Medtech companies that innovate with value-based care in mind will be well positioned 

In a video interview published by MDDI, Omar Ishrak, the CEO of Medtronic, describes the biggest threat to the medtech industry is not “acknowledging that in the end patient outcomes is the most important criteria and therefore helping move payment incentives both for us and for others in that direction – not doing that would be a mistake. To build walls around devices alone and not think about outcomes that those devices provide.  I think that would be a mistake. So I think embracing the move towards outcomes, embracing the move towards a longer time horizon over which performance is measured, I think those are things I would encourage the industry to move into”.

Mr. Ishrak is referring to value-based care (VBC). Without question, if the CEO of the largest medical technology company is using ‘outcomes’ within the context of both threat and opportunity… one should probably take notice.

Just a few years ago, if you were to Google value-based care (VBC), chances are very little on the subject would appear during your search. Today, not only will your search include endless data on VBC, it will also include a multitude of acronyms all encompassed around VBC. In fact, if you try to obtain a simple definition of VBC, one does not really seem to exist.

That’s because VBC essentially means something different to each of the various parties involved; whether payers, providers or patients, etc. Having been in the medical technology marketplace for almost 30 years, to me, VBC appears to be the next evolution of ‘managed care’. Let’s see how this evolves around medtech and innovation.

Background

According to Wikipedia, the Western Clinic in Tacoma, WA, provided lumber mill owners and their employees the first form of a prepaid healthcare plan for $0.50 per member per month in 1910. Fast forward to 1973, the Health Maintenance Organization Act (HMO) was established under the U.S. Department of Health and Human Services. HMOs opened opportunities around managed care, but seemed to place limitations on patients in the process.

On March 23, 2010, the Affordable Care Act (ACA) federal statute was signed into U.S. law. Since then, the traditional and progressive “fee-for-service” business model is being increasingly tried with an “evidence-based” or “value-based” model to shine a brighter light on the increasing burden of healthcare costs.

The VBC Model

The essence of VBC is that it ‘shifts’ the medical healthcare industry from a ‘volume’ payment model to an ‘outcome’ payment model. In simple terms, VBC introduces a way to ‘package’ healthcare services versus individually charging for itemized services, such as for each patient visit, test, procedure, etc.

The medtech innovation community will need to consider the transforming dynamics of VBC in order to synthesize with the evolving models within VBC: Accountable care organization (ACO), Patient-centered medical home (PCMH), Pay for performance (P4P) and bundled payments.

While each of these models promote potential advantages in improvements to patient outcomes, a common thread places significant pressure on cost. In VBC, everyone is a participant in reducing cost, including medtech companies.

Medtech Validation

Digital Health technologies is one example that continues to provide new opportunities with data-driven devices that can assist in both monitoring and managing outcomes. Taking this a step further, Medtronic’s acquisition of Cardiocom is a new divergence into a business strategy that dives right into remote patient monitoring and disease management services.

Additionally, new technologies like minimally invasive transcatheter aortic valve replacement or implementation (TAVR/TAVI) continue to provide improved patient outcomes with significant reduction in patient risk, trauma and price.