By Dan Bayer, VP and GM Life Sciences, Model N
U.S. hospitals and other providers face unprecedented change with reimbursement cuts, pressure to improve quality and outcomes, consolidation, and new pay-for-performance reimbursement models just some of the forces driving it. The pressure for change is impacting many areas of the healthcare system with one area receiving increased attention being the healthcare supply chain.
The supply chain has historically suffered from misaligned incentives, opaque data on price and value, outdated purchasing practices, and less accountability for managing costs. In fact, in one large survey conducted a few years ago, more than 50 percent of provider supply chain professionals described their own supply chain as immature.
As the hospital supply chain matures, suppliers to hospitals need to evolve as well. With all of the change occurring, medical technology suppliers in particular face a choice. Embrace the change and help save billions in healthcare costs or try to survive operating in an evolving market using an old business model.
Evolving MedTech Focus
The medical technology or MedTech industry is projected to be almost $500 billion in global sales by 2020. Medical technology includes everyday objects such as syringes and latex gloves. At the high-tech end of the scale, medical technology includes total body scanners, robotics, genomic tests, laboratory informatics, implantable devices such as heart valves and pacemakers, and replacement joints for knees and hips. In fact, there are more than 500,000 medical technologies currently available in the MedTech market today.
In the past, the innovation and marketing efforts of the industry were largely directed toward the users of the technologies — physicians, nurses and technicians. This sometimes led to adding features and services, which had questionable value and added costs to the healthcare system. In recent years, there has been increasing attention to the cost and workflow impact of innovation as well as the impact over the continuum of care.
Advanced medical technologies that capture data are an example. Manufacturers have recognized the importance of data. Clinical, device performance, billing, and compliance data that are captured by devices, such as point of care testing instruments or implantable devices, can be used to create value. Integrating the information coming from these technologies can improve patient outcomes, improve clinical workflow, lower equipment downtime and reduce costs.
The evolving focus of MedTech is being driven by the changes in the market and will likely continue into the future as the healthcare system continues to come under pressure.
Focus On Value And Taking Costs Out
The evolution of the hospital supply chain and the rise of value analysis have helped to emphasize the balance of cost, quality and outcomes in the buying decision. Value analysis, in particular, has helped to challenge manufacturers to get clear on the value that their solutions bring. This is pushing manufacturers to re-think how they can create value for their customers.
This change in buying has also been enabled by an ecosystem of businesses concentrated on helping provider supply chains to:
Most MedTech companies know change is here. A recent survey of global MedTech executives by Model N showed that 77 percent believe price and value transparency will have a significant impact on their business within 10 years. The same survey shows that over one-third of MedTech executives believe that generic devices will capture a significant market share in the future. Likewise, over one-third believe that the “rep-less” sales model will gain 30 percent or more market share among their customers in the future. According to Chris Provines, CEO of Value Vantage Partners, buying behavior in MedTech continues to rapidly evolve, and many more changes will be taking place in the next decade alone.
The Future — Rising To The Challenge
This change in the market is causing many MedTech suppliers to evaluate their commercial models, innovation strategy and customer relationship models. In order to fully embrace the cost-quality-outcomes movement, a number of suppliers are focused on:
It is a challenging, but exciting time in healthcare. Many MedTech suppliers are embracing the change and helping to find new ways to take substantial costs out of the system.
About The Author
Daniel Bayer is the General Manager and VP of Model N’s Life Sciences Practice, where he is responsible for Model N’s go-to-market strategy and management of the solutions and services groups. Bayer is a 25-year veteran of the consulting and software industry, where he specializes in business process improvement, Global, large-scale and SaaS implementations for Fortune 500 companies. Bayer has worked in all around world in multiple industries. Previously Bayer held management positions at Accenture, I2 Technologies, and Revitas. Bayer holds a B.S. in Decision Sciences from Miami University (Oxford).