Setting a Price Cap
Beth Ward, chief financial officer at Dallas-based University Hospital UT Southwestern, which has an annual operating budget of about $2 billion, says that rather than limit the number of vendors, her organization has done a value analysis of each product and set a maximum price it is willing to pay for individual items.
"As an example of how the value analysis process works, we will pay so much for total joints, and anybody that wants to play will play," she says. "We haven't limited the vendors, but a lot of them have dropped out because they won't meet our pricing."
A physician who wants to continue to use a particular product that doesn't pass muster in the value analysis process has to negotiate with the vendor to cut the price, Ward adds.
"If the providers want to bring in that product, they will work with the vendors to get the pricing down, and that has happened in several instances," she says. "No product is allowed into the system without going through the value analysis process."