Breaking The Chain

Hospitals set supply cost-cutting targets, push physicians to change behavior

Patients with a new cardiac pacemaker have an advantage over patients who have received standard pacemakers: they can undergo MRI scans as a part of their care without the risk of adverse events.

But the new device costs hospitals $1,300 to $3,000 more than a traditional pacemaker and could cut into a hospital's margin because Medicare and other insurers pay the same rate for implanting MRI-compatible pacemakers as they pay for the standard pacemakers. From a clinical perspective, physicians are put in the position of having to predict which patients are likely to need an MRI and should receive the new pacemaker.

It's one of many supply-chain decisions hospital administrators have to make where they must weigh the benefits of a new technology—such as the fact that the new pacemaker doesn't improve immediate outcomes for the patient but may have additional benefits in the long term—against its higher costs.