Article preview from IN VIVO - December 2013
The Affordable Care Act is shifting the economic risks of care from the payors to the providers, and medtech companies will be forced to find new sales and distribution channels, new ways of defining clinical and economic benefit, and new offerings wrapped around devices to enhance both their clinical and economic value. At the IN3 meeting in October 2013, executives from both the payor and provider communities discussed how medtech companies should respond to these new dynamics.
Medical Devices: What Those Paying Are Saying
Article preview from IN VIVO - December 2013
More than ever, medtech companies must demonstrate how their devices will both improve care and save the health care system money. This creates a new barrier to entry for start-ups. But a panel of payors and providers at the recent IN3 meeting in San Francisco gave tips to device executives on how they might clear those hurdles.
- The Affordable Care Act is reforming health care. Cost reduction is one aspect, but increasingly these changes also mean shifting the economic risks of care from the payors to the providers.
- As risks shift, the buying process is going to change. Medical device companies will be forced to find new sales and distribution channels, new ways of defining clinical and economic benefit, and new offerings wrapped around devices to enhance both their clinical and economic value.
- The consolidation of providers, and in some cases, the merging of payors and providers, is creating a new kind of volume purchasing power never wielded by the group purchasing organizations of the past.
- How should medical device start-ups operate differently today? At the IN3 meeting in October 2013 executives from both the payor and provider worlds shared their wisdom.
Lisa Suennen, a partner at the venture capital firm the Psilos Group, has sat through countless pitches from medical device companies seeking funding. Psilos is a diversified fund focused on health care, and its current $300 million fund invests across health care services, health care IT, and medical devices, with medical devices tending to account for 34% of the mix. Before becoming a founding partner of Psilos in 1998, Suennen had spent 10 years as an executive at Merit Behavioral Care, a specialty health care management organization. Because she operates in both the service and medical device worlds, Suennen says she has realized how insular the thinking of the medical device world is and how out of sync it is with the way health systems operate. “I often see medtech start-ups focused on getting a reimbursement code. But getting a code isn’t the same thing as getting it paid for and too few really understand that.”
Medtech companies are certainly sensitive to the pressures of health care reform and they’re conscious that their products need to bring benefits without increasing costs or even by saving costs, and in fact, that’s the way many companies and their investors argue the benefits of a new technology. But a focus on cost, per se, is not the right framing for the issues medical device companies should be looking at, says Suennen. A whole new host of challenges arise as risk shifts from payors to providers, prompting consolidation among providers, shrinking product choice for physician employees of hospitals, and moving buying power to the corporate, rather than physician level of decision-making.
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