Authored by Christina Cool and Kelly Seeger
As the healthcare industry continues to implement cost containment measures and shift away from a fee-for-service model, it is increasingly imperative for medical technology (medtech) companies to understand how to effectively engage stakeholders and obtain market access. Hospital procurement has dramatically changed over the past few decades—physicians no longer single-handedly hold the purchasing power, more hospitals are merging into Integrated Delivery Networks (IDNs) and the timeline to get a technology deployed at a hospital is significantly longer.
Many of the changes in hospital procurement can be attributed to enactment of the Physician Payment Sunshine Act, the introduction of various value-based reimbursement programs and the subsequent rise of hospital Value Analysis Committees (VACs). With these changes, hospitals have been focusing and spending on the hospital procurement process. The transition to value-based care reimbursement places an even greater onus on hospitals to manage the supply chain operations and associated costs. In response, medtech companies seeking to have a role in the emerging VBC marketplace must perfect their pitch to providers to reflect the new reimbursement environment in which their customers operate.
In this current environment, there are more stakeholders involved in the evaluation process and typically multiple tiers to the process itself. Most hospitals facilitate this evaluation process through a Value Analysis Committee (VAC). VACs are comprised of physicians, nurses, administrators, supply chain and liability specialists and are tasked with evaluating all new product purchases for their hospital. The diversity of this group forces the medtech company to compile a package addressing the needs and concerns of each major stakeholder—whether they are on the caregiver, supply chain or service-line side of the equation. VAC members are challenged to build consensus on items regardless of whether they are a commodity, clinical preference item (CPI) or physician preference item (PPI), with PPIs being the most problematic for them.
Since their introduction to the industry, VACs have evolved to take on expanded scope and rigor—they evaluate more products and services than ever before and, more notably, they now have extensive capabilities to analyze cost, quality and utilization data. As their general capabilities improve, the ability for medtech companies to navigate a product through VACs is becoming increasingly difficult. It is critical to note that degrees of data usage to drive decisions and the extent of physician involvement vary greatly across VACs; the resulting variation creates complexity in presenting the right message and package to providers.
Given the limited opportunity to directly engage VACs and other stakeholders, it is critical that medtech companies’ communication be deliberate and organized, ideally presented in a structured provider-specific dossier. The primary purpose of a VAC is to identify pure value when purchasing medical technology. In order to be seriously considered, it is necessary for medtech companies to deliver compelling evidence of how their device can benefit a hospital and the population it serves. Significant efforts must be dedicated early in the development process to accumulate and present providers with desirable clinical and economic data. Further, evidence of physician, patient and medical society support should be presented to VACs. Such support can be established through awareness campaigns that drive proactive demand.
A recent survey revealed hospital administrators make nearly 5 percent of all medical supply, device and equipment purchasing decisions with cost reduction as the goal (How Hospital Administrators Make Purchase Decisions). While the industry is moving towards Value-Based Purchasing (VBP), most hospitals are still reliant on fee-for-service (FFS) reimbursement for the majority of claims. And, some VACs are even evaluating products under both reimbursement environments. Consequently, vendors must be prepared to share economic evidence about their product—it is essentially a requirement to get technology into a hospital these days. Besides competitive pricing information, key data elements that will be essential to present include safety, comparative effectiveness, patient outcomes and quality measures.
Other outcomes that may be more challenging to collect data on but are still essential, particularly for a commodity device, include the operational impact and total cost of ownership of the technology. Evaluators expect medtech companies to include metrics on episode of care costs, cost-effectiveness and the impact of length of stay and readmissions. Ultimately, medtech companies should aim to align their product’s value with downstream outcomes regarding clinical processes, patient outcomes and financial performance. It will also be critical for medtech companies to help providers define the right sub-populations for each technology, as the use of any technology in the “wrong” populations leads to dissatisfaction for all stakeholders.
Alongside the collection of data to submit to providers, medtech companies may also be pushed to develop new expertise, which could include creating capabilities to integrate and invest in the healthcare delivery system. Doing so will require companies to think beyond their product and focus on assisting providers with disease management. An example of this is Stryker’s Performance Solutions (SPS), the business unit of Stryker’s Reconstructive Division. This unit develops risk-sharing partnerships with hospitals and physician practices with the goal of improving quality outcomes, patient satisfaction and profitability. Their Episode Performance Manager moves “beyond the device,” collecting claims data 90 days beyond a patient’s discharge for joint replacement surgery. This exercise gives providers visibility into the episode cost drivers, identifying areas to optimize efficiency. This example, as well as others, shows the active role manufacturers can have in assisting providers improve healthcare delivery and cost.
The relationships between providers and healthcare companies will continue to evolve. Going forward, medtech manufacturers will be increasingly expected to participate in risk-based contracts and value-based care (VBC) initiatives with providers. Doing this will likely require medtech companies and providers to track product performance data together, identifying to what extent it achieves expected outcomes. This collaboration between these two stakeholders should be mutually beneficial and give both parties access to performance data beyond what they individually have. Performance data will also improve the ability of providers and medtech companies to identify the patient population who will reap the greatest benefits from certain technology. Despite the benefits, these types of relationships will require medtech companies and providers to be flexible, particularly when challenged with issues such as data sources and measurement of outcomes.
Medtech companies that desire to compete successfully in the emerging VBP marketplace will need to perfect their pitch to providers— such companies should be prepared to take on challenging, new opportunities to articulate how their product can lead to improved patient outcomes and value for their customers.
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