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Value-Based Purchasing: Why Medical Device Developers Should CareValue-Based Purchasing: Why Medical Device Developers Should Care

Medical device manufacturers must be prepared to quantify the value of their devices in terms that can be compared with alternatives.

May 20, 2015

3 Min Read
Value-Based Purchasing: Why Medical Device Developers Should Care

Medical device manufacturers must be prepared to quantify the value of their devices in terms that can be compared with alternatives. 

Stephanie Kute

If value-based purchasing hasn't impacted your business yet, chances are it will soon. Purchasing decisions for medical devices and therapies are increasingly based on the demonstrated value they bring to patient outcomes.

What does this mean for medical device manufacturers? Soon you may need to be able to quantify the additional value your device brings to patients compared with other treatment alternatives in terms of specifically developed quality measures. And you may need to be prepared to price your product based on these measures.

Moving to Value-Based Healthcare Purchasing

Value-based purchasing models are part of a larger trend toward higher accountability and cost control driven by national concern over rising healthcare costs. Under the Affordable Care Act, CMS instituted the Hospital Value-Based Purchasing (VPB) program, which provides cash incentives for hospitals that meet or improve certain healthcare quality measures. This is part of a larger plan to shift more Medicare and Medicaid payments to value-based models. Private insurers are starting to follow suit with their own value-based reimbursement programs.

Hear more from Kute during her presentation, "Proving the Case for Your Connected Health Device," at BIOMEDevice San Jose, December 7-8, 2016.

What this means is that hospitals and clinics are no longer reimbursed for procedures based simply on costs. The money that insurers and federal programs are willing to pay is increasingly based on the demonstrated value that the treatment brings to patients.

Measuring the Value-Add of Medical Devices and Treatments

Under value-based purchasing programs, hospitals need to be able to demonstrate added value using clear and easily comparable quality measures. For example, the value-added for a given procedure or therapy can be measured in terms of quality adjusted life years (QALYs) or correlated to hospital quality indicators such as mortality rates and causes, readmission rates, rates of healthcare-associated infections, and surgical outcomes and complications. The move to electronic health records (EHR) allows hospitals and insurers to mine data in ways never before possible to determine which therapies, devices, and procedures have the greatest impact for the money.

Because reimbursement rates are being directly tied to the additional value a medical device brings to a patient, hospitals are beginning to make purchasing decisions based on quality measures as well. Healthcare purchasers will not invest in a medical device whose quality measure value-add is below the value-based purchasing reimbursement threshold.

How Medical Device Manufacturers Can Prepare

Medical device manufacturers have always needed to demonstrate the value of their products for healthcare providers, insurers, and purchasers. But now, they must be prepared to quantify this value in terms of quality measures so it can be compared with alternatives. This means going beyond clinical trial results and leveraging EHR, billing, and medical sensor data to answer questions such as the following:

  • How much value does a medical device add in terms of patient outcomes, and how does this compare with other alternatives?

  • What impact does the device have on hospital-level quality measures?

  • How much money does it save compared with other treatment options?

We are working with hospitals and device manufacturers to answer these complex questions by collecting and analyzing vast amounts of data from disparate sources--including medical sensor and device data, hospital billing records, EHR data, and other sources. Using advanced pattern recognition algorithms, we can then correlate device use to patient outcomes and hospital quality measures.

With the move to value-based purchasing and reimbursement, hospital purchasers will put more pressure on medical device manufacturers to quantify their added value. Manufacturers who learn to harness Big Data now will be better prepared for the new purchasing paradigm.

Stephanie Kute is the EluciData Platform Lead in the Battelle Analytics and Health Research Team. She can be reached at [email protected].


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