Zimmer and HCA Make Up
BY DAVID KRESSEL, APRIL 25, 2006
Our regular readers will remember that a few months ago, Zimmer and HCA had an unusually public fight. To briefly review, HCA entered into volume discount contracts with Zimmer, Stryker and DePuy. At year end, the implant companies reported HCA hadn't met the volume targets and would therefore have to refund any discounts given. When HCA announced its fiscal year 2005 and Q4 results, they said they had met these targets. After Zimmer and HCA publicly argued about what HCA did and did not do, HCA finally retracted its earlier statement. Orthopedic industry watchers cheered the defeat of this much-talked about gainsharing program.
It was therefore surprising to see Zimmer issue a press release saying that it entered into a 5 year supply agreement with HCA. The announcement did not go into much detail, except to say that the terms were mutually beneficial and that discounts were offered in exchange for "market share and growth." Zimmer also commented that HCA will be doing more MIS procedures with Zimmer's help. It had appeared that the ortho companies had dodged a gainsharing bullet when HCA announced it hadn't met the targets, and management teams had expressed a sentiment close to remorse for originally entering into these contracts that sacrificed price for market share, essentially commoditizing their offerings. On the other hand, it is not clear what role physician choice and gainsharing plays into this contract. If there is no gainsharing component to this, then it's no different from the many other volume purchasing agreements between device manufactures and GPOs or hospitals.
Lastly, and seemingly out of the blue, the agreement "provides for the opportunity to introduce trauma products into additional HCA facilities." Zimmer has mentioned in the past that it plans to invest in the Extremity space and this may be the beginning salvo in Zimmer's fight for the trauma and extremity market.
