By James Biggins, founder and CEO of Access Vascular, Inc.
If you have been involved in US healthcare in any capacity for the last few decades, odds are you’ve heard of value-based healthcare (VBC). In fact, you may be numb to the hype and even a little skeptical that our healthcare system will ever make meaningful advances away from fee-for-service (FFS) to VBC.
But recent momentum and a receding pandemic have paved the way for VBC to make significant headway in the medtech arena in the coming years. Medical device companies and their leaders must act now to be ahead of what will soon become a swiftly moving tidal wave of change.
A Slow, Inexorable Move Away from FFS
This transition has been years in the making, beginning with Patient-Centered Medical Home (PCMH) in the late 1960s, expanding with the advent of managed care organizations and HMOs in the 80s, and continuing today with recent changes like CMS’ Medicare Improvements for Patients and Providers Act (MIPPA), the Affordable Care Act (ACA) and Medicare Access and CHIP Reauthorization Act (MACRA).
Still, unless you are on the leading edge of VBC like the Inova Health System in Virginia or Intermountain Healthcare in Utah, you may be surprised to learn that VBC has gained critical traction over the years. In 2012, an estimated 2% of the patient population received treatment that resulted in value-based reimbursement. In 2020, 36% of all national reimbursement contracts are now value-based.
While not uniformly implemented across the US healthcare system, VBC has clearly arrived. Medical device companies must begin planning now to stay ahead of the curve.
VBC is Coming for MedTech
Much of the early adoption of VBC has been within payor provider contractual relationships, with medical device and medtech companies largely avoiding the transition. That was beginning to change prior to the pandemic, but VBC in medtech was stopped short as health systems became consumed with combatting COVID-19.
However, in a post-COVID world, those same health systems and insurers are now motivated to charge ahead with VBC because of economic realities. Providers are beset on all sides by competitors, thinning margins, increasing administrative burden, and growing patient expectations. VBC has not only shown it can be a cost saver and improve outcomes, but both payors and regulators are applying pressure for increased adoption and have begun to help accelerate the trend.
That is why the Deloitte Centre for Health Solutions recently predicted that medtech will play a major role in driving VBC, helping to reduce medical costs, optimize performance and improve patient outcomes.
New Medtech Contracting Models
The overarching themes of VBC are better outcomes, lower cost, improved patient experience and improved clinical experience. As this stretches into medtech, it means many of the revenue and delivery models for medical device companies will have to evolve. Broadly, this shift will likely be towards “as-a-service” contracts or models wherein both health systems and providers share in the risk – either the gain from savings or through guaranteed outcomes.
This could be a huge win for innovators and device companies that normally struggle to get the attention of health systems because they are not an approved supplier or on contract. By demonstrating an improvement in outcomes or by committing to the products they develop and provide, these manufacturers can suddenly find themselves in the competitive mix – and with a new payment model that allows them to share in the upside reward.
How to Get Ahead of Medtech VBC
But as we’ve already seen, executives feel vastly unprepared and unsupported in this shift. So how should medtech companies begin planning for this fast-arriving future? Here are five ways innovators can stay ahead of the curve.
- Thought Leadership: Do the heavy lifting on the marketing front for your partners so that working with you boosts their credibility and helps ease competitive pressure. Utilize your collective institutional experience within a specialty to identify and communicate the future standard of care to the market. For example, robotic surgery platforms have clearly established new thresholds in quality and outcomes that provide partners with a ready-made incentive to work with them and then market that relationship to their own patients and competition.
- Rethinking T’s & C’s: It’s clear that VBC contracts for medical devices will no longer be structured around volume but geared towards performance and patient outcomes. This could mean contracts where device companies provide a discount on the front end in exchange for a portion of reimbursed monies later. Companies should become comfortable with a few different approaches and begin work now with legal and sales teams to codify them.
- Product Development: Lasting change begins with product. A shift in contracting and compensation towards outcomes demands a product or device that can deliver on that promise. Educate your design team, then challenge them to revisit the product portfolio to ensure it contributes to positive patient outcomes. Evaluate this in the context of the competition. No amount of marketing nor contracting will supplement your bottom line if the product cannot deliver.
- Partner Mindset: Healthcare providers are under tremendous pressure by payers to transition to VBC. Medtech companies have an opportunity to partner with providers to help them in this transition. Consider offering a consultative, holistic approach to problem-solving that encompasses clinical implementation, procedural improvement and standardization. This is a value-added approach to contracting that can differentiate you from the competition.
- Expertise Beyond Products: To maximize opportunities for success, medtech companies must find ways to offer value to providers beyond just products or devices. Integrated services that remove the burden from providers – think procedural bundles, maintenance automation, or clinical issue resolutions – can help drive standardization of procedures, reduce practice variation, and reduce share of risk and costs for an entire disease state.
The reality is that healthcare is not just moving to VBC, but rather towards a radically different future. Medtech is fertile, uncharted territory for this new paradigm, and companies that begin planning now have first-mover advantage on the competition and can begin to establish commonly accepted standards for the industry at large.
Medtech innovator and entrepreneur James Biggins is the founder and CEO of Access Vascular, a commercial stage company solving for the most common and costly vascular access complications. He regularly speaks and is asked to comment on medtech investment, entrepreneurship and commercialization.