ACO Hospital Model Will Influence Medical Device Makers

ACOs are made up of providers and payers outside of a hospital working for accountability and care of patients to manage an at-risk population. They are becoming more popular as the Affordable Care Act (ACA) is going to take effect, and according to Bob Lavoie, vice president and head of L.E.K. Consulting’s global MedTech Practice, which means MedTech companies should pay attention.

“As hospitals migrate towards those models, they’ll be looking for aggressive savings,” Lavoie said. In addition, they will also be looking at medtech companies that will manage risk and a part of their general patient populations, as hospitals will be accountable for the outcome of their services.

It means that device companies need to change the way they approach hospitals. Although 60% of hospital administrators expect their budgets to increase in 2013, money is more likely to be spent in IT, transferring over to electronic medical records and chasing the meaningful use dollars available through the ACA.

Also, purchasing decisions are no longer reliant on physicians, but rather on group purchasing organizations (GPOs) or distributors -- external parties who will negotiate directly with medtech companies for the best price. GPOs are more common with smaller hospitals, but Lavoie said there is a good chance they will expand.

“They see the GPO as leverage,” he said. Often, Lavoie said they will look to partner with a specific medtech company for the long term for procedure devices. Meanwhile, on the broader capital side, they’re looking for partners to match their capital outlay on significant investments, such as MRIs and Pet scanners. This mentality means that companies need to rethink how they are going to approach hospitals with their devices.

“If I’m a medtech manufacturer, I have to think about my device and how it’s going to impact hospitals going forward,” Lavoie said.

Since hospitals are using a lot of their budget on IT to track metrics, one of the ways that he sees that medtech can take advantage of this is by offering devices that track metrics and plug into a hospital’s network. Lavoie said a lot of devices are already doing this, and even more are heading in this direction.

Medtech companies that have depended on their physician relationship need to find new ways to approach commercial models. They will need to prepare to demonstrate safety and efficiency of their devices.

Hospitals are often looking for the best deals in their purchasing decisions. However, exceptions can be made if devices have a proven track record of benefits, such as reducing readmission rates or preventing infection – things that hospitals are seeking to change and take control of. “They’re willing to pay premium for those products,” he said.

Lavoie said devices companies should be doing research into the hospitals they want to approach and work to fulfill their needs.

“If I’m a medtech manufacturer, I need to know what the priorities are of my hospital clients are,” he said. “We know those metrics are going to start getting measured and managed. I need my product to address it.”

Reina V. Slutske is the assistant editor for MD+DI.

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