The Affordable Care Act (ACA) takes its place as the major shaper of 2013 in Pricewaterhouse Cooper’s Health Research Institute’s (HRI) top 10 health industry issues. With 2014 as a significant deadline for changes in the industry due to expanded health coverage, 2013 will be a year to prepare for what is to come.

Reina V. Slutske

January 16, 2013

6 Min Read
Device Tax, ACA Top PWC's 2013 Top Healthcare Issues List

The Affordable Care Act (ACA) takes its place as the major shaper of 2013 in Pricewaterhouse Cooper’s Health Research Institute’s (HRI) top 10 health industry issues (scroll to the bottom of this article for full list). With 2014 as a significant deadline for changes in the industry due to expanded health coverage, 2013 will be a year to prepare for what is to come.

“The medical device industry has a real opportunity to explore its relevance,” Todd Evans, director on the Health Industry Advisory for Pricewaterhouse Cooper, said. “We have a sizable expansion of the population that’s to be treated coming online. There may be the potential in the growing pie for everyone to benefit, including medical device makers.”

2013-Top-Issues.jpgAlthough the top 10 concerns are diverse and influence a range of stakeholders in the healthcare industry, certain items will particularly affect medical device companies. Firms should should take heed and shape their strategies.

The medical device excise tax has been the subject of intense focus for a few years now. According to HRI, medical device companies should no longer wait for a chance at repeal—the tax is here to stay. Evans believes that medical device companies will have to work harder and perform better to get good results and prevent volatility and disruption in the supply chains. “The executive teams across the industry [should] consider this a chance to restructure the company in a more efficient way to perform at those levels,” he said.

In addition, it’s time to determine who will pay for the tax. PWC believes that passing the tax onto the consumer is not an option, but the report suggests that medical device suppliers could be tapped to take on the cost of the tax. The report notes that the tax poses a threat to smaller companies, which they may owe more in taxes than they can generate in profits. Larger device firms may be able to expand their portfolios by acquiring those smaller companies. The report suggests that ultimately, the device tax could be a boon for the industry, in that it could help spearhead new innovation and make operational recalibration possible.

The transition of hospitals looking to reduce costs will have a tremendous effect on the industry, as hospitals adjust purchasing habits. With 40% of consumers not seeking treatment due to the expense, hospitals will be scrambling to lower costs, which, according to Evans, includes procedures that extend beyond the walls of the hospital to make sure there are fewer cases of 30-day readmission. Hospitals have started with some minimal retooling, but PWC says it’s only the beginning. General cost management will be the most important decision for these facilities, and companies who can provide better outcomes at better cost will be at an advantage.

Comparative effectiveness and value analysis is changing the game for many medical device companies. Their success will not depend on the physicians using their products but on the insurers and large institutions that are willing to cover it. The HRI report references a recent example from Memorial Sloan-Kettering Cancer Center, where the center refused to pay for a colon cancer drug, citing a different drug that cost less and was just as effective. The result was that the company slashed its prices to the same as the competing drug two months after the release of the drug. In terms of medical devices, Evans sees that medical device companies can charge a premium price, but they should have the data to back up evidence that it will be worth the cost. “If there’s no outcome, there’s no income,” he said. “It can be an economic outcome, a clinical outcome, or a quality of life income, but any of those can lead to the other two.”

Finally, population health management is going to be a huge issue, as more companies will be taking it on in partnerships in order to share responsibility for working to prevent medical issues before they happen. PWC expects population health management to require major investments over the next several years, with no determined date of finish, and there will be a lot of trial and error to get effective systems in place. A strong technology base is vital for these collaborations, and systems should have the capabilities to support analytics and strong web data.

The Top 10 Medtech Predictions for 2013

The Affordable Care Act Gets Poor Marks from Physicians in Recent Survey 

HRI's Top Health Issues for 2013
  1. States will be determining how do deal with insurance exchanges, including whether to expand Medicaid and how to regulate the industry. Information technology (IT) will be a major challenge, and many states are overhauling the infrastructure of Medicaid eligibility systems.

  2. Consumers are starting to be able to take charge of how they spend their healthcare money, which is changing how medical companies will market their wares. The methods are now more retail-based in theory, and insurance companies are benefitting from nontraditional marketing.

  3. The excise tax will increase government revenue, but manufactures have to determine who will take on the cost. The tax is anticipated to help develop new innovations, as well as drive consolidation in the industry.

  4. Dual eligibles, or people who qualify for both Medicare and Medicaid, will begin to increase, and the cost of care is rising quickly. States must turn to managed care companies to help coordinate care and technology companies to support home-based care.

  5. Doctors and nurses are beginning to use their own devices, which brings questions of protecting patients’ information through the wifi networks of hospitals. Many hospitals will have to figure out how to regulate mobile device usage for its workers as well as for patients.

  6. Cost reduction for hospitals is being driven by multiple factors, not just ACA. Labor productivity and supply cost reductions are only the beginning of the cuts; look for hospitals to launch full transformation efforts in how they deliver care.

  7. Consumer ratings are having a higher impact on hospitals and insurers, with insurers being able to receive $3 billion in bonuses for quality reviews. However, hospitals may have $850 million held back as a result of the federal government’s value payment program.

  8. Insurance companies and larger providers will have more say in payment decisions than physicians. Medical device companies and pharmaceutical companies will now have to appeal to them.

  9. Employers are rethinking their roles in providing insurance to their employees, possibly resorting to private or state exchanges. Consumers will have to reconsider their place in their healthcare process, as employers may no longer have as much say.

  10. Population health management is more important that ever. Look out for partnerships to form with companies to share responsibility for patient outcomes and satisfaction as well as data collection and analysis. Population IT health infrastructures will also be built.

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