Medtronic Executive: Providers Make More Money on Implantables than Medtronic Does

 The topic of sky high healthcare costs has become a sort of evergreen issue, and earlier in March, it got a very lengthy examination by Time magazine's Steven Brill who wrote a tome entitled Bitter Pill: Why Medical Bills Are Killing Us.

Given the environment, it was not surprising that the topic reared its head in a broad panel discussion about healthcare organized by the University of Chicago's Booth School of Business Thursday evening at the Graves Hotel in Minneapolis.


Panelists - who came from different parts of the healthcare spectrum such as health insurance, medical devices, healthcare consulting and government - held a lively discussion about everything from ACOs, to the role of government in healthcare, to lack of evidence-based medicine and to the fact that even as providers are preparing to move to a value-based system they are still getting reimbursed based on how many people they see.

"We have one foot on the dock and one in the boat and the boat is moving," said Nancy Garrett, director of the Analytics Center of Excellence, at Hennepin County Medical Center.

But perhaps the most interesting and controversial part of the discussion came when the issue of cost came up.

Rachel Scherer, vice president of strategy and business development, of the Tachyarrythmia business of Medtronic, which is part of its Cardiac Rhythm Disease Management division, said that although consumers are upset over high costs, they sometimes do not clearly understand some of the elements at play. 

For instance, medical device companies get hammered for having high margins on their products, but in reality they are not really making that much money on them, Scherer contended.

"Providers make more money on implantables than Medtronic does," she said. "They come to us and ask for a 20 percent price discount, but they are not passing on savings to consumers. They are making up for what they are losing at another part of the hospital."

Device companies, not surprisingly, are feeling a little defensive these days. Their largest markets are shrinking. They haven't ramped up enough in emerging markets. The Affordable Care Act, with its emphasis on ACOs and which includes the Physician Payment Sunshine provisions mean that the cosy relationship that device firms enjoyed with physicians is rapidly eroding. And then there is the  2.3 percent device tax. [The repeal effort is appearing to gather some steam in Washington because of bipartisan efforts, although it remains to be seen whether it will become a reality.]

Still, finger-pointing, may not be the best way forward. Each actor in the healthcare industry played a role in creating the unsustainable system we currently have - be it device firms, insurance companies, pharma, doctors, government or hospitals. Collaboration may be the only way to solve this conundrum.

Otherwise, we might be forever be stuck with the dark characerization of the healthcare system that one panelist made.

"It's a fascinating place to be. It's totally broken," said John Cosgriff, Chief of Staff for UnitedHealth Group's $14 billion state a progams business.

 -- By Arundhati Parmar, Senior Editor, MD+DI

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