Subscription services are creeping into nearly every sector of the market these days, with virtually everyone ponying up monthly fees for something. Whether it’s your monthly Netflix subscription or a weekly grocery delivery service, there’s a subscription service for almost anything under the sun. As the services multiply, many have begun to ask whether or not a subscription-based business model could also thrive in the healthcare sector.
Subscription business models have proven to be extremely successful in a variety of different industries already, from movies and music to clothing and makeup accessories—but the trend has yet to really translate into the realm of medtech. This begs the question: Will device makers ever embrace the subscription model?
Lou Malice is the CEO for NFANT Labs, a medical device and digital health company that provides medical products and services for neonatal intensive-care patients. Malice and his colleagues are among the few in the industry that hope to find success with a subscription-based business model and believe that subscription models could be ideal for new emerging technologies.
Malice will be speaking on the subject at the MD&M East show in New York City next month, but before he does, he decided to sit down with MD+DI to preview his talk and share a bit about his own experience with subscription-based business models. In the following Q&A, Malice talks about some of the advantages that subscription business models offer, and how the model could translate into success within the world of medtech.
MD+DI: For starters, can you talk a little about subscription business models, and why you think they’re becoming more and more pervasive in today’s consumer market?
Malice: Subscription models allow consumer access to the newest products that change rapidly. From content providers like Netflix, to system providers like Quickbooks Online, the consumer always has the most up-to-date product version to ensure that they are satisfied. Why own changing products and technology, when it’s much easier to rent?
MD+DI: That explains why subscription models make a lot of sense for companies like Netflix, but do you think this model can translate into the medtech industry as well? If so, where do you see a subscription-based service taking off first?
Malice: The most obvious is data access. At NFANT, we provide a device for use in the hospital, specifically the NICU and PICU, that collects data around a baby’s ability to feed—which is a leading reason for delays in discharge. We present the data to the clinician through a web portal that helps clinicians promote better feeding, continuity of care, and to better focus resources on high-risk babies. Our database is always growing, and new results strengthen our algorithms, resulting in better actionable data. A subscription model allows us to keep all users working from the most current data available, and allows our technology to always be on the leading edge of our analytics.
MD+DI: Why do you think this specific business model could be good for business for both device developers and consumers? What’s the upside for both parties?
Malice: Many procedures in the hospital can be predicted. If the prediction models are strong enough, utilization of devices and services are also predictable. That means the supplier can create a recurring pricing model that the hospital can easily budget. The hospital can depend on the repeating costs, and the supplier can depend on the revenue stream. This requires a substantial change of mindset for both parties, but it can certainly be a win-win.
MD+DI: What medical technologies do you think would be ideal for a subscription-based business model in today’s market? What factors do you think make for a good match with this kind of business strategy?
Malice: Risk sharing is the buzzword of the day in many hospitals. Arms-length sales transactions between the supplier and the caregiver generally leave the risk of efficacy with the caregiver. Subscription models create a stronger bond and need for positive outcomes, not just another sale and another product on the shelf. The factors that make a relationship like this work are open communication of utilization and outcomes, willingness to share responsibility for quality improvements in products and hospital procedures, and an approach to product and service efficacy—not just a price-based mentality.
MD+DI: Finally, in a broad sense, what’s your experience been like trying to adopt a subscription-based business model so far? What have you learned, and how do you hope to evolve and succeed with this model as you move forward?
Malice: The data/content subscription aspect is relatively easy to understand and explain. Most people use this model now for their personal consumption. To implement hard product subscriptions will be more difficult and will require a cultural change at both the product and clinical service provider level.
The nFant Feeding Solution NFANT Labs is a finalist in the 2018 Medical Design Excellence Awards. The nfant Feeding Solution transforms any baby bottle into a smart bottle, measuring tongue movement during feeding.
