Advancements in medical technology have increased the demand for surgical implants. These implants, such as artificial joints and heart valves, pacemakers, ventricular shunts and cochlear implants, have revolutionized how doctors treat patients, helping them live better, more fulfilling lives.
The implantable device market is projected to reach $166.3 billion by 2032. Although this growth is exciting, it also highlights the need for healthcare to transform digitally.
Implant orders currently account for approximately 10 percent of all purchase orders, representing 40 to 60 percent of supply chain spend. Today, only a tiny portion of this expenditure is automated due to the unique nature of consignment implant orders, which complicates procurement and invoicing processes.
To reduce the complexity and realize significant cost savings, healthcare must prioritize automating implant orders, ensuring the right products reach the right patients at the right time.
The Complexity of Implant Orders
Health systems collaborate with multiple manufacturers to obtain implants and medical devices, primarily purchased on consignment. In a consigned inventory model, the vendor retains ownership of the products even after they are delivered to the provider. When the products are used and require replenishment, the provider issues a purchase order.
Consignment orders are complex because every manufacturer has specific implant purchase order requirements. The requirements often vary but can include the serial number, lot number, case ID, sales order and sales representative ID, procedure date, medical record number, and even where to send orders. This can make it challenging for buyers who must stay informed about the specific requirements of each trading partner to keep replenishment orders flowing smoothly, regardless of order type.
Further complicating matters, how implants are stocked and replenished depends on the service line. For example, tissue and optical lenses are typically kept in inventory because the frequency and volume of procedures involving these items can be predicted more easily. In orthopedics, a surgeon performing a hand surgery might open a whole kit from the sales representative but only use certain components within that kit as part of the procedure. This variation leads to multiple subtypes of consignment orders – consigned, bill-only, or bill and replace.
Over time, hospitals have unintentionally developed complex and customized business flows for various service lines, procedures and vendors, making it challenging to automate consignment implant orders. This has defaulted to a reliance on manual processes. Further, the capabilities of providers’ ERP and MMIS systems vary, creating additional barriers to sending automated consignment implant orders electronically.
When multiplied across different care locations and health networks, it’s easy to see how consignment orders have become unwieldy, inefficient and wasteful. Based on GHX’s internal statistics, up to 40 percent of a buyer’s time is spent on order processing and exception management, while one to three percent of total med-surge spend is wasted on missed contract compliance savings. In a time of tight operating margins, few hospitals can afford to lose a single dollar to price and contract misalignment. The industry must collectively try to break free of the status quo.
A Collaborative Effort to Standardize and Automate
Streamlining implant orders in healthcare has been a significant challenge, but progress is being made. GHX, in cooperation with more than 20 of the industry’s leading suppliers and providers, has identified a starting point. The group collaborated for a year to establish guidelines and best practices for standardized and optimized implant order management, focusing on the minimum data elements necessary to support consignment implant orders. By adopting these guidelines, the hope is that healthcare stakeholders can begin to work from the same playbook, ultimately eliminating the need for customized processes between trading partners.
To maximize automation, reduce variation and increase efficiency, the group made the following recommendations:
Automate all subtypes: Automation across only one subtype may create even more work for a provider or supplier that has multiple processes within a single trading partner relationship.
- Providers send subtypes electronically
- Suppliers accept all subtypes electronically
Providers send, and suppliers accept minimal data elements: Limiting the amount of PHI shared between trading partners to only the most critical pieces further simplifies the ordering process.
- Sales ID (preferred) or Case ID
- Lot or serial number
Adhere to the recommended timing: Ordering, invoicing and revenue cycle billing are trigged by the below events. Any delays within these processes will cause downstream impacts that can also result in a return to workarounds and manual efforts.
- Case sheet to provider
- Preferably the same day and no later than 24 hours after the case is completed
- Purchase order to the supplier
- Up to two business days for bill-and-replace
- Up to five business days for bill-only, waste-only and replenish-only
Managing implant orders similarly to non-implantable med-surge spend will help improve transaction accuracy, reduce the frequency of pricing discrepancies and decrease the time to purchase, invoice, and payment. It will also reduce administrative tasks and costs in providers’ procure-to-pay and suppliers’ order-to-cash processes and build a data foundation upon which clinical, financial and logistical insights can be delivered.
A Foundation for Healthcare’s Tomorrow
Consignment implant orders are one of the last remaining frontiers for automation, and the industry must act now, particularly as surgical volume increases and procedures shift beyond hospital walls to ambulatory surgery centers (ASCs). The ASC market is expected to grow to $59.3 billion by 2028 and coordinating the delivery of supplies to these additional points of care in a timely and efficient manner will be crucial to the market’s growth and profitability. Automation will help drive savings and better visibility across hospital procurement and supplier fulfillment departments, regardless of the care setting. In addition, bringing advanced automation to all healthcare processes is critical to the industry’s digital transformation and future. Automation creates a foundation for the analyses that allow providers and suppliers to make needed operational and clinical improvements, from financial management and cost efficiency to reducing waste and improving patient outcomes.
About Chris Luoma
Chris Luoma is the senior vice president of Strategy at GHX. Prior to this, as vice president of Product Management, Luoma led the procure-to-pay, credentialing, and business intelligence product portfolio teams and has overall responsibility for the Vendormate subsidiary. Before joining Vendormate, Luoma served as director of Product Marketing for Bottomline Technologies, working with clients and market thought leaders to make payment and document-centric interactions between customers, suppliers, and employees more productive and efficient.
