Cain Brothers Newsletters: Industry Insights

“Industry Insights” is a bi-weekly email newsletter published by Cain Brothers, a division of KeyBanc Capital Markets. The newsletter features innovative and original perspectives about healthcare services, healthcare IT, and life sciences from our team of experienced investment bankers. Read the latest newsletter content below, and subscribe to start receiving the newsletter in your inbox.
Benefits of Single-Use Surgical Instruments
In 2013, the Journal of Medical Economics published a report, which estimated that healthcare-associated infections (HAIs) cost the U.S. about $150 billion annually. Since that time, hospitals and healthcare systems have been looking for ways to significantly reduce HAIs, as well as their overall costs. One of the most promising solutions to these challenges has been the initial shift from reusable medical devices to single-use or disposable devices, and we believe this trend will continue due to the benefits outlined below.
1. Improved Sterility and Patient Safety – Sterility is a major concern for healthcare providers, and with reusable devices, there are risks associated with cleaning, disinfection, and sterilization between uses. For example, a recent study found that hospital steam sterilization failure rates ranged from 1.5% to 43%. Additionally, another study found that ~8.6% of instruments were still contaminated after the autoclave process. However, single-use medical devices are kept in sterile packaging until the time of use and significantly reduce these risks.
2. Better Economics for Providers and Healthcare Systems – Single-use instruments also enable hospitals, ambulatory surgical centers (ASCs), and providers to generate more income through faster operating room turnover. These instruments take less time to prepare for a procedure, reduce the time required for procedures, and enable providers to perform more operations each day.
It is also much cheaper to source and maintain single-use medical devices because hidden costs required to maintain reusable instruments are avoided. Reprocessing costs range from $200 to $900 for each cycle. These costs include the storage and maintenance of sanitation products and equipment, the labor hours spent sanitizing devices, the risk of cross-contamination infections, potential malpractice suits, replacement parts, and the service and maintenance time required to sort through kits after each procedure.
Additionally, the process of cleaning, disinfecting, sterilizing, inspecting, and testing reusable devices requires a significant amount of time and labor (typically more than three hours for each cycle). These processes must be done for all instruments after every procedure and cause significant downtime for operating rooms. However, single-use devices are ready as soon as a physician opens the package and are simply disposed of once that procedure is finished.
3. Enhanced Performance – Medical devices are only guaranteed to work reliably for a certain number of uses, and many instruments are used well past their validated lifetime. As a result, physicians often deal with dull, broken, missing, or suboptimal instruments during procedures. This can lead to delays and significant cost increases.
Single-use devices are manufactured to meet all specifications and are subjected to rigorous testing that ensures they will perform optimally through their intended life. These devices are always sharp, never broken or missing, and completely sterile, which helps reduce costs and facilitate on-time performance.
4. Environmental Benefits – Although reusable instruments are not thrown out after each use, they do generate a substantial amount of chemical waste and electrical power usage for each reprocessing cycle. The chemical waste comes from the solvents and disinfectants used to clean and sterilize the instruments.
Although single-use devices are disposed of after each use, they eliminate the need for onsite sterilization. Many of these devices can also be recycled and the raw materials can be reclaimed for new products.
Due to the benefits outlined above, the single-use medical device market is projected to grow at a CAGR of 9.3% through 2030. In a market where healthcare system margins are razor thin, the shift to single-use instruments provides considerable cost savings, while also improving profitability and reducing HAI risks. As a result, we expect to see a significant shift to disposable medical devices over the next few years.
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