Value-based contracting is prompting medtech companies to fundamentally change their operating models.

DRG Partner Adrienne Lovink reviews 3 key ways that manufacturers will need to evolve to compete in the new customer ecosystem.


The impact for medical device companies on the proliferation of value-based contracting is that they will have to change their operating model in some really fundamental ways. So they will have to be able to operate and drive stakeholder engagement with non-clinical stakeholders because the decision makers on these contracts will be different.

They will have to be willing to assume risk in a way they didn't have to do previously. That also means that they have to be willing to figure out, "How do we manage through these contracts? What are the right endpoints? Which of our devices are suitable for these types of contracts?" And they may have to learn to compete in a different way because some companies have clearly moved faster into being willing to do value-based contracting and being really focused on value-based care. And many companies are moving quite slowly.

So, for example, Medtronic has moved, by far, the fastest. They have been, by far, the most vocal. They have full strategic alignment from the top of their organization all the way down around how much of a priority this is. So for any companies that are competing in a space with Medtronic, again, just as an example, they will have to figure out, "What do we do in response?" because it is going to be part of the competitive differentiation in the future.

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