Unless your job involves orthopedic devices, you might have glossed over this year’s exciting news: as of April 1, 2016, the Comprehensive Care for Joint Replacement Model (CJR) is mandatory for 791 hospitals in 67 geographic areas of the United States. The headline may not have been very catchy, but really everyone in our industry should be paying attention to this first wave of emerging healthcare payment schemes. The Centers for Medicaid & Medicare Services (CMS) implemented the CJR to better manage its >$7 billion cost for the 400,000 annual hip and knee replacements performed on its beneficiaries, so CJR hospitals are now paid a capitated sum for the entire 90-day episode of care. It will not be long before CMS bundles payment for other procedures as well (cardiac care, e.g. heart attacks and bypass surgery, is next on the docket).
This payment model shift is not just putting pressure on healthcare providers; medical device manufacturers are being asked to help customers achieve value-based care goals, too. The response by orthopedics companies is evident – they clearly got the memo that gadgets are out, solutions are in. Just as quickly as CJR was announced, Zimmer Biomet launched Signature Solutions, an array of value-enhancing services for joint replacement care, including surgical planning, patient engagement, and data analytics. Stryker saw the handwriting on the wall early, offering similar capabilities under their Performance Solutions program since 2009. Other big device companies are also planting the solution flag, such as Medtronic which since 2013 has acquired a diabetes management company and entered the cardiac care services business. Incidentally, Medtronic also aims to compete for CJR dollars with their purchase of the low-cost implant maker Responsive Orthopedics.
This shift toward med tech offering end-to-end solutions is being driven by three powerful forces in the healthcare ecosystem that are only going to gain steam in the future:
Provider Financial Pressure
For the last decade or more, the mantra of healthcare reform has been the “triple aim” – improving the experience of care, improving the health of populations, and reducing per capita healthcare costs. This drive is slowly bearing some fruit, and providers are expected to continue carrying the costs and risks of the value-based care mandate. This is all relatively new territory for providers, who are just starting to figure out how to calculate their costs and measure outcomes. As a result, they are scrambling to find somebody (anybody!) willing to step up and shoulder some of the burden, or at least help them understand the risks they are taking on and how they might be mitigated. Long used to selling into hospitals subject to capitated payment, and gaining ever more share of providers’ wallets through consolidation, large medical device companies are in a unique position to lend a hand. A first step for med tech can be advising customers on how to reap the most value from products they've purchased from them. As Medtronic’s CEO Omar Ishrak put it, “…the appropriate application of technology can not only address inefficiencies in healthcare delivery but potentially drive inflection points in value creation.”
Whether you call it “big data” or some other buzzword, both health systems and medical devices are generating lots more of it every year. Providers need some way to make sense of all this information and harness it to measure and improve their performance on care delivery and cost. Data integration and analytics support is where medical device companies can really shine as solution partners to their customers. As the med tech industry embraces this role, it will also become ever more entangled in clinical decision making; eventually lots of regulatory, legal and ethical boundaries will need to be reconsidered to truly realize the value of the data. New models for using clinical data to evolve toward best care will be needed to replace the gold standard approach of randomized, controlled trials. In this new model of data-driven care, medical devices could become the central hubs, driving not just procedural practices but entire care pathways. Data will also form the backbone of true risk-sharing models where payment for medical devices is tied to performance on value-based metrics.
Whether pushed by growing financial responsibility for care, or pulled by enabling digital health technologies, patients have an increasingly large role in their healthcare. In addition, payers and regulators are measuring providers on patient satisfaction and other patient-reported metrics. As with other types of risk they’ve assumed, providers are looking for allies in their effort to make and keep their patients happy. To help their customers, and also cleverly differentiate their products with means other than price, device companies are learning new ways to interact and communicate with their patient customers – a group traditionally understood in terms of anatomy, biology and physiology. Engaging patients in their own care is critical for good outcomes, and good outcomes are critical to hospitals and device companies alike, particularly in a bundled payment world. To this end, Stryker recently introduced its new web-based JointCOACH platform, which enables two-way communication between patients and care teams about things like pre-op prep, pain control, and rehab during the 90-day CJR period.
The success of the major med tech companies will increasingly hinge on their ability to demonstrate and deliver value to their customers, either by improving care or reducing costs, and hopefully both simultaneously(!). With bundled payments like the CJR emerging, the stakes are getting real now, so the choice is becoming clear – either be the solution or prepare to be commoditized, with all that entails. Medical devices are already a bargain compared to many drugs, but the bargain aisle isn’t the only place we want to live.