Wednesday, April 7, 2010

The Worm Has Turned

Recently one of our readers provided TSB with a Consignment Agreement from one of its major hospitals. It's really not important where this facility is located for our readers. The language in the agreement was surprising. Upon consigning the product to the facility, the seller assumes complete responsibility for their implants and instruments regardless.

The seller must replace consigned inventory at no additional cost, the seller/sales representative and a designated hospital employee will be responsible to reconcile the inventory on a scheduled basis, ensuring accuracy. In the event that there is a discrepancy, the facility assumes no responsibility until the dispute is resolved, placing the onus on the seller. If it is determined that a surgeon at the facility did not implant the device since the last reconciliation, the facility will not be responsible for shrinkage.

The construct prices follow:

Anterior Cervical Fusion (1 Plate, 4 Screws): $1,700
Anterior Cervical Interbody: $1,100
Stalif or Zero P Type Devics: $2,800
1 Level Lumbar Fusion: $4,700
ALIF: $3,200
TLIF: $3,200
PLIF: $1,600
Cervical Disc: $3,250
Lumbar Disc: $9,000
Osteo Biologics: 40% off of 2009 List Price (you must provide the price list)
BMP's: 10% Rebate

The agreement is structured for two years, a comprehensive catalog must be presented to the facility, introduction of any new product must be pre-approved by the facility at least 30 days in advance, any product not pre-approved will not be reimbursed. The facility and seller agree that after two years, the price increase will be no more than 3% and that if there is a decrease in Medicare reimbursement pricing will remain unchange if that decrease is less than 5%. In the event that the decrease exceeds 5% pricing will be re-negotiated, meaning paying less.

So the game is on. If this isn't happening in your respective markets, its inevitable that its coming. So, TSB wants to know some of the pricing scenarios that are beginning to surface in various markets throughout the United States. Maybe its time that we tighten our belts because healthcare is in for a ride. What are hospitals in your territory paying for an XLIF, TLIF, Stalif, Zero-P, Cervical and Lumbar Disc, biologics, or BMP's? I've seen the future and it doesn't look good for anyone regardless of where you are in the food chain.





68 comments:

  1. My local non profit eight hundred pound gorilla hospital system that is effectively a monopoly has set the price they would be willing to pay for bone putty to $105 per cc. It doesn't matter if it is calcium phosphate, DBM, or has fairy dust in it all bone putties are considered to be alike.
    Of course it doesn't help that there are 50 bone putty companies out there with pretty thin data to base a comparison on. Yes, the game is on.

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  2. 1 level acdf construct (Plate and 4 screws) $1200
    1 level lumbar (4 screws, rod, caps) $3500
    Cervical interbody (PEEK) $800
    PLIF cage (PEEK) $1850
    TLIF cage (PEEK) $2150
    DBM capitated at $1000 for 10cc

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  3. The fact that you people are posting this information is irresponsible and shows your level of stupidity.

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  4. I hate to say it but it is bad salesmanship that is the reason why bone substitute products are all being grouped together and considered commodities. The majority of reps are not comfortable speaking to this area of products, whereas they have no problem talking about thread pitch and locking mechanisms.

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  5. Funny thing is, hospitals have been trending in this direction for years now. Not to get all political here, but people are going to want to pin this change on Obamacare but the reality is the ground swell started long before Obama took office. Now, the health care bill won't help matters, but I saw this as an unfortunate reality of the business long ago. Hospitals finally saw what other facilities were up to and it was inevitiable.

    Sadly, many people will blame Obama for this and and wrongly so.

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  6. Why on earth would you post this?

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  7. He posts this because it benefits him and career objectives. If you think Musculoskeletal Man is on the side of the rep and thier companies you're on crack. It's obvious by his posts that he consults hopsitals on many things but primarily is moving towards consulting on lowering implant costs for hospitals. This man is not on our side, he's on thier side. He posts low prices, some rep that want's to feel special and are a part of something posts thier LOWER pricing, and so on and so on. Hospital admins and other hospital interests get a wif of this, it imboldens thier initiatives to decrease industry revenues, therefore decreasing your chances of hitting quota, lowering commission earnings, etc.

    MM is a disgrace and many of us see right through his rightous BS. Two-faced BS.

    What's more asinine is reps responding to this post with thier pricing. To add to the earlier anonymous, utter stupidity.

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  8. I don't think so, he knows way too much about the nuisances of specific companies and their management to just be a hospital consultant.

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  9. Einstein I have never worked for a hospital nor have I ever consulted with a facility on price. Free markets rule, unfortunately, you fail to acknowledge that salespeople and distributors are doing a great job driving down pricing by buying products from fly by night companies and low balling pricing to the facility.

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  10. Either way, the person who tries to "one up" his low pricing is shooting his/herself, and every other rep, in the foot. Brainless.

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  11. 1 level acdf construct (Plate and 4 screws) $300
    1 level lumbar (4 screws, rod, caps) $700
    Cervical interbody (PEEK) $150
    PLIF cage (PEEK) $200
    TLIF cage (PEEK) $250
    DBM $100 for 10cc

    Ha ha just kidding! Anyone can post bogus pricing on an anonymous board. Unless you state the names of the products, vendor, hospital, and volume - you are lying until proven otherwise. Anonymous boards have more misinformation than information - reader beware!

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  12. I'm an "old" spine guy from Italy and I can tell you that those prices are very common here in Europe since a very long time....and it is your turn now.....!!!

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  13. 1 level acdf construct (Plate and 4 screws) $300
    1 level lumbar (4 screws, rod, caps) $1000
    Cervical interbody (PEEK) $350
    PLIF cage (PEEK) $389
    TLIF cage (PEEK) $415
    DBM $489 for 10cc

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  14. The “veil of ignorance” is designed to be a “position of equality” that represents persons purely in their capacity as free and equal moral persons. The parties in the original position do not know any particular facts about themselves or society; they all have the same general information made available to them. They are then situated equally in a very strong way, “symmetrically” and purely as free and equal moral persons. They know only characteristics and interests of themselves in their capacity as moral persons—their interests in developing the moral powers of justice and rationality, their need for the primary social goods, and so on. The moral powers are the basis of equality, the features of human beings in virtue of which they are to be treated in accordance with the principles of justice.

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  15. Anon 10:46

    Thank you for your profound and utterly useless commentary that actually made me chuckle.

    Warning! Warning! Pervasive idiocy at critical mass!

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  16. 11:06, Your welcome. It was meant for humor. I will refrain from name calling.

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  17. I can't help but smell the irony in the air. My guess is that those that are uncomfortable with pricing being posted, are the same who rail against Obamacare and think they are advocating continuation of free markets in healthcare. I hate to break this to you, but pricing transparency is a critical component of a well functioning free market! It's the only way that a free market can enable participants to purchase on the basis of value. If you want successful free markets in healthcare in this country, which I for one do, then embrace and encourage as much transparency in pricing as possible; by doctors, hospitals, and implant companies too. Every industry does this! Groceries, Wine, Cars, Houses...

    In a free market at least some competitors need to be promoting their products as being attractive based on their price. To be an effective free market, that needs to happen in healthcare too.

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  18. I've been reading SB for some time and I think you've hit a nerve. More comments to this than other postings. Also, knowing who MM is and what he's up to is beside the point, there's change coming and we all know it. Ready or not it's coming.

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  19. I'll tell you what hits a nerve. The education system that lets people graduate from school, get a job selling spinal imlants, without knowing how to spell simple words like "their"!

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  20. Anon 11:20

    This is likely the direction we are headed. None of the markets you mention, in fact very few rational, mature markets, function with distribution margins in the 30% range. Welcome to the future 5-10% will become the norm as this shakes out. The days of a rep making more than anyone else in the company will end rapidly.

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  21. For those readers that don't believe in transparency. Hospitals have an annual meeting in Washington D.C similar to AAOS, NASS, AANS, CNS etc. Besides the usually housekeeping that is performed at this meeting, what do some of you think they are discussing, or having workshops on? The same way that United Healthcare provides a data base for the insurance industry and physicians with reimbursement guidelines by selling the INGENIX ICD-9 database, hospitals are discussing and sharing information on everything from soup to nuts including the cost of implants. So before you start spewing ridiculous comments get a thorough understanding of what is happening on a larger scale outside of your vacuum. The future will judge whether our actions were beneficial or harmed the industry. When a distributor is buying implants at a cost plus transfer price from one of the renegade implant companies, and then selling these products at a discounted price to the hospital based on the hospitals previous pricing, what do you think they are doing? Establishing a precedent for future negotiations whether it is with company X, company Y or company Z. Maybe some of the commentators are missing the point of this post. But then what would you expect from someone whose existence and livelihood is being threatened? The bottom line is that many do not hold themselves responsible and accountable for their actions, its always someone else's fault. Go figure?

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  22. Hey Anonymous 8:56

    You have a skull full of wilted lettuce.

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  23. So who cares if TSB posted prices, did this post specify an area of hospital? Besides did any one read the rest of the post. Two years, 3% increase and language specifying that if Medicare reimbursement is decreased more than 5% the contract must be renegotiated for a lower price. Does anyone believe that posting pricing from an unknown facility is going to hurt the business. What are we experiencing at the present moment. Hospitals limiting vendors, hospitals not allowing reps to sell to doctors or they will be banned from the facility, we have created a machine that stopped being well oiled a long long time ago.

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  24. It's the Wild Wild West. It's every man and woman and out for themselves. Only the strong will survive, the weak shall perish. When the banking industry deregulated itself, only the big banks survived, the same will exist in our industry. Too big to fail is coming to a market near you. The small companies will eventually not be able to sustain themselves or their business model.

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  25. no pricing for XLIF?

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  26. Anonymous 1:16pm - Get's it.

    It is supply and demand and from my perspective it's a buyer's market.

    If you're living in fear of price transparency, I'm sorry to say that that train has already left the station. The momentum starts to pick up with more and more doctors leaving private practice to find harbor in a hospital that knows how to pit unsophisticated reps against each other while snuffing out risk-laden vendor - surgeon 'consultancies'.

    I see the anxiety in this thread as a bell weather for our industry. We're getting a ring-side seat to the working end of good ole' capitalism. Markets grow, become saturated, then shrink. This is the, healthy tension that pushes talented, hard working people to get creative and deliver Value in new markets.

    Big companies will indeed remain. The others, harsh as it may sound: sell out, adapt or die.

    And, yes, rep-credentialing is already taken.

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  27. Whats to keep the larger hospital systems from developing their own me-two products?

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  28. I am sure you are all familiar with the "Golden Rule"... He who has the gold makes the rules. Living in a free market society is a double edge sword; It cuts both ways.

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  29. no pricing yet for XLIF>>>

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  30. This is not a new concept, atleast not in our area. Same pricing since 2004, its a shame some of these "sales" reps are actually going to have to add value to their product by their service instead of just showing up and filling out a piece of paper.

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  31. You want xlif pricing? Here you go:

    $8,250 for 1 level with disposables. This was given to me in an email from a materials manager at a very large non profit hospital with 5 spine surgeons.

    $7,550 for 1 level with disposables. I got this off a requisition from a hospital in a major metropolitan area.

    If you know how to sell on the merits of your product and you engage a surgeon champion there is the ability to sell at list price.

    Take a 101 sales course and learn how to sell.

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  32. Obama is the worst president this country has ever seen. He is a socialist moron, dumb as dirt. He'll be lucky not to end up impeached. Obama will never be reelected, thank God. Obama makes Bush seem like a national merit scholar and member of MENSA. What dopes voted for this fool?

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  33. 10:35 - Bush was better??????? LOL (trasnslation- Laugh Out Loud)

    http://www.youtube.com/watch?v=SDD5tDzNDwo&feature=related

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  34. translation - LOL again

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  35. anonymous 7:56

    at 3-4x competitive pricing...ya better take the 102 course as well.

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  36. If we hadn't had Bush in the first place, our country would be in much better financial shape.

    If we had not invaded Iraq or passed Bush's tax cuts the US would be several TRILLION dollars richer.

    In my opinion the fact that everyone seems pissed at Obama probably means he's doing the best job that can be done in our country right now.

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  37. The really funny/scary thing is, we would kill for that pricing originally posted by MM, much better than we are getting

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  38. I know who TSB is. He never consulted for hospitals guys. He did consult for RY after he was fired from blackstone. Then he worked for custom but they let him go, so he worked for choice, and guess what, they also let him go. He interviewed with many others but even Cardo would not hire him, so now he blogs and keeps himself busy by occasionally and bitterly projecting on the industry. I guess its more fun blogging while your wife supports you than asking if you want your latte with skim or whole.
    If one of the readers would give him a job with a nice expense account(he likes his wine), it might soothe his bitterness about our industry and only then he can write more thoughtful commentary that he is obviously capable of. Are you listening boys and girls?

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  39. Off topic:
    TSB doesn’t have 149 noted followers and who knows how many anonymously for nothing, right? So I could care less who he is personally. But do feel he does provide some insightful thoughts and lets others express theirs. “Killing in the name of.”
    So when is TSB coming out with his own T-Shirt? : )

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  40. Off topic:
    TSB doesn’t have 149 noted followers and who knows how many anonymously for nothing, right? So I could care less who he is personally. But do feel he does provide some insightful thoughts and lets others express theirs. “Killing in the name of.”
    So when is TSB coming out with his own T-Shirt? : )

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  41. I just found this website and I love it, the comments are great. My question/comment is who is working in this industry that is not cynical? This is the furthest thing from a functioning free market. The doctors, hospitals and gpos are all bought and for the most part care nothing about patient care. Meanwhile hedge fund managers make more money than Zimmer makes in a year. Yet we all keep doing it, why, surely it is not to be treated like shit by the next doctor, nurse or administrator. Sarcasm. I laugh every time I hear that the hospitals can do our job and they do it in Europe. Without a major overhaul or transformation, the hospitals I work at, I wouldn't trust to perform routine procedures on my dog or the physicians for that matter! Who else has had the experience of walking seemingly well-trained physicians through common procedures? Frightening. Meanwhile, posters cry foul about their little piece of cheese and they make more than anyone in the companies they represent. Really? I can guarantee you don't make more than the C level employees of the companies you represent and that pricing is coming down and your going to be making less. So my advice is to deal with it and/or get a new job, which I think about doing at least two times a week and I run a semi successful distributorship with six reps. For the super sales reps, which I certainly don’t claim to be, for the most part these are all commodity products. If there were a best; knee, hip, pedicle screw, cervical plate, biologic and the doctors, administrators, and gpos weren’t bought those who didn’t represent those products would be out of business. Fortunately they are bought and our products are commodities with obscene margins but that is not going to last! PS Unfortunately I have no Surgeons on consultancy agreements but the market I play in is a very small puddle of a very small pond but it is better than pouring pavement!

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  42. Sometimes I think the ones pouring pavement have got us beat all to hell. Think about it... home every night with their kids. If someone is an ass... they tell them to kiss it.
    And, if they own their own 'pavement' business... well, they are probably making more money than the avg. rep (150k) anyhow... so, I think we all need a little wake up call. What we do sounds glamourous but is really just shit.

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  43. I guess your right, I just hate manual labor!

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  44. Who cares who it is? I love the blog and its more than Orthospine News, Orthopaedics This Week and Orthoworld have to offer the reader. At lease whoever this is doesn't kiss anyone's ass.

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  45. Anonymous 12:27

    If what you say is true I know who he is too.

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  46. why are you so sure it is a "HE"

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  47. because I've talked to him in person many times and he has a few keywords he loves to use. I just did a search of those words on this blog and sure enough it showed up in numerous posts. I know exactly who he is but I will keep his identity to myself because I like reading ths blog.

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  48. Hey 3:59 what are you a lexicographer

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  49. The people who cry foul the most are the ones that have turned this industry into a bazaar in Baghdad. I could care less if TSB was whoever he is, maybe this industry needs more people that are willing to call a spade a spade. Some of these people running these companies are no different than the self-righteous scumbags that work in the banking industry. Whoever you are keep writing at least someone is entertaining us.

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  50. You know you Christians have no conscience

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  51. I'm a civilian and I'm not in the spine world. My sales days in retail are long gone but the fact the seller is responsible for shrinkage when (s)he doesn't have control over the merchandise anymore jumped out at me. Is that common in the industry? How do you insure against the potential loss?

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  52. Until companies do something with their very solid double-digit net margins to create actual advancements in products, what we are seeing is, as several people have said, free market pricing evolution. As the price goes down, the smaller companies without the benefits of scale will get below that critical level of income and have to sell their technology, if it's worth anything, or just shut down. Why do we wonder at 75% gross margins and 20+% net and think hospitals don't know where to push? There's a reason there are only a handful of recon companies with the bulk of the market. Spine's going the same place eventually aside from the true innovators that lie outside the top half dozen or so. And the innovators will get 'Researched and Duplicated' by one of the big co's or get bought.

    50+ comments = nerve hit!

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  53. 8:09 - With pricing like it is, you're just happy to have your product on the shelf at all. Zero x a capitated price is still zero.

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  54. Speaking from some experience, Pricing is factor of all the factors it takes to produce and market the particular device. Moderate and reasonable overhead is needed for developmental needs and forward progress. The way I see the market now it is a boom for those who have just begun there entrance and a bust for long tenured companies. To some this may look like evolution that the little guys are doing something right, and the bigger guys are too big.

    I see it the way it is and how business is done these days, anyone can get competitive product take it apart reconstruct it and change it with the guidance of a decent patent attorney. Anyone can "obtain" 510k documentation or seek consul to get there product approved and on the market. Its simple when all the hard work is done. Is this a time to get complacent in the pricing game. Should we all be worried about price manipulation. Are things changing for the better. All these questions leave uneasy terrain ahead about the state of the industry.

    I am all for free economy and the little guy making good. But when the little guy doesn't play by the proper rules of engagement they have no right to play the game. I feel people need to be more vigilant in there field in order to keep the development of spinal industry going. "Me too" companies know who they are, they are very clear about there core philosophy and practice. These companies are going to meet there days eventually, but the quicker the me too companies are shut down the better for the big picture.

    This is only a microcosm of the greater picture. The american economy was built on personal responsibility and fundamental ethics. How far have we strayed from the path when the government has to play nanny on most forms of our life. Has the capitalist system been abused that long that it cant be fixed. Are we victims of our own fear that no one can stand up for core values. The short answer is yes we are crippled by fear to state the obvious because of that vile L word. Lawsuit's in this country haven't displayed what is right and what is wrong just who can read the loopholes better. The long answer is no we can still correct this problem and get back to the real task at hand making everyone lives better through real american innovation and problem solving. All we need to do is to take a stand against inferior companies and copy cat devices. If we all stay true then we will all get out just fine.

    But at the end of the day you got to do what you got to do, and I got to do what I got to do. Hopefully we both choose ethical and wise paths.

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  55. In many ways the behavior that is exhibited in spine resembles the unregulated banking industry. Many of these small companies have raised money and evolved because in the last ten years investors entered on the ground level before there was saturation. Example: those that reaped the greatest rewards in the sub-prime market were the first to identify an opportunity and hedge their bets. Success is predicated on timing. Its not a matter that you are in the game, its a matter of when you got into the game. Timing is everything.

    Having performed due diligence on many of these ventures and spoken to some of these self-anointed CEO/entrepreneurs how can an outsider let alone an insider not be cynical. Just because you think you are, doesn't mean you are. The only thing innovative coming out of so many of these early-growth ventures is that they believe they are innovating when all they are doing is glutting the market with product that are driving down the price in the marketplace. It's simple economics.

    Your industry is the only industry that believes that there should be no transparency in pricing because you are attempting to hide the fact that the margins are so incredible you don't want anyone to end the party. I must agree with some of the comments that the party is over for many of you. In the long run the economy will separate true innovation from false expectations. It's not Bush's fault, its not Obama's fault, its your own fault. The arrogance and ethics of this industry just makes me shake my head.

    By the way, I love the blog.

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  56. As a distributor, it has become apparent that some of the people running these smaller companies have no inkling about market forces. If they do, they are still living in the past. What worked ten to fifteen years ago no longer applies. They are still promoting the features and benefits of the product. No one cares about what you think about your pedicle screw, cervical peek or interbody device. It's all about the benjamins. So my question to some of you is, is some business better than no business? Think about it the next time you cash your payroll check.

    Since

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  57. Hah! I guess MM realized that things were getting slow here, and kind of boring. What better way to get the peons up in arms that to post implant prices. Smart my man..

    How exactly is this thing gonna shake out in 5-10 years? What will the business look like? Will hospitals/surgeons figure out how to do cases without a rep there every time (like it was 15 years ago)? Will the service/sales person be a thing of the past? One Medtronic rep per state?

    Would you (the rep) do this job for $85k a year? Maybe so, at this point, what else is there?

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  58. Why would posting pricing be such a big deal. The hospital and the market were never identified. If you have any talent, we all know what each of us is charging. Besides hospital administrators and surgeons can identify a commodity product when they see one. With more and more surgeons buying or being hired by hospitals as employees , its only a matter of time before pricing is all it will come down to.

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  59. All the previous comments railing the little guy about their "business practices" make me want to gag or laugh! Danek has more bullshit consultancies than the rest of the spine industry combined, followed by Depuy, Synthes and Stryker. I would say those are the big companies. The big companies didn't play fair and the little companies that are more nimble and had less to loose one-upped you by royalties, investment opportunities and more consultancies and now your crying. Give me a break and spare me the holier than now and your ruining it for everybody routine. I don't have any consultants, royalty surgeons or investments but anyone that knows anything about this industry knows it is not the small companies that have ruined it, or for that matter capitalism. Look at Banks, did your neighborhood bank cause the meltdown or were maybe Citigroup, Bank of America and some of the other really big banks responsible. Hmmm. Either you don’t work in this industry or you don’t have a clue. On the prices, anywhere there is high margins and easy way to get a product to market (see 510K), it is going to be a crowded market sooner or later. That is called free enterprise. Stop crying and start coming out with better products. When is the last time Danek launched a pedicle screw system or Stryker?

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  60. 1:30

    Wow, when is the last time you took a spelling/grammar course?

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  61. 2:08 you're an idiot. Add a useful comment or don't comment at all.

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  62. 7:09

    Thanks for the great advice. I will make sure I listen to you next time Mr. Anonymous.

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  63. I will agree that is is hard to take someone (1:30) seriously who has worse grammar than my 12-yr old niece.

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  64. Sheesh! Until we can stop with all of the "us" (device manufacturers) versys "them" (facilites) we are never going to actually be able to focus on patient care. Can't we all just get along? :)

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  65. So, If I'm reading this correctly, it's safe to say the vast majority of you feel this industry is headed for a big overhaul!! In 3-5 years only the "big boys" will be left standing. The larger companies will have half the sales force they do now, working 80 hour weeks, making 50% less!! If one provides some innovative technology the can expect an 8-10 month run until the others launch a similar product. To quote a very well known spine surgeon 2 years ago "If your not making money now in this business, you never will". "This holds true for the surgeon, rep, and manufacturer".

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  66. I have had a Stryker rep visit me and is promoting use of the Bio AVS Cervical Spacers. Does anyone have experience with these and can you give a general idea of the cost you were quoted? Thanks.

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