Great expectations: hospitals find FDA regs build stronger case for reprocessing

By now, it's no big revelation that the once controversial practice of reprocessing has become second nature for many of the nation's healthcare organizations. In fact, with recent estimates showing that more than half of U.S. facilities with 2,50 beds or more are relying on reprocessing to stretch their budgets and cut their waste stream, it seems understandable why some would even say reprocessing is becoming a standard of practice.

Numerous factors of late have prompted the healthcare industry's increasingly growing gravitation toward reprocessing, with the Food and Drug Administration's stringent regulations earning the top spot on the list. Those regulatory requirements that not long ago spurred confusion and left room for some interpretation are now crystal clear in the eyes of the reprocessing firms who must follow them--a development that has led legions of loyal hospital followers to embrace the practice to the fullest degree.

"There is no longer any ambiguity. We now have a clear roadmap to follow in terms of the regulatory requirements for reprocessed devices, including what is expected of us in regard to 510(k) requirements," said Arthur Goodrich, vice president of marketing and business development for Alliance Medical, Phoenix, AZ.

In November 2004, the FDA completed its review of reprocessed medical devices that required supplemental validation submissions under the Medical Device User Fee and Modernization Act of 2002, with the majority of submissions found to be substantially equivalent to the original devices. Each of the three reprocessing firms that comprise the Washington-based Association for Medical Device Reprocessors--SterilMed, Vanguard Medical Concepts and Alliance Medical--has been vocal about the FDA's positive impact on the industry. While working through the stringent regulatory" requirements has no doubt been a challenge, it's been one the reprocessing firms have eagerly embraced. Not only has the oversight helped counter claims by original equipment manufacturers that reprocessing is unsafe, it has raised the level of awareness in hospitals, making facility administrators and end users more open to the practice than ever before, sources told Healthcare Purchasing News.

"Now that the FDA treats reprocessors the same as original equipment manufacturers, there's no question which devices are safe to reprocess. If we don't have 510(k) clearance for a [Class II] device, we simply cannot reprocess it," noted Mark Salomon, senior vice president of corporate development, Vanguard Medical Concepts, Lakeland, FL. "That has helped alleviate concern from hospitals. If we have that 510(k) clearance, they aren't worried because they know it has been [deemed] safe and effective."

The fact that AMDR member companies must also functionally test each device they reprocess doesn't hurt customer confidence levels, either. "That's a standard that is even more stringent than those placed on the OEMs," Salomon added.

Each of the AMDR member companies reported annual growth rates of approximately 50 percent, and in March, the AMDR announced more than 25 million medical devices had been reprocessed by its members for hundreds of the nation's hospitals. Findings from the 12th edition of the Solucient 100 Top Hospitals: National Benchmarks for Success further underscored the extent to which reprocessing has become accepted and adopted in the U.S. hospital sector. According to the 2004 study, AMDR member companies reprocess medical devices for 87 percent of America's top hospitals, including all of the 25 top teaching hospitals, all of the top 20 large community hospitals, 17 of the top 20 medium community hospitals, and 14 of the 15 best major teaching hospitals. That 87 percent figure represents a significant jump over the 69 percent reported in the 2003 study by U.S. News and World Report.

Such findings bode well for an industry that has fought hard to prove its value and commitment to quality. "We aren't trying to push the envelope and process all of the devices out there. Not only can't we do that because of the regulatory scheme, we wouldn't even want to do it," Goodrich explained, noting that AMDR members reprocess only a small percentage of the numerous devices used by hospitals. "We never want to lose sight of the fact that when we talk about savings [generated by reprocessing], we must also talk quality."

Savings spell better care

Still, it's hard to deny the savings generated from a well-implemented reprocessing program. On average, reprocessed medical devices offer 50 percent savings over the cost of a new device, AMDR reports. According to SterilMed's CEO, Brian Sullivan, a 250-bed hospital that follows SterilMed's best practice program could save between $100,000 and $200,000 a year.

By reprocessing EP catheters alone, a facility could save $300 to $400 per case, at a minimum, said Goodrich, adding that EP catheters can range from just under $100 to $1000 each, with between three and five catheters used per case.

"I like to classify' reprocessing as a supply cost reduction [strategy]. When you see that hospitals are making 2-3 percent margins and that they would have to put [millions] on the revenue line just to generate the same savings that we can offer with a simple program, you can really see why reprocessing makes sense," said Goodrich.

It certainly has made sense for Tampa-based University Community Health System. Since partnering with Alliance Medical roughly a year and a half ago, the organization has shown annual savings of approximately $91,0(X). Marcia Park, nurse educator for UCHS, said she believes that number will "increase significantly" when contractual constraints with the health system's previous reprocessing partner come to an end. Under those constraints, UCHS is unable to reprocess compression sleeves and orthopedic devices--two device segments that have been shown to garner tremendous savings. Until then, the organization is focusing its reprocessing efforts primarily on endoscopic instruments.

Suzanne Fleming, supply utilization specialist for UCHS, said the savings have become easier to realize as more end users recognize that reprocessed devices don't translate into lower quality. Put simply, "if a device is working properly, they aren't concerned," she said.

That's not to say there still aren't some obstacles to overcome, however. Like any practice, compliance issues can crop up and facilities must be prepared to develop interventions. Fleming noted that if a surgeon isn't pleased with a particular item, staff may automatically assume it's because it was reprocessed. Rather than risk being at the receiving end of a surgeon's discontent, they may opt to just reach for a brand new device--even though the problem had nothing to do with reprocessing. "The biggest thing is educating staff and reminding them that every item is functionally tested before use to ensure that that it is working as intended," Fleming said. She noted that education is also invaluable in reminding staff not to place an order for a new device if a reprocessed item is on the shelf waiting to be used. "Most of these non-compliance issues aren't about staff not wanting to cooperate. It's just requires ongoing education," she continued. "Obviously, the better the compliance, the [greater] our savings."

Take into consideration the environmental benefits of reprocessing from a waste reduction standpoint and the value becomes even more magnified. Medical device reprocessing has been shown to eliminate up to 70 percent of operating room metals and plastics from the waste stream.

"Environmental stewardship is becoming a top initiative for many hospitals. In committing to a waste reduction programs, they are not only working to improve the environment, but also realizing tremendous savings," said Salomon.

Vanguard's Advantage and Rapid Return programs were developed to maximize customers' waste reduction efforts. With the Advantage device collection program, hospitals use recycling containers provided by Vanguard instead of traditional red disposable sharps containers. Devices are collected and shipped to Vanguard in the containers, where they are processed. The more devices a hospital collects, the more it saves; Vanguard reports that a typical hospital with 15 operating rooms can save as much as $100,000 over a five-year period. With the Rapid Return prograM, Vanguard uses a constant supply of devices coming in from its customers to create a ready supply of reprocessed devices. For the past two years, Vanguard has been recognized as a "Champion for Change" by Hospitals for a Healthy Environments. In 2004, the company eliminated 449 tons of medical waste destined for landfills through its reprocessing/ recycling programs.

Pricier devices take center stage

By and large, industry sources agreed there's been a gradual shift in the types of devices being reprocessed. "Clients are motivated to do more and at higher levels," noted Salomon.

Nearly all of SterilMed's customers are engaging in "full suite" reprocessing, Sullivan said. "For the most part, they are interested in going the distance to drive the most savings." Not only are a growing number of facilities adopting a broader approach to reprocessing, many are making a noticeable leap toward high dollar devices, not just those used in high volume procedures.

Not surprisingly, cardiology and orthopedics have become two main focus areas for reprocessors. Alliance Medical is looking less into "sharp" orthopedic devices, and focusing instead on external fixation devices and others that come with a high price tag. "With a saw blade, you're going to save anywhere from 35 cents to a dollar. That's great, but with some of these higher cost items, you can be talking about $300 and $400 savings per instrument. That's pretty dramatic," explained Goodrich. Some are even crediting reprocessing as a catalyst for lowering prices of original products--a development that has led some reprocessing firms to drop certain devices from their reprocessing portfolios. Several months ago, Alliance Medical ceased reprocessing biopsy forceps. "We saw the price come down from $65 a unit to around $8. We discontinued doing forceps because were could no longer reprocess them and make even a small profit." The same thing is happening with compression sleeves, which have dropped from upward of $38 per pair to single digit pricing, he said. "That is the nature of this business. If we can help a hospital leverage and lower its costs, then we're all winners."

Hospitals that reprocess are also coming ahead by taking the savings generated by the program and putting it back into clinical areas to improve patient care. "For the first time, we're starting to see hospitals making that connection. We are having more and more [customers] say' they are able to provide an additional level of services with those cost savings," Goodrich said.

OEMs continue fight

Just because reprocessing continues to gain momentum doesn't mean that OEMs have given up their fight. According to Salomon, one noticeable trend popping up on the radar screen is the push by OEMs to file 510(k) submissions for minor device changes. The goal, he explained, is to rapidly convert business to the new device and render the previous device obsolete.

"What we're seeing happen in some cases is an OEM will make minor changes and call them major ones. If the OEM is going to the trouble of filing a 510(k) submission with the FDA, then that means reprocessors will need one for that device, too." While facilities are becoming privy/to the trend, he said clinicians typically will still want the "new" device. Receiving 510(k) clearance for a new device can take anywhere from three months to one year, and in that timeframe, a health system could easily lose $1/2 million by not being able to reprocess them, Salomon explained. Before blindly making the switch to a new product, he urges customers to be informed and ask the vendor to explain the differences between the devices.

The good news is some OEMs are seeing reprocessing as an opportunity rather than a threat. In 2003, Alliance Medical and Nellcor entered a first-of-its-kind co-marketing agreement for pulse oximetry sensor remarketing, and more groundbreaking partnerships may be on the horizon, according to Goodrich.

Even so, hospitals may not want to hold out for partnerships with large device manufacturers that hold the market share in numerous product segments. Instead, it will likely be the vendors that have one or two products on the market that will join forces with reprocessors, predicted Goodrich, adding that savvy hospital purchasers will play a key role in driving those partnerships.

"There is a tremendous amount of opportunity. Hospitals are looking for solutions, not situations that put them in difficult positions through purchasing contracts and requirements. I think we'll be seeing material managers continue to be more aware of contracting solutions that will include reprocessing."

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