The tectonic shifts in the marketplace require the development of a new medtech lexicon. What terms should be in it?
Unless you are living on a Kepler planet, you are most likely aware of the profound and perhaps irreversible shift in the overall healthcare industry that has upset the medtech apple cart.
With this, terms that weren't as important to medical technology companies even five years ago are becoming front and center. After chatting with medtech experts, it appears imperative to not only understand their meaning but also how they are fundamentally redefining the role of medtech firms in the healthcare industry.
"These 'new' words reflect the growing importance of a more holistic perspective of how healthcare should be delivered to maximize patient outcomes at lower costs," explains Jonas Funk, managing director and partner at L.E.K. Consulting. "
Given this development, it might be worthwhile to develop a new medtech lexicon. Here are some words that would be in it.
Continuum of Care
This is a phrase long used in the payer world that is slowly finding currency among medtech players. It is no longer enough to "fix" a heart rhythm problem with a pacemaker or defibrillator through a surgical procedure in the hospital, take the money from the hospital for selling those devices and go home and pat yourself on the back for a job well done.
Now, each stakeholder - be it hospital, medtech firm or pharma company - has a responsibility that the patient remains well no matter where or how their care was delivered. That is why hospitals have been buying up primary care clinics and post-acute care facilities. The same reason is driving acquisition activity among medtech companies too.
Medtronic bought telemedicine firm Cardiocom to remotely care for heart failure patients. In the company's fiscal fourth quarter, it signed 14 new Cardiocom contracts. This development suggests that extending its reach beyond the hospital walls to a patient's home is allowing it to be a broader player in that continuum of care.
"I constantly counsel my clients to think about how their device fits within the 'continuum of care,' specifically – does it replace another diagnostic test or procedure," explained medtech reimbursement expert Ed Black, president, Reimbursement Strategies LLC, in an email.
The new hospital customer is not looking for products. Well, okay, they are going to buy medtech company's products, but what they will really pay money for and be loyal towards is "solutions." Solutions to their problems of keeping costs down and improving patient outcomes. And they have many, many problems.
The progressive medtech company should therefore take a closer look at their business model and say, "Do I have a compelling services solution that may or may not be tied to my devices?" A great example of the value that medtech company brings to hospitals is borne out in the 15 year, $300 million agreement that Philips signed with Georgia Regents Medical Center back in 2013.
Under the agreement, the two will care a new healthcare delivery model that through which GRMC would be provided with technology innovation, operational planning/support, and consulting services. And Philips will leverage strength not only from its medical devices portfolio including radiology and oncology but also its consumer products portfolio that includes lighting.
The disruption that is being encountered in the marketplace as the health system moves from a volume-based reimbursement era to a value-based reimbursement world necessarily requires stakeholders to take some risk. Yet, hospitals and payers are increasingly looking to share risk with vendors. Pharma companies have done so in the past. And now medtech companies are being forced to assume some of that burden too.
Medtronic's Hospital Solutions business is one such endeavor to share risk and innovate the accepted business model. The group kicked off by managing cath labs of European hospitals where both the firm and the hospital customer would dip into cost savings as well as bear the brunt if they ended up with red ink. A PricewaterhouseCoopers report reveals that "Medtronic has saved its partner hospitals an average of 20% to 25% in costs associated with coronary care, and it has improved patient satisfaction by offering services such as patient referral programs, supply chain management, surgical supply kits, and cardiovascular information systems."
The program has been so successful that CEO Omar Ishrak announced on Tuesday that Medtronic is expanding the cath lab shared risk program globally.
Outcomes-Based Reimbursement and Purchasing
Back in the day, if products were safe and effective they would land on the market and medtech firms would cultivate relationships with doctors so that there would be buyers of their products even if there weren't as much difference between products. As physicians become employees of the hospital, and their purchasing influence is not what it used to be, hospitals and payers are pushing to use products that truly have clinical differentiation.
Now hospitals and payers want to know which products truly work. If there is no meaningful differentiation with products, hospitals are more than keen to cut the choices available to physicians. At Fairview Health Services in Minnesota, hospital purchasers reviewed competing stents and found that wide variations in pricing but no real differentiation in clinical outcomes. That led to a decision in January 2013 to cut vendors to two from three.
Another entity SharedClarity, a startup subsidiary of UnitedHealth is also reviewing clinical literature to decide how to buy devices certain expensive procedures for its hospital members.
The healthcare industry has been historically fragmented and it is arguably still so, but there is much greater urgency today among medtech firms and others in acknowledging that they are indeed part of an ecosystem. That acknowledgment comes in the part of greater collaboration and partnerships than ever before.
You have Boston Scientific becoming a founding device partner to a UnitedHealth group subsidiary engaged in gathering more information about how devices work. You have Mayo Clinic, and Medtronic and Johnson & Johnson, team up with Apple and IBM respectively as the healthcare ecosystem accepts high-tech companies into its fold to reimagine how care is delivered and push costs down. Not to mention that these collaborations point to the fact that the medtech companies are finally understanding that consumers are part of this new healthcare ecosystem.
"Ecosystem has become a buzzword in the world of drug delivery and I've heard that even in the hip implant context where orthopedics companies are having to surround their implant with an ecosytem," says Bill Evans, president of Bridge Design, a medical device design firm. "They have to develop a pre-patient induction web app to serve the way that clinicians are brought into the fold and a post-implant app to manage the rehabilitation process. If you do that right and not as a veneer, it's going to improve outcomes and lower the cost of care.
A medtech design expert believes that it is that overarching desire to push costs down that has led medtech companies to think about how their products function in this ecosyctem.
These are five terms now firmly established in the new medtech lexicon. What other terms would you put in there? Share your thoughts in comment or email me at [email protected]
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