- $450($800)
- 25%
SG&A - $2,000 - 40%R&D - $250 - 5%Operating Profit $1,500 30%
Traditional P&L of Knee Direct-Access™ P&L of Knee
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Recap of Traditional vs. Direct-Access™ P&L
Copyright © 2014, OrthoDirect USA, LLC. All rights reserved. Do not duplicate content or graphics without permission.
Selling Price $1,250 100%COGS of Lean Manufacturer
- $450 - 36%
SG&A - $100 - 8%R&D - $62.50 - 5%Operating Profit $637.50 51%
Selling Price $5,000 100%COGS + (Lg. Ortho Overhead)
- $450($800)
- 25%
SG&A - $2,000 - 40%R&D - $250 - 5%Operating Profit $1,500 30%
Traditional P&L of Knee Direct-Access™ P&L of Knee
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Implementation of a Rep-less Model
• Engage the help of a Learning Development and Change Management Partner
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Logistics
• Establish a Objective Decision Making Process
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Logistics, continued
• Assign Responsibility and Accountability for Managing the Provider’s Orthopedic Service
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Logistics, Cont.
• Educate the O.R. Staff
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The Grade Card
• More Control• More Choices• Lower Costs
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Volumes
• 154 Total Hips• Approximately 60% Reduction in Hospital Spend
• 234 Total Knees• Approximately 62% Reduction in Hospital Spend
More than 90% of Primary Joint procedures are done “Rep-Less”
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The Keys to Success
1. Clear Vision
1. Physician Alignment
1. Systems & Process Focused, Not Product Focused
1. Collaboration of Direct-Access™ and Capitation Strategies
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Thank you…
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Questions?
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References
• Botimer, Gary D., MD. Redefining Value in Healthcare: Why Providers need to take back their OR. 2013.• Gioe, Terence J., MD, Sharma, Amit, MD, Tatman, Penny, MPH, Mehle, Susan, BS. Do “Premium” Joint Implants
Add Value?: Analysis of High Cost Joint Implants in a Community Registry. Clin Orthop Relat Res. 2011 January. PMCID: PMC3008865. http://www.ncbi.nlm. nih.gov/pmc/articles/PMC3008865/#CR3.
• Herman, Bob. 4 objectives hospitals must pursue to shift successfully to value-based care. Becker’s Hospital CFO Report. June 03, 2013.
• Keckley, Paul H., PhD, Coughlin, Sheryl, PhD, MHA, Gupta, Shiraz PharmD, MPH. “Value-based Purchasing: A strategic overview for healthcare industry stakeholders.” Deloitte Development LLC. 2011.
• Kowalczyk, Liz. Plans steer patients to lower-cost hospitals. Boston Globe. February 10, 2011.• Marshall, Frank. Hospital Physician Alignment: Managing change in the shifting healthcare environment.
January 2011.• Mendenhall, Stan. “Repless” Implants?” Orthopedic Network News. 2010.• Mitchell, Thomas. Case Study: How Loma Linda University Medical Center is taking back their OR and improving
access to healthcare. 2013.• Robinson, James C. Value-Based Purchasing For Medical Devices. Health Affairs, Vol 27, Number 6. 2008.• Weisman, Robert. Study: The business model for the medical device industry is unsustainable. Boston Globe.
October 2012.