A recent survey by consultants L.E.K. of more than 200 hospital executives paints the picture: the next five years will likely see spending decreases for large device med tech spending. With 80 percent of those respondents already members of or planning to join accountable care organizations (ACOs), there are three things medtech should put on its radar.
1. The use of ACOs for device cost containment is already happening.
In Omaha, rivals Methodist Health System and Nebraska Medical Center (NMC) have partnered on an ACO-like model that in early 2012 used its group purchasing strength to sign favorable agreements with three cardiac arrhythmia management device vendors: St. Jude, Medtronic, and Biotronik. As these types of deals become more prevalent, it will be more important for medtech companies to understand the variety of dynamic relationships hospitals have with external stakeholders. For example, hospital affiliations with organizations like ACOs will be important for medtech companies to understand as it will help to determine the key stakeholders that need to be contacted in the purchasing decision process.
2. Consolidation and collaboration will further centralize power.
The Omaha ACO is worth noting for another reason: the effect of hospital/health system competition on purchasing power. Methodist and NMC banded together to compete against market leader Alegent Creighton. In addition, hospitals? continued acquisition of physician groups nationwide is another power play that L.E.K., in its hospital priorities study, notes as a negative for medtech. The growing incidence of hospital employment, compared against independent fee-for-service reimbursement, demonstrates the shift of purchasing influence moving away from the physician. Again, understanding this shift and who the key influential stakeholders are in the purchasing process will be critical for med tech companies? success in the future.
3. Hospitals aren?t the ones flexing their muscles.
Three health systems are partnering with UnitedHealth Group's Optum Labs to conduct independent studies on the long-term effectiveness of some medical devices. (For more information, read HLI VP Carolyn McMeekin's recent blog.) If the studies lead to the tiering of medical devices based on outcomes, this could be a real game-changer. This puts the mid-term possibility of medtech-focused ACOs squarely in focus. Optum's study partners?Dignity Health, Baylor Health Care System and Advocate Health Care?could be the most likely candidates to form them. All three are already active in the ACO space.
Just as happened with pharma, medtech has seen declines in its reps? access to hospitals and other providers. More and more hospitals are implementing stricter access guidelines. Additionally, as physicians continue to become less influential in the purchasing decision-making process, medtech representatives will have to find new contact points at the facilities. Furthermore, the services being provided will have to continue to evolve as hospitals? needs and their decision making processes are becoming more complex and intricate.
Now more than ever, the industry needs to position itself as a value partner. It remains to be seen whether ACOs and their cost-containment imperatives will expand those opportunities or limit them further.