This document discusses the impact of consumable costs in healthcare, using clinical laboratories, pulse oximetry, bronchial thermoplasty, and temperature management systems as examples. It notes that consumable costs can often equal or exceed initial capital investments. It provides details on the types and pricing of consumables for different technologies and purchasing considerations for negotiating costs.

1. Understanding the Impact of
Consumable Costs that Exceed
their Capital Investments
LeAnne Smith
Maria C. Hernandez, MBA, BSMT(ASCP)
Kathey Leibold, RRT
Lee Barnhart, RN

2. 2
Presenters
LeAnne Smith
Consumable Analyst, MD Buyline
– Joined MD Buyline in 2001
– Consumable team leader
– Previously served as Project
Manager at HELP
International
Maria C. Hernandez,
MBA, BSMT(ASCP)
Clinical Analyst, MD Buyline
– Joined MD Buyline in 2007
– 18 years in the clinical
healthcare field
– MT(ASCP) certified
– Member of American Society
of Clinical Pathologist
– Member of American
Association for Clinical
Chemistry
Kathey Leibold, RRT
Senior Clinical Analyst,
MD Buyline
– Joined MD Buyline in 2002
– Over 35 years in the clinical
healthcare field
– Registered Respiratory
Therapist
– Member of American
Association of Respiratory
Care and Texas Society for
Respiratory Care
Lee Barnhart, RN
Clinical Analyst, MD Buyline
– Joined MD Buyline in 2005
– 22 years in the nursing field
– Currently practicing RN
– Clinical Juror for the
Certification Commission on
Health Information
Technology (CCHIT)
– Member of Emergency
Nurses Association

3. 3
The Impact of Consumable Costs
• Projecting true costs for a new technology include considering:
– Capital
– Labor
• Outside of capital cost and labor, consumables present the next
largest line item for hospitals.
“In some instances, these [consumable] costs
may be equal to or even exceed the initial
capital outlay.”
Todd Nelson, HFMA Technical Director,
hfm magazine, August 2013
– Consumables
– Overhead
– Service

4. 4
Clinical Laboratory: Example

5. 5
Clinical Laboratory: Consumables
• Laboratory consumables have a different meaning than they do in the general
healthcare setting; it is important to understand the terminology used by
laboratory product vendors
– Lab consumables typically include
pipettes, slides, collections cups,
stirrer sticks, tubes, filters, tubing,
etc.
– Reagents, calibration and control
material are typically not grouped
with other consumable items
• Vendors may often exclude the
largest/most expensive portion of
the material needed to run the instruments
(reagents, calibration and control materials)

6. The Clinical Laboratory
6
Chemistry
Hematology
Microbiology
Coagulation
Blood Bank
Point of Care
Molecular
Genetics
Immunology
Source: Caris Life Sciences

7. • This profile is a routine test ordered by almost all healthcare providers
• A chemistry analyzer uses many reagents, consumables and quality
7
Clinical Laboratory: Chemistry Analyzer
in nearly all settings for determination of a patient’s health status
control (QC) material
Vendor Average Purchase Price*
*Source: MD Buyline
Procedures to
Breakeven
Vendor 1 $166,683 18,850
Vendor 2 $388,000 35,666
Vendor 3 $227,000 20,827
Vendor 4 $265,000 18,454
Vendor 5 $359,000 33,000

8. Discipline Capital Cost* Consumables Cost per year*
8
Clinical Laboratory: Consumable Cost
Core Lab
Discipline Capital Cost* Consumables Cost per year*
Hematology $301,100.00 for 3 analyzers $87,666.65
Chemistry $210,000.00 for 2 units $1,109,278.00
Molecular
$67,998.40
$494,274.31
Diagnostics
3 units and components
Glucometer
*Source: MD Buyline
$1,625,390.00
300 units and components
$2,092,424.70
Chemistry
$61,567.27
6 analyzers and components
$342,032.16
Point of Care

9. 9
Clinical Laboratory:
Purchasing Considerations
• Reducing consumable costs in the laboratory requires a unique
approach
• Most clinical laboratory setting vendors offer three types of purchasing
options:
– Direct Purchase
– Reagent Rental
– Cost per Reportable

10. 10
Purchasing Considerations:
Direct Purchase
• The facility outright owns the instrument and related accessories
– Purchase can be paid upfront or financed from a vendor or a third party lender
• Direct purchase scenarios are broken down by:
– Instrument(s)
– Service
– Reagents
– Consumables
– Financing fees (if any)
Pros
• Details facilitate negotiation
• Higher observed savings
• Negotiating future purchases
Cons
• Time intensive negotiation
• Upfront capital requirements
• Outdated equipment

11. 11
Direct Purchase Example

12. – Vendors often tack on an upcharge for all reagents or consumables to
– Simple Rental
12
Purchasing Considerations:
Reagent Rental
• The instrument is “free” with the purchase of reagents
Pros
– Fair Market Value Lease
– $1 Buyout Lease
• Easier to budget for
• No upfront capital investment
• Updated equipment
Cons
• Difficult to negotiate pricing
• Penalties for decreased
reagent usage
compensate for lost revenue
• Reagent rentals can be priced as:
– Cost per Test
– Monthly Payment
• Reagent rental offers several types of pricing structures (simple,
moderate and complex)

13. 13
Reagent Rental Examples
• Types of pricing structures
– Simple pricing structure can be seen
in systems that require a kit to run a
test or panel of tests
– Moderate pricing structure is seen in
microbiology, molecular diagnostics,
hematology, and other esoteric areas
of the laboratory

14. 14
Reagent Rental Examples
– Complex pricing structures are seen in chemistry, immunoassay, special
chemistry and blood bank

15. 15
Purchasing Considerations:
Cost per Reportable
• Facility pays set price per patient result obtained using the instrument
• Cost of equipment and service typically rolled into the cost per test
• Often gives purchasers a false sense of low pricing
– A few cents difference here can mean the difference between hundreds of
thousands, if not millions, of dollars in additional costs to a facility
– Know what is rolled into the cost per reportable amount
Cons
• Itemization typically not given
• Difficult to negotiate pricing
• Difficult to compare quotes
• False sense of low pricing
• Penalties on Usage: Higher volumes
results in higher costs
• Pricing seldom easy to understand
Pros
• Easier to budget for
• No upfront capital necessary
• New Instrument at end of
contract

16. 16
Cost per Reportable Example
Reportable
Category
Price per
Reportable
Quantity per
Year
Annual Dollar
Amount
CMP $0.060 1,296,333 $77,779.98
Gen. Chemistry $0.096 438,811 $42,125.86
Esoteric $0.540 88,945 $48,030.30
TDM $1.620 25,993 $42,108.66
DAT $0.840 248,292 $208,565.28
Proteins $1.980 51,738 $102,441.24
Specialty $2.550 12,788 $32,609.40
Electrolyte $0.042 1,279,722 $53,748.32
Indices $0.018 430,355 $7,746.39
Minimum Annual Commitment: $615,155.43

17. Poll Question
What type of purchase option does your lab
typically utilize?
• Direct Purchase
• Reagent Rental
• Cost per Reportable
• A combination of two or three
• Don’t know
17

18. Respiratory: Pulse Oximetry
• Pulse oximetry offers a noninvasive measure of oxygen saturation of
18
arterial blood (SpO2)
• Considered part of the basic standard of care along with heart rate,
respiratory rate, blood pressure and temperature measurements
• Used over the continuum of care in areas such as:
– Critical care
– Emergency Department
– Labor & Delivery
– Surgery
– Post-Anesthesia Care Unit
– Central monitoring on post-surgical floors
– Recommended uniform screening panel
guidelines for newborns
Source: Schiller

19. 19
Pulse Oximetry: Types
• Handheld
– Lightweight without elaborate alarms or wave forms
– Designed for spot checking, short term or when a quick view of a SpO2 is needed
– Includes fingertip, wrist-worn and handheld models
• Bedside or Table-Top
– Most common type; ideal for continuous or long-term monitoring
• Multimodality
– Combines the measurement of additional parameters
– Examples: capnography, methemoglobin, carboxyhemoglobin, etc.
• Module
– Integrated into patient monitors, OR anesthesia monitors, defibrillators, infusion
pumps, portable vital sign units and mechanical ventilators
• Central or Remote Monitoring System
– Composed of a central station and bedside oximeters
– Utilized to monitor patients on a general care floor
– Hardwired or wireless RF systems

20. 20
Pulse Oximetry: Pricing by Type
Type of Pulse Oximeter Price Range*
Handheld
*Source: MD Buyline
 Finger-tip: $300 - $600
 Handheld: $1,200 - $4,000
Bedside or Table-Top  $1,600 - $6,000
Multimodality  An additional $2,000 - $6,000 on bedside pricing
depending on additional parameters
Module  Physiological monitor module: $2,000 - $3,500
 Infusion pump module: $3,400
Central or Remote Monitoring
System
 $20,000 - $50,000, depending on bed
configurations
 Additional cost for bedside pulse oximeters

21. Vendor Handheld* Bedside* Central Monitoring*
21
Pulse Oximetry: Pricing by Vendor
Vendor 1 $450 - $845 $2,500 - $5,000* $20,000 - $112,000
Vendor 2 $500 - $900 $1,500 - $4,000 $28,000 - $90,000
Vendor 3 $200 - $600 $1,000 - $2,000 N/A
*Source: MD Buyline

22. 22
Pulse Oximetry: Sensor Types
• Single use disposable sensors
– Expensive
– Offer superior performance and accuracy
– Exert less pressure on the surface of the skin
– No risk of cross contamination
• Two piece sensors
– Lower cost
– Same performance of a single use sensor
– Small risk of cross contamination since cable is reused
• Reprocessed
– Cost per sensor is low
– Performance can be compromised
– No risk of cross contamination
• Reusable
– Cheapest and often most durable
– Low accuracy
– Possibility of cross contamination

23. Poll Question
What type of sensors are you mostly using at
your facility?
• Single use sensors
• Two piece sensors
• Reprocessed sensors
• Reusable sensors
• An even mix of two or more different sensors
23

24. 24
Pulse Oximetry: Sensor Pricing by Type
Type of Sensor
Standard
Adult/Pediatric*
Standard
Neonate/Infant*
Specialty*
Single Use
Disposable
Sensors
• Min: $3.91
• Max: $15.90
• Average: $8.72
• Min: $4.23
• Max: $20.32
• Average: $11.45
• Min: $17.36
• Max: $29.70
• Average: $22.44
Reprocessed
Disposable
Sensors
• Min: $6.00
• Max: $6.92
• Average: $6.46
• Min: $6.50
• Max: $7.42
• Average: $6.96
• N/A
Reusable
Sensors
• Min: $90.00
• Max: $196.46
• Average: $139.12
• Min: $199.00
• Max: $245.00
• Average: $207.97
• Min: $184.50
• Max: $195.00
• Average: $189.75
*Source: MD Buyline

25. • Patient body weight
• Skin integrity
• Perfusion
• Duration of monitoring
• Patient activity level
• Infection control concerns
25
Pulse Oximetry: Sensor Selection

26. • Competitive bids
• Market share commitments
– Provide good leverage to reduce sensor price
– Commitment level is negotiable and can be spread across multiple vendors
• Volume commitment
– Only useful for single use or reprocessed disposable sensors
– Volume of sensors should always be determined and set by the facility
– Ensure there is no price increase during the length of the term
– Vendor may agree to provide the equipment at no charge/reduced charge when
provider agrees to a set dollar amount in sensors
 Determine upfront if the volume commitment required is sustainable
• Rebates
– Complex contracts that require a significant number of hours to ensure compliance
– We strongly discourage these type of contracts, if a vendor can afford to offer one
then it is likely that they can afford to reduce the cost of the sensors
26
Pulse Oximetry: Purchasing Considerations

27. Respiratory: Bronchial Thermoplasty
• Used to treat patients with severe asthma when it is not controlled well
27
by inhaled corticosteroids and long-acting beta agonists
• Currently, only one system is FDA approved
• System is comprised of:
– Controller unit
– Single patient use catheter
• Three disposable catheters are required for
each patient during a single treatment session
• Patients are treated through multiple sessions, targeting identified
areas of the lungs
Source: Asthmatx

28. Respiratory: Bronchial Thermoplasty
28
Pricing for Vendor 1*
Bronchial Thermoplasty Controller
 Min: $48,999
 Max: $59,999
 Average: $56,384
Single Use Catheter
 Min: $2,500
 Max: $2,500
 Average: $2,500
*Source: MD Buyline
• At $7,500 per treatment, the cost of the consumable catheters
exceeds the price of the system ($48,999) after 6.5 treatments
• Typical consumable cost overall per patient treated ~$22,500

29. • Bundle programs
– Associated with consumable agreement offering a discounted price
for the system with a commitment to purchase a set volume of
catheters
29
Bronchial Thermoplasty:
Purchasing Considerations

30. Poll Question
Is your facility currently offering bronchial
thermoplasty treatment?
• Yes
• No
• Unsure
30

31. • Temperature management systems are widely used as a
neuroprotectant and cardioprotectant
• Need for temperature management systems is expected to grow in the
next ten years
• Studies continue to validate the significant clinical impact of
temperature regulation and induced (therapeutic) hypothermia
31
Nursing: Temperature Management
Therapeutic hypothermia is most often used to lower a patient’s
body temperature in order to help reduce the risk of ischemic
injury to tissue following a period of insufficient blood flow.

32. • Strong clinical evidence for use in cardiac arrest patients, those
suffering from hemorrhagic shock and several forms of severe brain
injury
• Several major U.S. cities require ambulances to transport cardiac
arrest patients only to hospitals with hypothermia capabilities
• Temperature management is recognized as part of the standard of
care for critically ill or surgical patients by:
32
Temperature Management :
Clinical Evidence

33. Temperature Management : System Types
• Strong
33
Temperature
Management Systems
Differences
Endovascular/Intravascular
 Requires physician involvement
 Potential for bleeding complication
 Studies indicate a more rapid cooling rate
Surface Management
 Accomplished by nursing personnel, quick to apply
 Potential for skin burns
 Two types: conductive and convective

34. Poll Question
What type of temperature management
systems are you using at your facility?
• Endovascular/Intravascular
• Surface Management
• Don’t currently use any temperature
management system
• Don’t know
34

35. • The outcome for both types of temperature management systems is
related to reducing mortality and providing better neurological
outcomes at discharge
• This can be considered a soft dollar reimbursement
– Clinical evidence associated with temperature management shows a direct
correlation with improved outcome and recovery
– This can be linked with a reduced length of stay and complications
– This offers a financial benefit to hospitals through the Affordable Care Act
 Hospitals are measured by the quality of care they provide related to decreasing
“never events” and hospital readmission
35
Temperature Management:
Soft Dollar Considerations

36. 36
Temperature Management:
Pricing by Vendor
Endovascular Surface Management
Vendor Price Range*
Vendor 1 $34,436 - $34,856
Vendor 2 $33,372 - $40,639
*Source: MD Buyline
Vendor Price Range*
Vendor 1 $12,355 - $14,535
Vendor 3 $38,000 - $41,000
Vendor 4 $6,950
Vendor 5 $4,500 - $4,795
*Source: MD Buyline
• Price differences between high and low end systems based on:
– Graphical user interfaces
– Color displays
– Type of data tracked and trended over time

37. • Careful patient selection is critical to help control cost since items are
single patient uses
• Clinical evidence suggests patients who should potentially be
excluded from using the devices include these characteristics:
– Greater than 6 hours after cardiac arrest
– Major head trauma
– Major surgery within 14 days
– Systemic infections
– Patients with ongoing bleeding
– Patients in a coma from other causes (e.g., drug intoxication)
• By limiting patient selection to those patients that have shown benefit
from induced hypothermia, hospitals are able to control costs
37
Temperature Management:
Other Financial Considerations

38. 38
Temperature Management:
Consumable Cost
Vendor Description Average Price*
Vendor 1
Catheter A triple lumen $858
Catheter B triple lumen $750
Catheter C triple lumen $550
Vendor 2 Catheter A single lumen $1,322
Vendor Description Average Price*
Vendor 2
Flow channels for water
circulation
$595
Vendor 3
Hydrogel coating mimic water
immersion
$1,122
Vendor 4 Water circulation $300
Vendor 5 Water circulation $308
*Source: MD Buyline
Catheters
Surface Products

39. 39
Temperature Management:
Purchasing Considerations
• Catheters and surface products are vendor specific
• Vendors do not typically offer pricing discounts based on committed
volume or market share
– Consumable items are routinely left off purchasing contracts
• Best practice: Negotiate consumable costs at the time of capital
purchase
– This is when you have the most negotiating power
– Lock in pricing for at least three years
• Large hospital systems using more than one device should negotiate
jointly for consumables if possible

40. • Cardiac ablation is used to correct heart rhythm
disorders, often when medicine is not effective or
appropriate
• Ablation uses two different types of energy to
destroy diseased or damaged tissue in the body
– Radiofrequency (RF)
 Utilizes heat, which is created from radio waves is the most
commonly used ablation technique in cardiac indications
 Energy is a low-voltage, high-frequency form of electrical energy
– Cryo
 Utilizes extreme cold, which is produced by a coolant, such as argon or nitrous oxide
• Ablation affects cells closet to the catheter tip, which results in scar
tissue, this disrupts the electrical current, and, in most cases, causes
the heart to return to a natural rhythm
40
Cardiology: Cardiac Ablation
Source: The Mayo Foundation

41. Poll Question
Which type of energy are you using for your
cardiac ablation procedures?
• Radiofrequency
• Cryo
• Don't know
41

42. • Atrial fibrillation (AFib) is the most common heart rhythm disorder treated
with cardiac ablation, leading to blood clots, stroke, heart failure or other
complications
• Cardioversion is the first line of treatment, followed by ablation
– Recent prospective randomized trials have indicated that catheter ablation might
offer better outcomes over traditional anti-arrhythmic medications for some patients
• In 2010, European Society of Cardiology guidance supported the use of
catheter ablation without first attempting anti-arrhythmic drugs
• Soft dollar considerations:
- Improved outcomes can now be linked to soft dollar considerations under
the Affordable Care Act
- Current clinical evidence suggests cardiac ablation can decrease the
likelihood of recurrence in patients anywhere from 44-87%
42
Cardiology: Cardiac Ablation

43. 43
Cardiology: Pricing of Generator
Vendor Generator Price*
Vendor 1  Cryo Based System: $7,000
Vendor 2
 RF Based System: $25,000
 Cryo Based System A: $17,500
 Cryo Based System B: $170,000
Vendor 3  RF Based System: $33,000
*Source: MD Buyline

44. 44
Cardiology: Probe / Catheter Cost
Vendor Probe / Catheter Cost*
Cost for 20
Procedures/Year*
Cost over Life of
Generator*
(assumed 7 years)
Vendor 1  Cryo Probe – $2,995 - $3,000  $59,900  $419,300
Vendor 2
 RF Probes – $1,695 - $3,495
 Cryo Probe A – $2,795 - $2,900
 Cryo Probe B – $1,700 - $4,800
 $33,900 - $69,900
 $55,900 - $58,000
 $34,000 - $96,000
 $237,300 - $489,300
 $391,300 - $406,000
 $238,000 - $672,000
Vendor 3  RF Probe – $650 - $1,500  $13,000 - $30,000  $91,000 - $210,000
*Source: MD Buyline
• There are no third party sources for supplying the catheters
• Once you purchase a generator, you are essentially locked in to purchasing
the consumables from the specific vendor

45. Cardiac Ablation: Purchasing Considerations
45
• Two different types of purchase options:
– Outright purchase of the capital equipment
– Capital equipment offered at no charge, based on an annual
commitment of catheter or probe purchases
 Negotiate consumable costs prior to purchasing the generator
 Ensure catheter or probe cost is clear from the beginning
 Remember: Consumables are tied to vendors, there are no third
party options
• We recommend considering the outright purchase of the capital
equipment

46. Conclusion: Understanding your Purchase
46
• There are commonalities with regards to cost management, purchase
negotiation, facility considerations, and hurdles across ALL departments:
o Choose the Equipment that is right for your facility
o Determine your annual procedure volumes
o Choose the length of the agreement that best fits your facility
o Know your expected cost increases
o Ask Questions before you agree to anything