By John Strong, Co-founder and Chief Consulting Officer, Access Strategy Partners Inc
August 2024 – The Journal of Healthcare Contracting
Expense “creep” for supplies continues
It is no secret to many readers that expenses continue to creep upward, despite many purchasers’ best efforts to keep them in check. The Kaufman Hall National Hospital Flash Report for April 2024 was a bit sobering after enduring several years of inflation-led price increases.1
| Percent Increase | Percent Increase | |
| April 2024 vs. March 2024 | April 2024 vs. March 2023 | |
| Supply Expense per Calendar Day | 7% | 16% |
| Drug Expense per Calendar Day | 7% | 15% |
| Supply Expense per Adjusted Discharge | 3% | 5% |
| Drug Expense per Adjusted Discharge | 2% | 3% |
Are we in a trade war with China?
As the effects of shortages caused by the global pandemic began to pass, many purchasers of Disposable Medical Equipment returned to their habit of purchasing these supplies that are sourced from China. The reason? The draw of lower prices than those that could be offered by reshored suppliers.
I wrote in this column in April 2024 that the market for onshore masks and gloves has collapsed.2 Unfortunately, the bad news keeps coming for companies that require shipments from the Far East, including China.
As the Red Sea crisis has continued, container transit times to the east coast of the U.S. have been extended by a median of 10-14 days.3 While this can be accounted for with proper demand planning, it nonetheless costs more money in terms of fuel, crews, inventory and related expenses.
The Biden Administration, in addition to maintaining the tariffs broadly imposed by the Trump Administration on many Chinese imports, recently announced even tougher tariffs covering an additional $18 billion in goods from China, “to protect American businesses and workers.”4 They include a tariff rate on steel and aluminum products to 25% from a previous high of 7.5% and on semiconductors to 50% from 25%.
In addition, the U.S. Department of Commerce has revoked licenses from Intel, Qualcomm and other American chipmakers to ship product to China’s Huawei Technologies for laptops and handsets.
All these problems are under the radar of many consumers – because the inflation from all of this is not likely to hit for the next six to nine months. Consider that for May 2024, revenues of the Suez Canal dropped by 64.3% from May 2023. Vessels using the canal dropped by about 54% year-over-year.5
A recent study by Capgemini Research Institute discussed “reindustrialization” strategies in Europe and the U.S. They define this as the reconfiguration of global supply chains and manufacturing capacity, often with the goal of bringing them closer to – or even with – domestic markets.6
Are you prepared for a supply chain emergency?
With all the post-COVID talk about resiliency and response time, 83% of respondents can’t respond to a disruption within 24 hours. A recent survey of 1,800 supply chain executives from various industries revealed that only a somewhat shocking 17% feel their companies could respond within 24 hours. Further, 67% of respondents are not satisfied with their response time.11
Global robotic-assisted surgery market growing
The global market for Robotic Assisted Surgery (RAS) is projected to grow from $9 Billion in 2024 to $13 Billion in 2030.8
Intuitive Surgical continues to dominate the market, with a limited number of manufacturers having any market share at all. North American sales lead global sales with 72% of revenue.
Other manufacturers in this space include Medtronic, Zimmer, Asensus, Moon Surgical, Cascination and others with a 1% share or less. Over the past year, more than a few startups have experienced financial challenges and layoffs, and a number also faced the risk of closure.
$1.42 million average selling price of Intuitive systems in the fourth quarter of 2023.9
$2 million+ expected cost of the latest DaVinci systems.10
Drugs and supply expense now constitute 21% of hospital spend
It is no secret that everyone is having trouble keeping up with inflation, especially with supplies, drugs and, of course, labor. “Economy-wide inflation grew by 12.4% between 2021 and 2023, more than double the 5.2% growth in Medicare reimbursement for hospital inpatient care.7
Modest shifts in market share: Global orthopedic knee market
Only modest shifts in the global orthopedic knee market have occurred between 2019-2024 (first quarter).12 New products such as the Kinematic Knee Alignment (Medacta Group) are trying to gain inroads.
3.8 million is the number of people expected to undergo a total knee arthroplasty (TKA) globally in 2030. The chart below13 shows some companies outside the “big four” are making small gains in global market share, along with Stryker Corporation. Stryker’s gains are partly attributed to the Mako™ Total Knee Replacement System14.
| Q1 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 |
| Stryker | 21% | 23% | 23% | 24% | 24% | 24% |
| Zimmer | 32% | 34% | 33% | 33% | 32% | 32% |
| J & J | 17% | 17% | 17% | 16% | 15% | 16% |
| Smith & Nephew | 12% | 12% | 11% | 11% | 10% | 10% |
| All Other | 17% | 14% | 16% | 17% | 18% | 18% |
1 Kaufman Hall National Hospital Flash Report, April 2024, p. 11. © Kaufman Hall.
2 Tita, Bob, Demand for U.S.-Made Masks Collapses; The Wall Street Journal, February 5, 2024, p. B3.
3 Schuler, Mike, “Container Transit Times Soar as Red Sea Crisis Continues Unabated”, gcaptain.com, June 24, 2024
4 SCIbid. P. B, “The U.S.—China Trade War Heats Up, and Businesses Move to Adjust,” accessed July 1, 2024.
5 LaRocco, Lori Ann, “Overseas shipping problems remain largely under consumers’ radar”, Freightwaves.com; accessed July 2, 2024.
6 Capgemini Research Institute, “The resurgence of manufacturing; Reindustrialization Strategies in Europe and the US; accessed June 24, 2024.
7 American Hospital Association, “Executive Summary: Hospitals and Health Systems Continue to Face Escalating Operational Costs and Economic Pressures as they Care for Patients and Communities,” © 2024 at page 1, accessed on May 6, 2024.
8 Fletcher Spaght, Inc., “Global RAS market is projected to reach $13B by 2030; RAS VC investment returned to pre-COVID growth trajectory”, April 2024; accessed April 22, 2024.
9 Kelly, Susan, “Intuitive details launch plan for new Da Vinci 5 robot”, MedTech Dive, March 18, 2024.
10 Taylor, Nick Paul, “Intuitive’s Da Vinci 5 robot could already widen substantial lead: analysts”, MedTech Dive, April 23, 2024, accessed April 25, 2024.
11 24/7, “Most Companies Unprepared for Supply Chain Emergency”, IDC/Kanaxis study; accessed April 24, 2024.
12 Diller, Wendy, “Kinematic Knee Alignment: Can Medacta Make it Mainstream?”, MedTech Strategist, May 2024, pp. 28-32.
13 Ibid. p. 30.
14 Ibid. p. 29.