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Financial Impact of Dual Vendor, Matrix Pricing, and Sole-Source Contracting on Implant Costs
Abstract
Implant costs comprise the largest proportion of operating room supply costs for orthopedic trauma care. Over the years, hospitals have devised several methods of controlling these costs with the help of physicians. With increasing economic pressure, these negotiations have a tremendous ability to decrease the cost of trauma care. In the past, physicians have taken no responsibility for implant pricing which has made cost control difficult. The reasons have been multifactorial. However, industry surgeon consulting fees, research support, and surgeon comfort with certain implant systems have played a large role in slowing adoption of cost-control measures. With the advent of physician gainsharing and comanagement agreements, physicians now have impetus to change. At our facility, we have used 3 methods for cost containment since 2009: dual vendor, matrix pricing, and sole-source contracting. Each has been increasingly successful, resulting in massive savings for the institution. This article describes the process and benefits of each model.
... There is substantial room for cost savings within this environment. Previously, there has been documented cost savings in forms such as matrix pricing, sole-source contracting, and single or dual vendor negotiation (Althausen, Lapham, and Mead 2016). Several recent publications have demonstrated cost effectiveness with the use of high value implants in orthopaedic trauma (McPhillamy et al. 2016;Althausen et al. 2014;Lybrand and Althausen 2018;Gurnea et al. 2021). ...
... Our surgeons first began utilizing high value alternatives for fracture fixation in 2012. We have also employed other cost savings strategies such as matrix pricing on hemiarthroplasty and nail constructs resulting in massive savings (Althausen, Lapham, and Mead 2016). Despite concern that high value implant use may negative affect pricing on unique implants and instruments by conventional companies, the significant savings due to these programs has al-High Value Tibial Nail Utilization Improves Cost Without Compromising Outcomes: Experience at a Level II Trauma Center ...
In today’s opportunistic healthcare climate, value-based care has moved to the forefront of cost containment. With respect to orthopaedic trauma, it has become increasingly important to factor cost into the treatment of an often underinsured patient population.
As patents expire on many commonly used trauma implants, high- value alternatives represent an excellent opportunity for trauma surgeons to provide value-based care so long as it does not compromise outcomes. The objective of this study was to appraise the clinical and economic impact of the use of high-quality, low-cost tibial nails in the treatment of tibial shaft fractures.
... Cost savings programs that target expenditures on medical devices have been described previously in the literature, especially in the field of orthopedics. [12][13][14][15][16][17][18][19][20][21][22][23][24][25] To our knowledge, however, no studies have reported on cost savings in spinal surgery associated with a single-vendor procurement model. The objectives of this study were to describe our experience with the single-vendor procurement of spinal implants, characterize the economic benefit of sole-source contracting, and examine whether vendor rationalization, also known as supply base reduction, is associated with a diminishing quality of care. ...
... 35 Preserving physician autonomy in implant selection is a key feature of many cost-saving initiatives that target medical devices. [12][13][14][15][16][17][18][19][20][21][22][23][24] The limitation of such choice-preserving measures is, however, that manufacturers often require volume-based guarantees to justify meaningful price reductions. 19,24,25 As a result, hospitals may be forced to balance the competing priorities of reducing cost and protecting physician choice. ...
Importance
Significant cost savings can be achieved from consolidating purchases of spinal implants with a single vendor. However, it is currently unknown whether sole-source contracting or vendor rationalization more broadly affects patient care.
Objectives
To describe the single-vendor procurement of spinal implants, characterize the economic benefits of sole-source contracting, and gauge whether vendor rationalization is associated with a diminished quality of care.
Design, Setting, and Participants
This retrospective cohort study assessed adult patients receiving single-level lumbar interbody fusions at a single institution from January 1, 2009, to July 31, 2017. Exclusion criteria included multilevel fusions and prior spinal fusions.
Exposures
Patients were analyzed based on the number of vendors available to surgeons at the time of the patient’s surgery. January 1, 2009, to December 31, 2010, was defined as the multivendor period (10 vendors); January 1, 2011, to December 31, 2014, was defined as the dual-vendor period; and January 1, 2015, to July 31, 2017, was defined as the single-vendor period.
Main Outcomes and Measures
Rates of 12-month revision surgery, complications, 30-day readmissions, and postoperative patient-reported outcomes, as measured by 5-dimension European Quality of Life (EQ-5D) and Patient-Reported Outcomes Measurement Information System-Global Health (PROMIS-GH) utilities. Propensity score weighting was performed to control for confounding. The Holm method was used to correct for multiple testing. Annual cost savings associated with the dual-vendor and single-vendor periods were also reported.
Results
A total of 1373 patients (mean [SD] age, 59.2 [12.6] years; 763 [55.6%] female; 1161 [84.6%] white) were analyzed. Rates of revisions after adjusting for confounding were 3.2% (95% CI, 1.5%-6.7%) for the multivendor period, 4.5% (95% CI, 3.1%-6.5%) for the dual-vendor period, and 3.0% (95% CI, 1.7%-5.0%) for the single-vendor period. Complication rates were 5.3% (95% CI, 2.7%-10.1%) for the multivendor period, 7.2% (95% CI, 5.4%-9.6%) for the dual-vendor period, and 6.4% (95% CI, 4.6%-8.8%) for the single-vendor period. Readmission rates were 14.2% (95% CI, 9.7%-20.2%) for the multivendor period, 12.6% (95% CI, 10.1%-15.5%) for the dual-vendor period, and 9.7% (95% CI, 7.4%-12.7%) for the single-vendor period. Revisions, complications, and patient-reported outcomes were statistically equivalent across all periods. Readmissions were not statistically equivalent but not statistically different. The savings attributable to vendor rationalization were 24% for the dual-vendor and 21% for the single-vendor periods.
Conclusions and Relevance
The single-vendor procurement of spinal implants was associated with significant cost savings without evidence of an associated decline in the quality of care. Large hospital systems may consider sole-source purchasing as a viable cost reduction strategy.
... In addition, such dramatic savings have provided the hospital with the ability to more effectively negotiate prices on conventional items such as arthroplasty and arthroscopy products. Matrix pricing has become the norm at our institution with hemiarthroplasty and nail constructs which have resulted in massive savings as well (Althausen, Lapham, and Mead 2016;Althausen, Lu, et al. 2014). As a result, the use of high value alternatives has been successful on many levels. ...
Introduction:
In the current climate of cost containment and fiscal responsibility, high value implant alternatives represent a substantial opportunity for the treatment of orthopedic trauma patients. As patents have expired on many commonly used trauma implants, high value alternatives have become available. The purpose of this study was to examine the clinical and economic impact of a cost containment program using high quality, low cost external fixation components for temporary spanning constructs in the treatment of tibial plateau and pilon fractures.
Methods: 62 patients with tibial plateau and pilon fractures treated with temporary high value external fixation devices were compared to 62 patients treated with conventional brand external fixation devices over the same time period. The groups were analyzed for differences in intraoperative and post-operative outcomes in order to analyze the clinical efficacy of high value devices. Operative records were analyzed to identify intraoperative complications, operative time and estimated blood loss. Cases of infection, malunion, nonunion or need for repeat surgery were recorded. Hospital financial records were appraised to determine implant costs.
Results: There were no significant differences in age, sex, presence of diabetes, smoking or fracture type between the high value and conventional groups. No difference in operative time was noted. No intraoperative or postoperative complications occurred in either group from the time of external fixation to the time of external fixator removal and conversion to definitive fixation. Overall the hospital realized a 58% reduction in implant costs, an average of 136,400 during the study period.
Conclusions: Use of high value external fixation implant constructs has been a very successful endeavor at our institution providing equivalent clinical outcomes while significantly reducing implant expenditures. Based on this data the use of high value implants has the potential to markedly reduce operative costs as long as quality products are utilized.
... In addition, such dramatic savings have provided the hospital with the ability to more effectively negotiate prices on conventional items such as arthroplasty and arthroscopy products. Matrix pricing has become the norm at our institution with hemiarthroplasty and nail constructs which have resulted in massive savings as well (Althausen, Lapham, and Mead 2016;. As a result, the use of high value alternatives has been successful on many levels. ...
Introduction : In the current climate of cost containment and fiscal responsibility, high value implant alternatives represent a substantial opportunity for the treatment of orthopedic trauma patients. As patents have expired on many commonly used trauma implants, high value alternatives have become available. The purpose of this study was to examine the clinical and economic impact of a cost containment program using high quality, low cost external fixation components for temporary spanning constructs in the treatment of tibial plateau and pilon fractures.
Methods : 62 patients with tibial plateau and pilon fractures treated with temporary high value external fixation devices were compared to 62 patients treated with conventional brand external fixation devices over the same time period. The groups were analyzed for differences in intraoperative and post-operative outcomes in order to analyze the clinical efficacy of high value devices. Operative records were analyzed to identify intraoperative complications, operative time and estimated blood loss. Cases of infection, malunion, nonunion or need for repeat surgery were recorded. Hospital financial records were appraised to determine implant costs.
Results : There were no significant differences in age, sex, presence of diabetes, smoking or fracture type between the high value and conventional groups. No difference in operative time was noted. No intraoperative or postoperative complications occurred in either group from the time of external fixation to the time of external fixator removal and conversion to definitive fixation. Overall the hospital realized a 58% reduction in implant costs, an average of 136,400 during the study period.
Conclusions : Use of high value external fixation implant constructs has been a very successful endeavor at our institution providing equivalent clinical outcomes while significantly reducing implant expenditures. Based on this data the use of high value implants has the potential to markedly reduce operative costs as long as quality products are utilized.
... 23,24 With the healthcare system becoming increasingly interested in the value of orthopedic care, and in particular, the impact an orthopedic surgeon has on cost of care, implant selection may be utilized as an opportunity to decrease costs. 8,16,25 Many orthopedic subspecialties have evaluated how implant selection affects cost of care. Cavallero et al. evaluated the cost and outcomes of locking versus nonlocking (NL) implants for the treatment of bicondylar tibial plateau (BTP) fractures. ...
Introduction
Geriatric intertrochanteric (IT) femur fractures are a common and costly injury, expected to increase in incidence as the population ages. Understanding cost drivers will be essential for risk adjustments, and the surgeon’s choice of implant may be an opportunity to reduce the overall cost of care. This study was purposed to identify the relationship between implant type and inpatient cost of care for isolated geriatric IT fractures.
Methods
A retrospective review of IT fractures from 2013-2017 was performed at an academic level I trauma center. Construct type and AO/OTA fracture classifications were obtained radiographically, and patient variables were collected via the electronic medical record (EMR). The total cost of care was obtained via time-driven activity-based costing (TDABC). Multivariable linear regression and goodness-of-fit analyses were used to determine correlation between implant costs, inpatient cost of care, construct type, patient characteristics, and injury characteristics.
Results
Implant costs ranged from 5,045.62, averaging 9,129.18 to 19,822, and patients receiving a sliding hip screw (SHS) had the lowest mean total cost of care at 19,314 and $21,372, respectively). When construct type and fracture pattern were compared to total cost, 31-A1 fracture pattern treated with SHS had significantly lower cost than 31-A2 and 31-A3 and less variation in cost.
Conclusion
The cost of care for IT fractures is poorly understood and difficult to determine. With alternative payment models on the horizon, implant selection should be utilized as an opportunity to decrease costs and increase the value of care provided to patients.
Level of Evidence
Diagnostic Level IV.
... In some cases, the difference in cost between implant options can shift the utility and cost-effectiveness of a treatment 30 . Various strategies have been successfully implemented to address variations in implant costs, including dual vendors, single-price purchasing programs, matrix pricing, and sole-source contracting 31,32 . Most of the efforts to control orthopaedic implant costs have focused on total hip and knee arthroplasty, with 1 health-care system reporting 26% lower implant costs after 1 year of using a capitation matrix system 33 , whereas another had >30% lower implant costs and 25% savings per case using a single-price purchasing program 32 . ...
Background:
As the United States transitions to value-based insurance, bundled payments, and capitated models, it is paramount to understand health-care costs and resource utilization. The financial implications of open reduction and internal fixation (ORIF) with a volar locking plate for management of unstable distal radial fractures have not been established. We aimed to elucidate cost differences between ORIF and closed reduction and percutaneous pinning (CRPP). Our hypothesis was that ORIF has greater direct perioperative costs than CRPP but that the costs equilibrate over time.
Methods:
We reviewed financial data for 40 patients prospectively enrolled and randomized to undergo CRPP or ORIF for treatment of a closed, displaced, unstable distal radial fracture. Clinical and functional outcomes, hospital-associated direct perioperative costs, postoperative care and therapy costs, and costs for additional procedures were compared. Cost data were stratified into perioperative, 90-day, and 1-year periods, and were reported utilizing cost ratios (CRs) relative to the CRPP cohort. Statistical analysis was performed with chi-square and independent-samples t tests with an alpha level of <0.05.
Results:
Seventeen patients underwent CRPP and 23 underwent ORIF with a volar plate. Patients who underwent ORIF incurred greater 90-day (CR = 2.03/1.0, p < 0.001) and 1-year (CR = 1.60/1.0, p < 0.001) direct costs than those who underwent CRPP. The differential was greatest in the immediate perioperative period and gradually decreased over time. Operating room fees (CR = 1.7/1.0, p < 0.001), operating room implants, anesthesia (CR = 1.8/1.0, p < 0.001), and total perioperative costs (CR = 2.7/1.0, p < 0.001) were significantly greater in the ORIF cohort. Rehabilitation and cast technician costs were comparable (CR = 0.9/1.0 [ORIF/CRPP], p = 0.69). At 1 year, the CR for all costs of decreased to 1.6/1.0 (ORIF/CRPP, p < 0.001). Compared with the CRPP cohort, the ORIF cohort demonstrated significantly better functional outcomes at 6, 9, and 12 weeks and similar outcomes at 1 year.
Conclusions:
ORIF for a displaced, unstable distal radial fracture incurred greater direct costs than CRPP. Although implant costs for ORIF provided the greatest cost differential, additional procedures and higher clinic costs in the CRPP cohort narrowed the 90-day and 1-year cost gaps.
Level of evidence:
Economic Level II. See Instructions for Authors for a complete description of levels of evidence.
Aims & objectives:
The purpose of this study was to evaluate for cost variation in distal radius fractures (DRFs) treated with a volar locking plate (VLP) and to identify key factors that affect the total construct cost.
Materials & methods:
A retrospective case series was conducted for a single healthcare system. A total of 140 patients with a DRF treated with a VLP from May 2014 to December 2021 were identified. Patients were excluded for polytrauma, open fractures, and skeletal immaturity.
Results:
Most patients were female (n = 120, 85.7%) and were on average 59 ± 13.7 years old. Patients most often injured their dominant hand (n = 75, 53.6%) and presented with an AO/OTA 23C fracture (n = 93, 66.4%). Twenty-two surgeons were included with fellowship training in hand or trauma and orthopaedic or plastic surgery residency. Orthopaedic hand-trained surgeons treated the highest proportion of 23C fractures (69.8%). Ninety patients (64.3%) were treated at a surgery center. The average cost was 215.32 (range: 2156.95). The most expensive fixation constructs used a variable angle locking screw (264.99) or a multidirectional threaded peg (192.94). Multivariable regression analysis revealed none of the study variables to be significant contributors to construct cost (all p-values >0.27).
Conclusions:
Surgically treated DRFs with a VLP demonstrated similar total implant costs regardless of fracture pattern, surgeon specialty, or treatment facility. Contrary to previous literature, VLPs showed minimal cost variation, although some surgeons were able to decrease the overall cost by reducing the number of screws used.
With an increasing focus on costs in healthcare, it is important for all surgeons to have a basic understanding of how costs can be accounted for in practice and have an awareness of when decisions can lead to significant cost variation. Variation in clinical practice is expected and appropriate as each patient we see is unique and our job as surgeons is to understand the preferences and values of the patient in front of us and help them find the treatment pathway that is best for them. This rational variation is warranted and based on efforts to provide patient-centered care based on evidence. However, many studies would suggest that a large portion of the variation we see in treatment “as delivered,” and the associated costs, go far beyond what might be considered rational or warranted due to patient factors. This chapter will explore the measurement of cost, science of variation, and impact of physician behavior as they relate to the daily practice of orthopedic surgery and the potential impact on patient safety, clinical outcomes, and resource utilization.KeywordsCostVariationPrice transparencyPhysician behaviorCost reduction
Background Context: The ethics of industry payments to physicians and the potential impact on healthcare costs and research outcomes have long been topics of debate. Industry payments to spine surgeons are frequently scrutinized. Transparency of industry relationships with physicians provides insight into their possible impact on clinical decision-making and utilization of care.
Purpose: To analyze trends in medical industry payments to spine surgeons and all physicians from 2014 to 2019, and further evaluate whether specific payments to spine surgeons vary based on company size.
Study Design/Setting: Cross-sectional investigation of publicly reported Center for Medicare and Medicaid Services (CMS) Open Payments Database (OPD)
Population Sample: All US providers listed as receiving industry payments with further evaluation of payments to neurosurgeons and orthopaedic spine surgeons.
Outcome Measures: Main measures were the magnitude and trends of industry general and research payments and subcategories of general payments, such as royalty/license and consulting fees, to spine surgeons and comparison to all physicians over the six-year period. Variations in payment patterns among spine device manufacturers with the highest reported level of spine surgeon payments in 2019.
Methods: 2014 to 2019 publicly reported general and research industry payments in the CMS OPD were analyzed. Trends in payments to all physicians were compared to trends in payments to neurosurgeons and orthopaedic spine surgeons. Trends in payment patterns among spine device manufacturers with the highest payments in 2019 were determined. Linear regression analysis was completed to find statistically significant outcomes.
Results: Our investigation found an aggregate of 1,112,936,203) of which went to spine surgeons. Industry general and research payments to spine surgeons decreased by 17.5% (161,283,683, 2019), while increasing by 8.7% (7,288,003,832, 2019) to all physicians. Industry research payments to spine surgeons were notably low each year and decreased to only 0.5% of research payments made to all physicians in 2019. Median payment received by spine surgeons as well as the overall distribution of payments to the 75th and 95th percentile significantly increased over the six-year period in comparison to the stable distribution of payments to all physicians. Top eight spine device manufactures with the highest level of spine surgeon payments accounted for 72.9% payments in 2014 but decreased payments by 17.6% to 2019 (99,283,264.49, 2019).
Conclusions: Industry general and research payments to all physicians increased from 2014 to 2019 but decreased to spine surgeons, largely due to decreasing payments from eight device manufacturers with the highest level of surgeon payments. A small subset of spine surgeons continues to receive increasing payments. The implications of decreasing investments in research by industry and of large payments made to a small group of spine surgeons bears cautious oversight, both for the future of the specialty and any impact on patient care outcomes.
Background
Few studies to date have investigated healthcare administrators’ knowledge of implant costs, and, to the authors’ knowledge, none have evaluated surgeons’ knowledge of implant costs comparing their own cases to a general cohort. The purpose of this study was to analyze cost perceptions surrounding orthopaedic implants across subspecialties within a cohort of musculoskeletal surgeons and healthcare administrators.
Methods
A 10-question survey, consisting of 10 fracture patients with their associated postoperative radiographs and the corresponding implant list, was distributed to administrators and musculoskeletal surgeons at a single Level I trauma hospital. Surgeons and administrators were asked to estimate the total cost of each of the constructs given on the survey. The estimates were subtracted from the actual implant costs, with average cost differences assessed as a net value for cohorts, surgeon specialties, and question type.
Results
Administrators averaged an overestimation of 41.61/case. The surgeon cohort averaged an underestimation of 3160.07/case for the control cases, neurosurgeons excluded. Traumatologists averaged an underestimation of 379.72/case for their subspecialty cases, and an underestimation of $13.06/case for control cases.
Conclusions
This study identified that neither surgeons nor administrators could accurately estimate implant costs. Orthopaedic surgeons appeared more accurate and may be uniquely positioned to interface with administrators. Although our study was limited by a small sample size, it pointed to opportunity for collaboration between surgeons and administrators to better understand implant costs and maximize value.
Level of Evidence
Level VI.
In any discipline, improving quality and efficiency of services acts as a unifying goal. In health care, the goal of achieving high-value care is the new doctrine for all individual entities: payors, providers, and patients. Value is defined as the ratio of outcomes to costs incurred. Therefore, a strong understanding and interpretation of cost measures is crucial to accurately deriving health care value. Health care costing is not simply limited to the costs of implants or the procedure but the costs required to deliver treatment throughout the episode of care. Consequently, physicians serve a keystone role toward driving change in health care costs and initiate high-value care practices. However, physicians require a better understanding of health care costs and institutional accounting practices. To this effort, it is critical that health care providers begin to close the knowledge gap around health care costing and provide leadership when advocating for high-value patient care. This review is purposed to provide a basic review of fundamental components for health care economics, deciphering health care costing, and preview current strategies that prioritize high-value patient care.
Purpose of review:
This review provides historical background on trauma care in the USA and summarizes contemporary trauma-related health policy issues. It is a primer for orthopedic surgeons who want to promote improvements in research, delivery, and cost reduction in trauma care.
Recent findings:
As of 2010, funding for trauma research accounted for only 0.02% of all National Institutes of Health research funding. This is disproportionate to the societal burden of traumatic injury, which is the leading cause of death and disability among people aged 1 to 46 years in the USA. The diagnosis-related group model of hospital reimbursement penalizes level-I trauma centers, which typically treat the most severely injured patients. Treatment of traumatic injury at level-I and level-II trauma centers is associated with lower rates of major complications and death compared with treatment at non-trauma centers. Patient proximity to trauma centers has been positively correlated with survival after traumatic injury. Inadequate funding has been cited as a reason for recent closures of trauma centers. Orthopedic surgeons have a responsibility to engage in efforts to improve the quality, accessibility, and affordability of trauma care. This can be done by advocating for greater funding for trauma research; choosing the most cost-effective, patient-appropriate orthopedic implants; supporting the implementation of a national trauma system; leading high-quality research of trauma patient outcomes; and advocating for greater accessibility to level-I trauma centers for underserved populations.
Hospital revenues for orthopaedic operations are not keeping pace with inflation or with rising hospital expenses. In an attempt to reduce the hospital cost of orthopaedic operations by reducing the cost of operating-room supplies, we developed a Single Price/Case Price Purchasing Program for implants used in total hip arthroplasty, total knee arthroplasty, and total shoulder arthroplasty as well as for arthroscopic shavers and burrs, interference screws, and bone-suture anchors.
The Lahey Clinic asked orthopaedic vendors to supply all instruments, implants, and disposable items related to these selected products for one single price per unit or case. For example, a single price for total hip arthroplasty implants included instruments, acetabular cups, acetabular liners, acetabular screws, femoral stems, femoral heads, and stem centralizers, if required. The hospital implemented the Single Price/ Case Price Purchasing Program with a competitive-bid request for proposal. Surgeons evaluated the responses to the bidding process, and they made final decisions on product selection.
The Single Price/Case Price Purchasing Program at the Lahey Clinic was successful in reducing the cost of orthopaedic implants and supplies. In the present article, we could not disclose the specific prices that we agreed to pay our vendors. The specific cost reductions were 32 percent for hip implants with a change of vendor, 23 percent for knee implants without a change of vendor, 25 percent for shoulder implants with a change of vendor, 45 percent for arthroscopic shavers and burrs without a change of vendor, 45 percent for interference screws without a change of vendor, and 23 percent for bone-suture anchors without a change of vendor.
The Single Price/Case Price Purchasing Program at the Lahey Clinic allowed the hospital to reduce its cost of orthopaedic operations by lowering the cost of operating-room supplies. This cost reduction is important in a health-care economy in which hospital revenues per unit of service or care are decreasing.
Total joint arthroplasty is a successful surgical treatment for painful, arthritic hips and knees. The prevalence of total joint arthroplasty is increasing, and it is consuming an increasing proportion of health care dollars. Payers, especially Centers for Medicare and Medicaid Services, have targeted total joint arthroplasty for cost control, and joint implants, the greatest expense in total joint arthroplasty, have been identified as an opportunity for cost control. Hospitals seek to control the cost of joint implants because the rate of increase in the price of implants is rising faster than the rate of increase in hospital payment for total joint arthroplasty. As joint implants consume more of the hospital payment for total joint arthroplasty, hospitals are encouraging surgeons to use less expensive implants. Several methods for controlling the cost of implants have been described, but no method has succeeded without the cooperation and involvement of surgeons. Gainsharing programs may help align the incentives of hospitals and surgeons relative to the selection and cost of implants. We have implemented a Single-price/Case-price Purchasing program with considerable savings on the cost of implants without adversely affecting the patient outcome of total joint arthroplasty.
Total hip and total knee arthroplasty are high-volume surgical procedures that have a substantial economic impact for the healthcare system. This study analyzes the financial effect of a capitation matrix system on total knee and total hip implant costs over a 1-year period at a community hospital system. The matrix implant levels were based on implant characteristics, correlating increased technological sophistication of the various implants with increased but capitated payment to vendors. In the first year after the implementation of the matrix system, implant costs for the hospital decreased by 26.1% per implant for 369 total hip procedures and also by 26.1% per implant for 934 total knee procedures.