This Article Abstract Submit a response to this article Services E-mail this article to a friend Alert me to new issues of the journal

I N T E R V I E W :
M I L L E R  &  B U R N S
 
18 May 2006  
  

Dealing With Innovation 
And Costs In Orthopedics: 
A Conversation With Dane Miller

Satisfying short-term demands in an industry with a
long-term focus can be challenging.


by Lawton R. Burns


ABSTRACT:

Rob Burns talks with Dane Miller, former CEO of Biomet, about challenges posed by new technology in the orthopedic devices area. One key challenge is the rising cost and use of orthopedic devices at a time when providers are facing decreased profitability and reimbursement for orthopedic services. Another challenge is the long-term time horizon needed to gauge product success that contrasts with payers’ and providers’ short-term horizon. A third challenge is heightened governmental scrutiny of device makers’ relationships with orthopedic surgeons. This interview was conducted before Miller left Biomet in March 2006. [Health Affairs 25 (2006): w241–w251 (published online 18 May 2006; 10.1377/hlthaff.25.w241)]

Rob Burns: Can you please explain the differences between the orthopedic products that Biomet makes and the cardiac devices that Ron Dollens [CEO of Guidant Corporation] talked about in his interview last summer?¹

Dane Miller: Sure. We’re concentrated in the musculoskeletal products area. We deal in hard tissue—mechanical products rather than electronics. Our principal product is total joint replacements, primarily hips and knees.

Burns: But like the cardiology companies, you use independent or sometimes employed sales reps to get your products to market and deal with the clinician rather than the hospital.

Miller: Yes. We are a doctor-preference product company. The primary decision maker is the orthopedic surgeon.

Device Companies And Pharma

Burns: What are the biggest differences between the device companies and the pharmaceutical companies?

Miller: We’re in the mechanical products area, not chemical. The biggest difference is that we’re interested in both long-term and short-term product performance. Long-term, our performance is not measured in terms of days, weeks, or months but in years and decades. Short-term, the installation process is highly critical for patient outcomes. It’s much more complicated than putting a pill in your mouth.

Burns: So the outcomes also take a long time to surface as well?

Miller: They do. We’re now supporting the accumulation of twenty-year clinical data on our products. It’s certainly important if a product doesn’t perform on a short-term basis, but what really matters is how well our products perform five, ten, twenty years out.

Burns: Right. But from what I can tell, hospitals care about implants that have some short-term benefits for them in terms of lower lengths-of-stay, less dislocation, less infection—whereas the vendors are more interested in the long-term benefits, including durability, longevity, and survivorship. Are there any products out there that serve both?

Miller: There probably are, but I think that what you describe is a dichotomy within the philosophy of health care thinking. I remember when everyone assumed that managed care was going to be the future of health care. A managed care specialist said, “We really don’t care about four-year results, because the people in our system are going to be in another managed care system in two years anyway.” That kind of short-term thinking ultimately leads to major problems.

Burns: There are now five major orthopedics companies, and three of them are here in Warsaw, Indiana. Most people probably don’t even know where Warsaw is (it’s west of Fort Wayne and south of South Bend). Why do device companies cluster in Warsaw?

Miller: Usually when you see a cluster of manufacturers, it’s because there’s some strategic reason or raw material source in the area. Here in Warsaw, we have an infrastructure that services our industry. If you want a piece of titanium or cobalt chrome molybdenum or 316 stainless machined, almost any machine shop in town can handle your needs. But if you go to Chicago, you probably have to talk to ten different machining subcontractors until you find one that really knows how to machine these unique materials. And that also applies to packaging, coding, various kinds of polishing, metal finishing. It all developed around an infrastructure here in Warsaw.

Industry Growth: Impact Of Demand

Burns: The orthopedics industry has gone through a tremendous growth phase in the last two decades, and your firm’s approximately twenty-seven years old, so you’ve ridden the wave of that. That growth seems to be due to several factors: rising demand and volume of procedures, rise in price, and a change in the product mix. Let’s go through those things. What has been fueling the rising demand?

Miller: There are probably two factors. Number one, demographics. As we get older, eventually we need our hips and knees replaced, and other joints potentially. Number two has been product performance. Folks who have been the recipient of total hips and knees return to a normal, active state of life. You pass people on the street every day that you don’t even realize have a hip or knee replacement. It’s because they function so successfully. Basically, it’s a source of not only quantity but certainly quality of life in our later years.

Burns: And so they act as a set of referrals, or growing patient acceptance for the product by virtue of their testimonials?

Miller: Although many companies, including Biomet, are doing direct-to-consumer advertising, the principal source of expansion of application of total joint replacement is word of mouth: patients who have had a successful result with an orthopedic surgeon and who have returned to the golf course. In fact, the most common thing we hear from most patients who have received a hip or a knee is, “I can’t believe I waited so long.”

Burns: What about the trend toward people trying to have more active lifestyles, exercising more—the weekend warriors, the bionic boomers? Is that having an impact on your business in terms of people getting injured?

Miller: Probably it is less injury than simply wear-and-tear arthritis—wearing out of our joints because we’re more active.

Burns: Does the rising incidence of obesity have a bearing on your business in terms of people developing osteoarthritis?

Miller: I think probably heavier patients tend to wear their joints out a little sooner. Obesity or weight control is certainly a factor.

Burns: As part of rising demand, the age threshold for patients receiving total joint replacement seems to be dropping. Is that a result of patient interest or the fact that the products are now more appropriate for younger patients?

Miller: Twenty years ago, the rule of thumb was that we could replace your hip or knee once, and it had better last the rest of your lifetime. Since the success rate in revision surgery, or replacement surgery, was relatively low, we would wait until the point where you simply couldn’t function in a normal lifestyle anymore, and then we’d replace the joint. In other words, delay the surgery as long as possible. Maybe the rule of thumb was sixty or sixty-five years of age. Today, there’s no reason to delay joint replacement. Number one, total joints last much longer than most people had envisioned they would last twenty years ago. Number two, if a revision or a replacement is required, that’s also now very successful.

Impact Of Price

Burns: OK. Let’s shift to the second factor in the growth of this industry: price. The average annual price increases through 2004 have been 5–6 percent. Why has your industry had such good pricing?

Miller: There are several things. First, our costs do go up. Certainly, raw material prices go up. The cost of labor goes up. Fortunately, we have been able to offset these increases with improved manufacturing efficiencies. But I think that generally per unit price increases over the past decade have been somewhere along the lines of inflation. There have been some “mix shift” price increases to new technologies, such as alternative bearing surfaces. But it’s been a combination of both increased costs of raw material and labor and improved technology.

Burns: Some analysts comment that physicians, who are your major customers, aren’t price-sensitive. Would you agree with that?

Miller: Oh, I think they are price-sensitive. I think they do consider anticipated demand and attempt to match the patient’s age and expectations with the cost and ultimate performance of the product.

Impact Of Product Mix

Burns: Let’s turn to the third driver of growth in this industry: product mix and the shift to more complex products and “premium implants.”

Miller: What we call “mix shift” is very much driven by the patient’s age and expectations. As the average age of the patient declines with the anticipated need for longer-term performance of implants, we’ll see a continuing shift toward higher-technology products, such as alternative bearing materials.

International Comparisons

Burns: These three forces that we’ve talked about—demand, price, and mix shift—are they also playing out in the rest of the world?

Miller: I think the same factors apply. Probably the biggest differences are expectations. Americans expect to return to the golf course or the tennis court. Almost the entire world, other than the United States, is driven by national health care systems. I don’t think the expectations are quite the same. Another set of differences are physician-related. Throughout most of the world, physicians are compensated by a national health care system. They’re on a salary. I don’t think doctors anywhere in the world work as hard as they do here [in the United States].

Burns: Given all that, what are the prospects for growth in the rest of the world?

Miller: It’s interesting. One would think that where national health care systems are in place and where there isn’t competition for the patient, so to speak, the demand for technology wouldn’t be what it is in the United States, but that’s not the case. Europeans want the latest and best, and their lives depend on the long-term performance of their implants just as they do in the United States. But we do see an ebb and flow in some of the international markets as national health care budgets are increased and decreased, or controlled or left out of control a little bit.

Innovation In Orthopedics

Burns: OK. Let’s turn to the issue of innovation. Would you characterize the bulk of innovation in orthopedics over the last five or ten years as incremental or breakthrough?

Miller: For the last several years it has been incremental.

Burns: And that’s products that are approved using a 510(k) as opposed to a PMA [premarket approval]?

Miller: That’s correct.

Burns: And if you compare your products with those of your competitors, would you say that there’s a narrow or broad differentiation among those products?

Miller: If you look at long-term outcomes, I think the differentiation’s fairly broad. The Swedish knee study and several peer-reviewed publications here in the United States show some fairly significant differences in long-term outcomes. If you look superficially at products and technologies themselves, there don’t appear to be great differences. But when you combine all of the factors and look at ten-, fifteen-, twenty-year outcomes, there are some pretty big differences.

Burns: Where does the innovation come from? Universities? Engineers? Start-ups? Or from orthopedic surgeons themselves?

Miller: It’s hard to say that one group or another is a primary source of innovation. I think that the university environment is less a source today than it was twenty-five years ago. The university setting has become somewhat complicated, bureaucratic. The tendency is for innovation to now come from the privately practicing orthopedic community.

Burns: And how do they develop their products? Do they contact companies such as yours, or do they contact venture capitalists?

Miller: They tend to contact companies such as Biomet and our competitors.

Relationship With Physicians

Burns: Let me read to you a quote from Leo Hopkins, the head of neurosurgery at SUNY [State University of New York] Buffalo, and get your reaction to it. He said: “There is this huge reservoir of opportunity within the physician community because the physicians are…on the front line.… There are millions of wonderful product ideas that [lie] dormant because the physician doesn’t know how to bring them to light or how to interact with companies.… The core concept, technology will advance when physicians work with companies[,] …is key to advancing the practice of medicine.” I was wondering what you thought of that.

Miller: I think that’s a very accurate statement. Some of the pressures on relationships between physicians and vendors put that opportunity at risk a little bit. But the future of health care technology can only benefit from the relationship between physicians and manufacturers .

Burns: This all raises an interesting dilemma. Here you have a physician saying that there’s an untapped reservoir of innovation that can come from surgeons working with vendors, so surgeons are an important source of innovative ideas for manufacturers. And then the Department of Justice [DOJ] has initiated an investigation of these relationships that develop between surgeons and vendors.

Miller: Ultimately, any innovation in our field requires a relationship with a physician who will apply the new idea or technology in a clinical setting. I think that the future of orthopedics—in fact, the future of health care—is based on those kinds of relationships. If we’re going to treat larger, aging populations, for fewer dollars in the future, those relationships are absolutely critical. I think that society is going to have to get beyond the general sense that economic relationships between any two parties are by definition fraudulent.

Burns: Can you tell us what the differences are in these kinds of arrangements?

Miller: Well, certainly, if a physician comes to a manufacturer with an idea that is novel, unique, and patentable and develops a royalty relationship, that’s pretty clean and unequivocal. The second level of relationship—and we have a number of these in place, as does the entire medical device industry—is a data collection relationship. As I said earlier, what’s really important is long-term clinical outcomes, and the way you’re going to know about these is to follow the patients long term. Bring the patients back every year or two, see how their hip or knee is performing, and provide us with the data about the product performance. We thus can build a significant database and learn how well our products are performing long term. That doesn’t come free. The process of chasing patients down, determining where they are—we’re a fairly mobile society—is a fairly expensive process. We reimburse orthopedic surgeons to help us collect those data.

Third is a consulting relationship where we bring physicians together and talk to them about what their experience has been and where they think we ought to be pointing our long-term R&D [research and development] efforts. Doctors are often reimbursed for their input along those lines. And then there’s a fee-for-service relationship whereby, for example, we bring orthopedic surgeons to a variety of different learning centers here in Warsaw, in Chicago at the American Academy of Orthopedic Surgeons headquarters, or a couple of our other facilities, and provide cadaver training. We bring orthopedic surgeons in to help us teach other orthopedic surgeons new techniques and technologies.

Burns: So where has all of this run afoul in terms of the DOJ?

Miller: Well, I’m not sure it has, at this point. The DOJ is doing some investigating to ensure that in fact there are benefits and services received for compensation due physicians. I think that the DOJ has initiated the investigation on the premise that there may be situations where physicians are simply paid to use a product, and certainly in orthopedics, that doesn’t exist anywhere that I’m aware of.

Burns: Do you think that this issue has been overblown?

Miller: Yes. Successful companies and successful relationships between physicians and companies seem to be ripe for media attention today. Simply because physicians are compensated to help us collect data and to help train other surgeons is not necessarily the same as kickbacks, I don’t think.

Burns: How do you think the surgeons view these arrangements with vendor companies?

Miller: I think they feel the same way I do. If they’re spending a lot of their time and effort, hiring statisticians to help collect data, they generally feel that they should be reimbursed for what they’re doing.

Burns: Is there a role here for AdvaMed [the medical device industry group] and a code of ethics—the kind of things we’ve seen in the GPO [group purchasing organization] industry?

Miller: I think that there probably is a role. We need to be careful.

Burns: It seems like there’s been a schism between what used to be the traditional continuing medical education [CME] put on by the vendors and now what the government wants you to do. As I understand it, you can pay for orthopedic surgeons to attend an event, but then they don’t get CME credit. But if an orthopedic surgeon wants to get CME credit for something, you can’t pay for that physician to come. Is that correct?

Miller: Yes, in an oversimplified sense. It seems that some interpretations of the ethics of compensation are that if there’s any benefit to a physician, a manufacturer can’t pay for it. I think that’s silly.

Burns: What is going to be the impact on physician training on new products and procedures that companies used to provide?

Miller: There will be an adverse impact if these sorts of philosophies continue.

Burns: Do you see a drop in the number of surgeons attending your training programs?

Miller: We have significantly reduced the number of training programs we have, and there has been a drop in attendance, yes. In the past we have paid course registration and travel expenses, and now physicians are expected to pay their own expenses. This has led to a reduction in the number of people attending such courses and instructional programs, but we continue to offer them—carefully, cautiously. We tend not to go to the attractive places we used to go in the past—ski resorts, for example—but we continue to offer the programs. We just ensure that physicians pay their own way.

Burns: Do you have distance learning now, or Web-based training, to supplement this?

Miller: We do a fair amount of Internet work. But when it comes to procedure training, instrumentation training, nothing compares to on-site cadaver training.

Convergent Technologies

Burns: The last thing I wanted to discuss in terms of innovation is that there seems to be some shift toward more convergent products like antibiotic-coated implants—similar to drug-eluting stents. Has this taken off?

Miller: I wouldn’t say that it’s taken off. Combination products from a regulatory standpoint are complicated because they involve several branches of the FDA [Food and Drug Administration]. As was the case with those stents, I think that we’ll see a variety of combination products emerging in the years ahead. But the regulatory pathways for those products are somewhat complicated at present.

Burns: Is there a growing trend toward the use of biologicals in implants?

Miller: Yes, absolutely. It ranges all the way from cadaver bone and bone-based products to synthetic biologicals to autologous products such as our platelet-rich plasma product.

Burns: In addition to these convergent products, there seems to be a merging of the implants themselves with computers—computer-assisted surgery, minimally invasive surgery. Is that a growing trend as well?

Miller: I think that it will be a growing trend. Smart instruments, computer-assisted surgery, have certainly been floating around for a number of years. The real key to computer-assisted surgery will be—and we’re not there yet—when we can actually save time in the operating room [OR]. And I am convinced that the time will come when computer assistance in the OR can reduce operative time, reduce the risk of infection, and reduce the total cost of the procedure. We’re not quite there yet.

Burns: What about minimally invasive surgery?

Miller: Keep in mind, as long as surgeons have been doing surgery, there has been a motivation to make smaller incisions. I don’t know that there’s a sharp line between non–minimally and minimally invasive surgery. It involves more than simply incision size. It involves protection of the soft tissue during the procedure and a variety of other things—muscle-sparing versus muscle-splitting surgical techniques and so forth. But I think that, certainly, anything that can assist the process of earlier healing is a benefit, and minimally invasive surgery will play an important part of our future in joint replacement.

Burns: Is the jury still out on whether this type of surgery is an improvement?

Miller: Probably. If it leads to shorter recovery times but higher complication rates with a certain percentage of patients, I think it will still be looked on with questions.

Burns: But physicians seem to be adopting this technique more, even despite the lack of good clinical evidence.

Miller: If you look at some of the clinical papers that have been published and presented recently, there is some push-back because people are asking the question: If you can get 90 percent of your patients out of the hospital quicker, and they recover quicker, but you’ve got a 10 percent higher complication rate, was it really a benefit?

Rising Costs

Burns: Let me shift to two of the big topics that accompany innovation: cost and quality. The most recent data showed an enormous growth in Medicare spending on implant cases over the last few years. During this time, hospital reimbursement was relatively flat, hospital profitability on orthopedics dropped, surgeon reimbursement declined in real terms, but implant prices rose. There seems to be a “perfect storm” brewing. What do you think is going to happen?

Miller: Well, number one, total hip and total knee replacement today are less expensive than they’ve ever been in the past, despite the cost of the implant. Just to give you a frame of reference, twenty-five years ago the average total hip or total knee procedure took up to two and a half hours in the OR. The average patient was in the hospital ten to seventeen days. Today, the average OR time for hip or knee replacement is about forty-five minutes, or probably less in the hands of many experienced surgeons. So you have more efficient OR turnover time, a higher number of procedures per day per OR, with an average patient stay that ranges from an overnight stay to maybe two or three days. And so when you look at the bigger picture, the cost of total hip and knee replacement today is less than it’s ever been in history, and this is due to a combination of improved implants, improved surgical procedure, improved instrumentation, and a better understanding of rehab requirements. So even though implants may have increased in price, the total cost is what we ought to all be about, what it costs to bring a patient through the front door and out the back door of the hospital, and how well the patient’s doing ten years down the road. All of those are positive and continue to improve.

Burns: If product and procedure innovation lessens the time in the OR, then that suggests that the orthopedist can do more procedures, which would increase his or her income. It would increase hospitals’ turnover in the OR, which would increase their revenues. It would help patients recover faster and probably reduce the number of medications they use. Sounds like a win/win for everybody, as well as increasing your sales.

Miller: Absolutely.

Burns: And the only down side is for the payer, who has to pay for the higher volume.

Miller: Higher unit volume. I think that’s accurate.

Burns: So when the hospitals and the Advisory Board point to the diminishing profitability of inpatient orthopedic services, they should point the finger as much at declining Medicare reimbursement as rising implant prices?

Miller: Absolutely. It seems to me that if any kind of an economic model applies to health care, the CMS [Centers for Medicare and Medicaid Services] should be identifying those areas where the health care services are truly socially responsible, and I think that’s certainly the case in orthopedics. We’re putting people back on their feet. We’re helping them return to functionality in society. And if that’s the case, the CMS should be targeting those areas with increased reimbursement.

Burns: Some people are obviously going to ask the question: What are the implant companies doing to reduce the cost of the products for their customers downstream who are facing this constrained reimbursement?

Miller: We offer a variety of technologies, from hemiarthroplasty [partial hip replacement] all the way to advanced metal-on-metal, large-diameter femoral heads, and we don’t dictate which technology applies to which patient.

There are some examples where false economy has come into play. My mother-in-law, who’s now eighty-eight, fractured her hip twelve years ago and ended up with a hemiarthroplasty and an Austin Moore implant, which replaces just the femoral head. I think probably the surgeon who treated her truly believed that her medical condition was such that this was an adequate level of technology and certainly a substantial reduction in cost over total hip replacement. About nine years after her hemiarthroplasty, we looked at her pelvis. The metallic femoral head was eroding into her pelvis. Each year her medical condition declined somewhat, each year she was a poorer candidate for replacement, and each year we decided we were going to put it off and think about it again next year. And eventually she fractured her femur below the implant. Now, if she had had a traditional total hip, or even a bipolar, she would’ve remained active, would not have had the complications she had with her hemiarthroplasty, and probably would not have fractured her femur below the implant. The second surgery, which took place about two years ago, was a very complex procedure, involved a long-stem implant, basically a revision implant, cadaver struts, a special cup, and she’s now—knock on wood—doing reasonably well. But she had an awful lot of surgery, and had it been done properly the first time, she would’ve probably been walking just fine today. There are lower-cost alternatives, but I think in the longer term they don’t all turn out to be more cost-effective.

Burns: Another thing people might ask is: What are the companies doing to reduce their internal costs of production? Do you compete based on manufacturing costs, or is it more in terms of your sales forces and your relationships with surgeons?

Miller: More in terms of technology, products, quality, and so forth; less so in the area of product cost. We certainly continue to invest in manufacturing technology and cost reduction, but in the marketplace we compete on technology, quality, and clinical outcomes.

Hospitals And Orthopedics

Burns: Let’s come back to your hospital customers who claim that their orthopedic margins have declined in part due to the rising implant prices. What can they do to improve their margins, aside from negotiating lower prices with vendors?

Miller: We manufacturers should work together with hospitals and orthopedic surgeons to see the “whole cost” picture, and not focus on just one component like implant cost. Certainly, we can reduce the cost of our implant, but that’s only a component of the total cost of the procedure.

Burns: Has this total cost approach—which the pharmaceutical companies also advocate—actually been applied between any vendors and hospitals that you’re aware of?

Miller: Absolutely. Our Health Care Initiatives program basically provides a service whereby we go into a hospital and look at its overall costs. For example, if it takes a hospital two hours between cases to turn an OR, that’s a cost. There are some techniques that can reduce that substantially. We have many different programs to help hospitals examine and reduce their overall costs. We also say to hospitals, “Hey, we know of models around the country where total joint replacement is highly profitable, very efficiently operated; let us bring some experts in to help you.” It’s kind of interesting. In several experiences recently, we were told, “We’ll give you fifteen minutes. Come in and give a presentation to our surgery committee.” And some of those meetings lasted two hours. So I guess the answer is yes, we are engaging the economic customer, the hospital. We are offering what input and assistance we can based on our relationships with hospitals that are highly efficient in their total joint programs.

Burns: What do you think about the current panoply of hospital strategies to save money on implants—capitation, reducing the number of vendors they deal with, gain sharing, competitive bidding, getting manufacturers to discount prices?

Miller: Once again, I think that hospitals should consider the total cost of the delivered health care service. It’s interesting—there were a number of consulting companies that ten or fifteen years ago would go into a hospital and for some $25,000 or $50,000 evaluate its total joint service and make recommendations as to what the hospital could do to improve its cost picture. It always came down to three areas. Number one, reduce your OR time. Number two, reduce the hospital stay for the average joint patient. And number three, beat up on the manufacturer for price. I don’t think that solved many problems.

Burns: The easy way out was to do number three—beat up on the manufacturers?

Miller: Absolutely. At the end of the day, we ought to be working together as a team rather than as competitors in dealing with the whole cost picture. It would be helpful to reframe the cost of joint replacement. In different parts of the country, orthopedic hospitals are being built or equipped to do principally total joint replacement. Some are physician-owned; some are hospital-owned. The general opinion seems to be that total joint replacement is a highly profitable specialty area and that physician-owned or -built hospitals are simply cherry-picking from the profitable parts of the hospital system. Now, that’s not consistent with hospitals’ expressing concern that their joint replacement programs are loss leaders and unprofitable. You can’t have it both ways.

And so I think that total joint replacement, in my opinion and the opinions of a lot of people around the country, can be profitable, if properly managed. In fact, we have a retired orthopedic surgeon who put together a total joint program in a hospital in Maryland. Before he put together his system, called “Joint Camp,” total joint replacement in that hospital was not profitable. It is now one of the most profitable parts of the hospital. He’s now retired and educating others around the country on how to do the same thing.

Burns: What is it about the relationship that you and your sales reps have with orthopedic surgeons that hospital administrators and their materials managers don’t?

Miller: I would divide total joint replacement into two categories. The vast majority of hip and knee replacements in this country are done in relatively small hospitals, by general orthopedists and OR staffs who do relatively few hips and knees. These facilities are highly dependent upon the relationship with our technical field reps. The OR staff, for example, yesterday did a gall bladder and the day before yesterday did an appendix, and now they’re faced with this broad array of instruments and implants. So they rely on the technical field rep to ensure that everything’s in place, that it’s in good working order, and that the procedure goes smoothly.

The other end of the spectrum is the high-volume total joint replacement doctor and hospital; they don’t need that level of service on a per case basis, but if they’re doing six procedures in one day, the inventory needs are pretty substantial. They need to make sure that they have adequate inventory—by the way, we own the inventories and the instruments in the hospitals. I think that defines the relationships we have with orthopedic surgeons, which are completely different from the relationships the surgeon has with hospital administration, purchasing, and the surgery suite. Those relationships between manufacturers and orthopedic surgeons and OR staffs, I think, are critical to the success of the implant procedure.

Burns: You’ve raised an interesting issue here: the large volume of orthopedic procedures being done by surgeons who do only a handful. Is that a problem? Do you see worse outcomes here? We often talk about volume being positively associated with quality.

Miller: I’m not familiar with any studies that compare joint volume with outcomes. If, or maybe more accurately when, I need a hip or a knee replacement—I hope I need one, that means I’m living long enough to need one—I would go to a surgeon who does a large volume of them.

Burns: Is there a rationale for regionalizing these procedures, concentrating them in a smaller number of high-volume facilities?

Miller: Probably. I think that some of this is occurring, but ten years ago I would have predicted that there would be a much more concentrating effort taking place than there is today. A lot of people don’t want this. If you live in Warsaw, Indiana, and you’re seventy-five years old, you really don’t want to go to Chicago to have your hip and knee replaced.

Burns: The problem there is that at that point, you’re in physical discomfort, and you might not necessarily want to move away from your home for a long time. Maybe that’s a natural barrier to concentration.

Miller: I think so. The family and the support network are there, not in some regional center.

Burns: You also mentioned the single-specialty surgical hospitals that have gotten a lot of attention. What’s your view of these hospitals and the competition they pose?

Miller: Our feelings toward them are very positive. I’ve heard them referred to as “total joint factories,” and those that we’re familiar with are extremely efficient, cost-effective, probably profitable as well, and probably the way of the future. But there will still be a need for community-based orthopedic care.

Other Initiatives

Burns: Let me ask about some other cost-effective initiatives that might be undertaken. Can you do head-to-head comparisons of implant products made by different vendors other than a historical retrospective analysis?

Miller: You can. I don’t know that a lot of it is taking place. The right way to do a scientifically valid clinical trial is double-blind, where you use two different products unknown to the patient, clinician, and OR staff. But unless you’re going to use blind surgeons to do the procedure, it’s a little difficult to do.

Burns: Right. I guess another thing that might prevent doing even those kinds of studies is that the surgeons have a definite preference for one vendor. They would not want to randomly insert another vendor’s product in the patient that they’re unfamiliar with, along with the instrumentation, and so you probably couldn’t do those studies.

Miller: You’re absolutely right. If one company’s instrumentation is designed for an anterior approach and another company’s instrumentation is designed for a posterior approach, and the surgeon has done 4,000 posterior procedures and isn’t familiar with the anterior approach, you’re right. There are some ethical issues there.

Burns: What about some other efforts, such as Sweden’s national joint registry that tracks success rates on devices?

Miller: I think that it works reasonably well, with some exceptions. It’s basically a high-volume registry that is not designed to be a scientifically valid blinded or prospective study of any kind. It’s just a data collection process. This is an interesting example. The Swedish knee study really had an adverse impact on our global roll-out of the Oxford Knee. The Oxford Knee is a unicompartmental meniscal bearing knee with three parts: a femoral component, a tibial component, and a meniscal bearing that goes between the two. We had generally great success with the Oxford Knee, except that the Swedish knee study suggested that it had a somewhat higher revision rate—2 or 3 percent versus 1 percent with a non–meniscal bearing unicompartmental knee. The FDA was concerned about the results from the Swedish knee study regarding the Oxford, as were a number of other markets around the world. As we began to look at the data, it boiled down to one surgeon at each of two different centers who probably wasn’t balancing soft tissue properly. I mean, I hate to say that this surgeon wasn’t doing a good job, and that’s not what I’m saying. But in part because the complications in general with knee replacement were so low, the complications with the Oxford Knee in this study boiled down to two different clinicians in two different hospitals. That’s an example where you have to be careful, when you look at a database, that you understand what’s going on.

Burns: Would it make sense to develop such a database here in the United States—for example, getting all vendors to pool the data that you’ve all collected?

Miller: There has been talk at the American Academy of Orthopedic Surgeons of putting together a joint registry for both hip and knee. I think that most vendors probably would be hesitant because of the legal implications of a registry. Are you doing nothing more than providing the legal system with a road map for class-action litigation?

Burns: As we look at the outcomes of orthopedic surgery and the use of implants, are the differences that you observe in outcomes largely a function of the physician’s volume, learning, skill, and proficiency with a given vendor’s products, or are they a function of the orthopedist’s team in the OR, or are they a function of the product, or just patient differences?

Miller: It’s probably a little of each. Shorter-term complications with products tend to be more surgeon/interoperative-based. Longer-term performance differences tend to be more product-based.

Burns: Is there a tendency for orthopedic surgeons to jump on the next big product that comes out, without necessarily the proper training or sufficient volume?

Miller: Much less so today than twenty-five years ago. Today’s orthopedic surgeons are somewhat more conservative and want to be sure that there are long-term outcome benefits before they jump on a new technology. Manufacturers are less aggressive with new technologies, in part because if there isn’t both clinical and economic benefit, ultimately the market won’t accept the new technology. And finally, as I said earlier, orthopedic surgeons’ expansion of their clinical practices is very much based on word of mouth.

Role Of Consumer Ads

Burns: What’s your view of the role of direct-to-consumer [DTC] advertising? A few years ago I saw Stryker’s ad featuring Jack Nicklaus, which implied that one might improve one’s golf game by having Jack Nicklaus’s hip. What’s your view of this phenomenon?

Miller: Well, I think Jack Nicklaus can improve my golf game, but I’m going to ask him about my swing—probably not my hip. In the pharmaceutical area, my understanding is that for every 10 percent increase in DTC advertising, manufacturers expect a 1 percent increase in demand for their products. I don’t know if that holds in the medical device field. At Biomet, our principal focus on DTC advertising has been branding: getting the Biomet name in front of the public. For some of our competitors, the motivation seems to be product specific: the only knee that bends and flexes, or bends and rotates, or whatever. I think our advertising was designed to be, whether it’s achieved it or not, more educational than product-specific.

Burns: There are some cynical people out there who actually think that DTC advertising is designed to have the patient get involved and mitigate whatever influence the hospital might have over the surgeon in terms of switching vendors. Is that the case?

Miller: I think that’s a little bit overreaching, to be honest with you. I don’t think patients are going to have a significant impact on the decision making of the orthopedic surgeon, and certainly the hospital’s one step beyond.

Burns: One thing that has been mentioned is the potential for sales reps to do what’s called “up-selling” at the point of care—substituting premium products for standard products or using products that are not on contract versus products that are on contract. Is that something that your company has discussed?

Miller: I don’t know. If you walked into a General Motors dealer with the intention of buying a Pontiac, and the salesman talks you into buying a Cadillac, is he guilty of something? If a joint procedure is scheduled, and the sales rep notices that it’s a fifty-five-year-old, very active patient who wants to go back and play tennis again for the next twenty years, is it inappropriate for that rep to say, “Hey, why don’t you consider a Magnum? Why don’t you consider a hip that won’t dislocate and that, based on the data we know today, may last the next twenty or twenty-five years?” Is that wrong? If it was me lying on the table, I’d appreciate it if the rep would suggest that.

This interview is the fourth in a series of interviews with leaders in the biomedical sector, sponsored by the nonprofit Institute for Health Technology Studies, or InHealth, which recognizes that innovation in medical technology plays a vital role in better and more cost-effective health care. The series focuses on individuals who are either innovators in their own right or in a position to foster novel research.

NOTE

1. J.K. Iglehart, “Grasping the Role of Technology: An Interview with Ron Dollens,” Health Affairs 24 (2005): w296–w313 (published online 23 June 2005; 10.1377/hlthaff.w5.296).

Dane Miller is the former president and chief executive officer of Biomet, a bioengineering firm that manufactures joint replacements, in Warsaw, Indiana. He received his doctoral degree in Materials Science Biomedical Engineering from the University of Cincinnati. Dane Miller was Biomet's CEO since the company's founding in 1978; he resigned as CEO on 27 March 2006 but remains as a director and consultant to the company. Rob Burns (burnsl{at}wharton.upenn.edu) is director of the Wharton Center for Health Management and Economics, Wharton School, University of Pennsylvania, in Philadelphia.

DOI: 10.1377/hlthaff.25.w241
©2006 Project HOPE–The People-to-People Health Foundation, Inc.