Medical device companies accused of passing on cost of new tax to customers

Medical device manufacturers are shifting the cost of the 2.3 percent device tax, which went into effect on Jan. 1 as part of the Affordable Care Act, to hospitals and other healthcare providers, the Healthcare Supply Chain Association alleged on Friday.

According to HSCA, some medical device companies are adding a line to their invoices that passes on the cost of the tax to its customers.

 “Medical device manufacturers should be on notice that passing the device tax on is not acceptable,” said Curtis Rooney, president of HSCA, a trade organization that represents 15 group purchasing organizations.

“GPOs are effective at limiting these attempts but it appears medical device manufacturers are trying to work around the GPOs by creating a new line on their billing statements to hospitals,” said Rooney. “We think this practice should stop immediately.”

“We think now that the tax is being implemented, it should be the responsibility of the medical device companies to pay it and not pass it on to others,” he added.

[See also: Medical device excise tax remains in place after SCOTUS ruling]

The medical device tax is not what is driving up product prices, said Kem Hawkins, president of Bloomington, Ind.-based device company Cook Medical.

“Like every other company doing business in America today, we have seen significant increases in utilities, rising gasoline prices and higher healthcare costs,” said Hawkins.

“We have seen higher costs for raw materials and from regulations. We’ve seen unemployment insurance taxes increasing, along with other state and local taxes including property taxes. Our employees need raises. We will have price increases but those increases will not include the 2.3 percent tax,” added Hawkins.

Bruce Carlson, publisher of New York City-based healthcare research and publishing firm Kalorama Information believes the HSCA’s accusations are designed to discourage device companies from attempting to use the tax as leverage in negotiations with GPOs.

“It’s an unsurprising part of negotiations that will occur between GPOs and med device companies for a long time, with the tax adding just a bit more friction,” said Carlson. “Right now, I’d say this is a warning shot across the bow to device companies saying, ‘don’t come to us – GPOs representing hospitals – and ask us to consider the excise tax you are facing in price negotiations.”

While it is illegal for medical device companies to charge their customers for the tax, it is legal in some states for them to include a line item showing the tax on their invoices, said Carlson.

“It is illegal to put the healthcare reform medical device excise directly onto an invoice and collect it as tax,” he said. “However, some states such as Texas – where there was opposition to healthcare reform in the state legislature – have allowed companies to print the 2.3 percent tax on invoices to demonstrate to consumers what costs the company is facing, as long as the tax doesn’t add to the total.”

Source: healthcarefinancenews

Global outsourced research market expected to reach $65B by 2018

The global healthcare contract research outsourcing market is increasing at a compounded annual growth rate of 14.7 percent and is expected to be valued at $65.03 billion by 2018, according to a new report from market research firm Transparency Market Research.

The report, "Healthcare Contract Research Outsourcing Market – Global Industry Analysis, Size, Share, Trends and Forecast, 2012 – 2018," found that the contract research outsourcing market is being propelled by the recent and impending patent expirations of some of the most successful brand name drugs of all time and the inability of the current product pipeline to make up for the lost revenue.

Global pharma and medical device companies are transitioning to an outsourcing model for several functions, including clinical trials, medical writing and regulatory processes, according to the report.

There are a few main factors leading to the increase in outsourcing, said Harpreet Singh Buttar, senior research analyst at Transparency Market Research.

“The global contract research outsourcing market is driven by cost savings, globalization of drug and medical device development and reduced productivity,” said Buttar. “The research outsourcing process also enables pharmaceutical companies to break free from the basic research and support processes and focus on drug R&D.”

“As the regulatory guidelines and approval processes are becoming increasingly stringent, most pharmaceutical companies are outsourcing their research activities in an attempt to curb their R&D expenses,” added Buttar.

While outsourcing is an attractive option for many companies, there are some drawbacks, including quality and efficacy issues, he said.

“The research activities (that are) outsourced are still facing challenges in terms of meeting requisite standards and maintaining data integrity,” said Buttar. “This is creating an apprehension in some sections of the industry to outsource.”

Among the most common countries for outsourcing are China, India, Australia and Brazil, said Buttar.

“These countries possess abundant expertise and technology to handle research processes related to the industry and support the pharma giants who are involved in continuous research related to advanced therapies and life saving drugs,” he said.

Source: healthcarefinancenews

Electronic Health Record System, a new trend in Patient Record Management

More than two-thirds of family doctors now use electronic health records, and the percentage doing so doubled between 2005 and 2011, a new study finds.

If the trend continues, 80 percent of family doctors -- the largest group of primary care physicians -- will be using electronic records by 2013, the researchers predicted.

The findings provide "some encouragement that we have passed a critical threshold," said study author Dr. Andrew Bazemore, director of the Robert Graham Center for Policy Studies in Primary Care, in Washington, D.C. "The significant majority of primary care practitioners appear to be using digital medical records in some form or fashion."

The promises of electronic record-keeping include improved medical care and long-term savings. However, many doctors were slow to adopt these records because of the high cost and the complexity of converting paper files. There were also privacy concerns.

"We are not there yet," Bazemore added. "More work is needed, including better information from all of the states."

The Obama administration has offered incentives to doctors who adopt electronic health records, and penalties to those who do not.

For the study, researchers mined two national data sets to see how many family doctors were using electronic health records, how this number changed over time, and how it compared to use by specialists. Their findings appear in the January-February issue of the Annals of Family Medicine.

Nationally, 68 percent of family doctors were using electronic health records in 2011, they found. Rates varied by state, with a low of about 47 percent in North Dakota and a high of nearly 95 percent in Utah.

Dr. Michael Oppenheim, vice president and chief medical information officer for North Shore Long Island Jewish Health System in Great Neck, N.Y., said electronic record-keeping streamlines medical care.

These records "eliminate handwriting errors, and help with planning and caring for patients with chronic medical problems," Oppenheim said. Plus, the files can be accessed by a doctor when the initial provider is unavailable, he said.

Electronic health records also save money in the long term, he noted. "If a patient has a complaint and just had a blood test, and then shows up at the ER (emergency room) with the same complaint, the ER doctor can access the record and not reorder the same test," he said.

Oppenheim said medical penalties are driving adoption of e-records, but there is still some hesitancy. "Doctors are nervous about the cost and worried about how it will affect their practice," he said. "The conversion process is complex."

Doctors can do it themselves or outsource the system. "You pay in productivity or dollars," he said.

Electronic health records are good news for all involved, agreed Dr. Adam Szerencsy, an internist at New York University Medical Center in New York City and the Epic Medical Director there. Epic is NYU's electronic health record system.

When the concept first surfaced, many patients were concerned about their privacy. Today's electronic health records are secure and often have protocols attached to make sure that they don't fall into the wrong hands, he explained.

A key reason that family doctors are leading the transition is that government incentives make it a little more lucrative for family practitioners than specialists, he said.

Also, "primary care doctors manage patients over time, while subspecialists usually don't," Szerencsy said. For example, a surgeon may treat appendicitis, and then the case is closed.

The Holy Grail is thought to be a universal health record where doctors everywhere can access patient records. "We are getting closer," Szerencsy said. "Within the next couple of years, electronic health records will explode across the board."

Written By Denise Mann, HealthDay Reporter

Source: wmdt47news

5 Supply Chain Forecasts For 2013

This will be the Year of the Supply Chain Network

It’s that time of year when we celebrate the fact that next year is a clean slate and all is possible. It’s also the time when we propose our budgets and very quickly realize that we’d better focus on what’s important, as that’s where the budget will inevitably go. Or, as the beloved Judge Smails of Caddyshack — an amateur CFO (little known fact) — says to his grandson Spalding, “You’ll have nothing — and like it!”

Overarching Theme for 2013: This will be the Year of the Network

Stanford Professor Hau Lee says that competition is supply chain versus supply chain. With today’s prevalent business model of brand owners embracing trading networks of outsourced manufacturing and distribution, one could argue that it’s now trading network versus trading network. The secret to success here is how well brand owners and their trading partners can collaborate — moving beyond the archaic one-to-one manual sharing of spreadsheets to achieve one-to-many and many-to-many visibility based on real-time information across a network that provides a single source of truth.

Harnessing the collective brainpower of a trading network’s supply chain practitioners and leaders provides a formidable competitive advantage and the kind of agility and flexibility needed to handle an increasingly volatile world. This is the derivative factor – the speed at which the trading network can adapt to a new opportunity, business model, or product introduction. Smart people, all working together with timely, accurate data on a platform that coordinates business processes across the global network can make faster, better decisions that provide more profit for them and more satisfaction for their customers.

1) Fast Data Will Become the New Big Data

Big Data is everywhere, and we deal with our fair share in today’s complex manufacturing environments. But what is perhaps more daunting is Fast Data – that is, the incessantly changing positions of forecasts, orders, shipments and inventory. This challenge is complicated enough within the virtual enterprise, and becomes downright overwhelming in the context of global trading networks – with multiple tiers of partners trying to manage information changes across unique operating systems.

In order to reap the benefits of Fast Data, all relevant participants – within the organization and across the global trading network – need to have access to a “shared version of the truth,” plus the ability to act on this information in real time. Put differently, Fast Data must be collaboratively managed – shared; agreed upon in terms of source, authenticity, and timeliness; correlated across relevant roles and processes; and understood within the context of actionable opportunities.

In the sea of information flying around the network, where is that one indicator that has “turned red” – that will ruin our day, week, or quarter unless we identify and resolve it quickly, intelligently, and cost-effectively?

2) The “Social Supply Chain” Will Transform the Way We Work

When it’s doing what it’s supposed to, the supply chain function is collaborative – people (and companies) working together to meet the needs of their customers. It’s also profitability minded, which doesn’t always “play nicely” with real collaboration across enterprises.

But the ability to be both collaborative and profitable will take center stage in 2013 as two areas of social networking move quickly into the supply chain space.

First is collaborative problem solving. Over the next 12 months, online partner communities will create virtual war rooms where teams can solve problems quickly and collaboratively. They’ll also create online repositories to document processes and decisions for future reference and organizational learning.

Second, demand sensing and sentiment analysis will move upstream from Marketing to Supply Chain, generating earlier awareness of trends (either positive or negative) for better preparedness and responsiveness.

Companies that embrace social tools will have another dramatic advantage. As the supply chain talent gap worsens, the more socially-minded companies will be able to attract the best and most innovative minds of the next generation—a generation that has always approached learning and communication in the context of social networks.

3) Supply Chain Control Towers Will Transition From Concept to Adoption

The buzz around Supply Chain Control Towers has been building for a while now; I predict that 2013 will be the year that Control Towers move from concept to reality. This transition has already begun, and it will continue to gain momentum as practitioners adopt a more accurate understanding of the concept: a Supply Chain Control Tower it is not a “cure all” product that can be purchased and installed; instead, it is a core competency in end-to-end collaboration and process management that facilitates good decision making based on the best available information.

Within this framework, Supply Chain Control Towers should provide real-time transparency and exception management, tools for operational and financial evaluation of potential course corrections, and an integrated system for decision execution. This type of “core competency” requires a dynamic combination of people, processes, and technologies, and it is developed (and continuously improved) over the course of months and years—not days. That being said, 2013 is the perfect time to begin the Control Tower journey.

4) Dynamic Cost Will Transform Decision Making

Historically, decision making and performance management have been based on standard costs. These costs are usually provided by the Finance organization and are updated infrequently (i.e., annually or when a new product is introduced). The challenge to effective management is that the actual costs of products, as delivered to individual customers, are rarely “standard.”

A better measure is total landed cost, which incorporates shipping and distribution costs. But these costs themselves are often based on standards or averages, despite wide swings in actual costs in response to the supply of, and demand for, transport, the cost of bunker fuel, or other factors.

2013 will see a shift to greater use of dynamic costing, based on real-time visibility into granular information on product production, transportation, and distribution costs. When companies can see the actual costs of delivering specific products to particular customers building in real time, they will be well-positioned to make the right customer-specific tactical decisions and to enable more profitable segmentation strategies.

5) Risk Management Will Move from Static to Dynamic

Most risk management modeling today involves offline contingency planning based on statistical likelihood of occurrence data. Over the next 12 months, I predict significant movement away from the relatively static realm of risk management theory towards the “real-world dynamism” of today’s integrated supply chain business models.

Specifically, the next phase of risk management will operationalize risk identification and reduce the time it takes to respond intelligently to disruptions across the trading network. By incorporating contingency plans into dynamic operating models with network monitoring, practitioners will be able to make better decisions within the execution window. Risk management tools will move beyond identifying weak links and ginning up responses to hypothetical problems to providing the information and communication platform needed to assess and manage situations as they occur—mitigating downside when the inevitable hits the fan.

Written By Mark Woodward, President and CEO, E2open

Source: Supply Chain management Review

Supply Chain Visibility in Healthcare: Beyond the Dashboard

A CEO’s Perspective 

Richard is Cofounder and Chief Executive Officer of LifeScience Logistics.  He has more than 15 years of supply chain experience and has held a variety of operations, marketing and business development roles.  Richard most recently held leadership positions at United Parcel Service and has served in both the U.S. Navy and U.S. Coast Guard.  He holds a Bachelor of Arts degree from the University of Texas at Arlington and an Masters of Business Administration from Southern Methodist University.

The 21st century has witnessed an active change in the working of the supply chain. As such, visibility is crucial in the healthcare industry where the emphasis on prompt delivery of treatments, under the right conditions is critical. Additionally, an assurance of quality is also of utmost importance in a dynamic regulatory environment

The “Darwinian Model” is alive and well.  Significant risks and opportunities are driving businesses to shed the inefficiencies of the past or go the way of the dinosaur.  This is especially true in Healthcare.  Given the personal and professional impact of timely, cost efficient and most importantly effective treatments, today’s global healthcare industry faces enormous challenges and opportunities.  Effectively trying to manage both ends of that spectrum is forcing executives out of the boardroom and into the supply chain.  Here’s a look at what we’re facing.

Change is constant in the supply chain

Major evolutions in distribution and manufacturing in the 21st century have changed the dynamics of doing business in North America and across the globe. Growth in imports has soared in the last few years fuelled by the Asian domination of the manufacturing sector. This is especially true in North America where manufacturers have become importers and distributors with a new focus on efficiency and improved customer service.

Furthermore, with the shift in power due to margin compression, regulatory pressures and competing demand for capital in healthcare, many provider networks have taken their supply chains into their own hands while manufacturers have opted to focus on their core competencies; research and development, sales/marketing and customer services, delegating supply chain operations to outsourced experts. These movements in the landscape are at the heart of the changing economy and more so in healthcare where the management of a secure supply of healthcare products is vital for the well being of patients.

 

The supply chain – a network of resources

The supply chain is no longer a controlled entity within the four walls of a warehouse. Today, it is a network of resources, scattered across facilities and entities in different cities and countries. To be effectively managed, supply chain resources need to be linked. Suppliers, partners and customers; each performing a role in the supply chain, and each user and/or automated process are small “hubs” contributing to the movement of goods, funds as well as information in the supply chain.

The need for visibility

To support today’s business model in this high-velocity, complex and distributed logistics environment, real-time visibility has become a key strategic imperative. Visibility to suppliers’ production rates and shipment lead times, in-house inventory, historical data, and customer sales projections can drive benefits in efficiency, lower inventories and improve fulfillment rates. Overall, visibility is driven by companies’ need to:

•          Become more proactive and systematic in their supply chain operations
•          Track and trace products throughout the supply chain, from cradle to grave
•          Proactively alert customers of product availability and status of shipments
•          Improve on-time delivery, reduce lead time and lead time variability
•          Reduce and/or redirect working capital, as well as fixed and variable costs

These are fundamental capabilities for the supply chain today, and given the risk and regulatory oversight, clear visibility is vital in Healthcare!

A look at the healthcare industry

With over $4.5 trillion in expenditure, the global medical industry is one of the world's largest and fastest growing industries, comprising various sectors: medical equipment and supplies, pharmaceutical, healthcare services, biotechnology, and alternative medicine sectors. Undoubtedly, the management and delivery of these vital goods throughout the healthcare supply chain are proportionally as complex and important as its size and velocity.

Overall, the process of manufacturing and distributing pharmaceutical products is similar to that of other industries. Companies purchase raw materials for bulk synthesis of active and inactive ingredients. Dosages are formulated and packaged. Products flow (from cradle to grave) through manufacturers’ warehouses, wholesale distributors/3rd Part logistics providers, retail pharmacies, medical institutions, and finally to the patient.  Some products make their way back to their manufacturers due to recalls and returns.

Today, the healthcare industry is characterized by a number of drivers affecting its supply chain, including:

·         Globalization, competition and margin compression

•          Increased regulatory oversight
•          The rise in IT budgets at healthcare institutions
•          Growth in usage of medication
•          Increased cost of drug development, production and distribution
•          Major retailers driving packaging and labelling requirements
•          Manufacturers’ desire to control the customer and margin away from wholesalers
•         New outsourcing models  in the “patent to patient” supply chain process

To meet these while improving cost, reducing inventory and maintaining high fill rates is a significant challenge to any supply chain. It is an even greater challenge in pharmaceuticals because of the compliance and regulatory requirements.

Written by Richard Beeny, CEO, LifeScience Logistics    

Source:  Hospital & Healthcare Management

 

How to Create Sustainable Hospital Financial Improvement: 3 Steps

Tips on how to improve financial performance in any organization are a dime a dozen. Usually, organizations will readjust their focus on cutting costs by quickly glancing at labor expenses, supply chain and real estate — and cutting anything that is nonessential.

Will King, senior manager at HFS Consultants, a healthcare financial consulting firm based in Oakland, Calif., says those strategies may work, but shallow attempts to improve performance with those strategies are rarely sustainable. This is especially true for hospitals and health systems, which are searching for some semblance of financial stability amidst potential Medicare sequestration and healthcare reform funding cuts.

"Anyone can slash-and-burn 5 to 10 percent from their cost structure by telling cost center managers to whack a few people or to stop buying 360-slice CT scanners," Mr. King says. "It takes a patient CFO, COO or CEO to diagnose the problem properly and prescribe a treatment that will work over time — sustainably." Mr. King, who has worked in the hospital financial field for nearly 20 years, says there are three important steps hospital CFOs should take to find the sustainable financial improvement measures for which they yearn.

1. Use data to identify improvement opportunities, specifically for labor and length of stay. Several states throughout the country require hospitals to file detailed reports on various metrics, beyond what they file for Medicare. In California, Mr. King says hospitals report this data to the Office of Statewide Health Planning and Development. Data include costs, revenues, productivity by cost center, full-time equivalents, productivity by department, length of stay and more.

For states that have these hospital databases, Mr. King says hospital CFOs and other department managers must take advantage of this trove of free, accessible information because it allows for true apples-to-apples comparisons among other hospitals.

"We used to do labor productivity assessments by hand," he says. "Now we have powerful macros that allow us to probe databases for department-by-department benchmarking of, for example, length of stay for certain MS-DRGs compared with other hospitals of a similar size, or where a hospital stands in FTEs per adjusted occupied bed with other hospitals."

Utilizing this data can immediately help guide thoughtful decisions on a hospital's labor force and clinical improvements without arbitrarily hacking away at everything. A more efficient labor force and lower LOS can be had through this method, and it can impact the bottom line in a positive way, he says.

"Instead of cutting 10 percent across the board, use data to see where the real opportunities are. For example, making changes on flexing staff up or down based on volume is when hospitals can make [labor cost cutting] sustainable," Mr. King says. "Anyone can slash-and-burn, but a year later, the problem is back with a vengeance."

"Wise CFOs are increasingly looking to this type of evidence for clues to how they can operate more efficiently from a financial standpoint but also from clinical standpoint," Mr. King adds. "When doing this, no one wants to sacrifice quality or service."

2. Go to accounts payable and the general ledger to find out exactly what is being spent. For some, a hospital's financial system may seem like a landfill — you only want to tread there if you absolutely have to do so. Mr. King looks at it differently. The general ledger and accounts payable systems provide another source of great data collection because they outline all expenditures and money paid out. Looking back periodically to make sure the organization is spending its money wisely on purchased services, contracts and supplies can be hugely beneficial. While group purchasing organizations are helpful is some areas, they focus mostly on medical and surgical supplies, and not as much on business supplies or clinical and business services.

For example, Mr. King says looking at freight and shipping costs can save a hospital system hundreds of thousands of dollars. Hospital CFOs and other financial executives may not look extensively to see how they are shipping their supplies and which couriers (FedEx, UPS, DHL, etc.) offer better pricing. At one hospital system, Mr. King noticed the organization had certain supplies shipped overnight with next-day arrival by 10 a.m. After interviewing internal customers, he realized those products did not need to be delivered so quickly. 

"We found about $600,000 to $800,000 in savings by switching the shipping from next-morning arrival to next-afternoon arrival, with no diminution of quality or service," Mr. King says. "It's just a simple, little business concept that companies do in other industries all the time, but some hospitals haven't deployed those techniques yet."

These types of initiatives may be easier for large health systems that have corporate offices and more resources, but that still is no excuse for small hospitals and health systems to ignore financial statements and, potentially, cost savings. "Go to the data," Mr. King says. "Go to accounts payable and the general ledger, and see who's spending how much on what with whom."

3. Stay diligent on payor contracts. Financial improvements are normally associated with cutting or fine-tuning certain areas within a hospital, but they can also come in another form: renegotiated payor contracts. Payor contracts that have longer terms, commonly known as "evergreen" contracts, can often collect dust, and this could lead to outdated reimbursement rates that leave money on the table.

"This is a really simple one, but you'd be amazed how often hospitals overlook their payor contracts," Mr. King says. "Community hospitals and safety-net hospitals sometimes let their contracts with big health plans just sit. We have a health plan contracts expert who looks at contracts and what payment rates are in the community, and it often happens that payors say they've been waiting for hospitals to come for [budgeted increases]."

Hospitals should talk with their major payors at least once every one or two years to make sure rates are where they should be and to build a better, more constructive relationship.

With these three steps, Mr. Kings says any hospital and health system can build a more sustainable financial structure, which is paramount in almost every healthcare organization today.

"There are opportunities in each of these areas to improve performance by 1 to 3 percent of net patient revenue," Mr. King says. "Implemented together, the impact can be enormous for a hospital with a 3 to 4 percent margin going in. For those doing worse than average, the difference can mean survival."

Source: Becker’s Hospital Review