At the end of last year, we commissioned some research at ZS to identify hospital trends. Our goal was to uncover trends and changes to our clients’ customers that perhaps they weren’t seeing, and to shape our own thinking about where the industry was headed.
At first glance, everything with the findings was very predictable: Hospitals cared about costs, attracting patients, maximizing throughput. They had strategies that varied from focusing on patient capture through forward integration or payer interaction, to operational efficiency or innovation and research.
We looked at differences in departments, and while there were interesting patterns that emerged, most of it also was fairly predictable. The service lines that drive revenue and patient satisfaction (namely, the surgical ones) focused on one set of priorities, while more cost-center service lines (radiology, central lab) were much more cost-oriented. These were interesting facts to confirm what we already knew, but that was all.
Then we stumbled across something much more profound: The No. 1 way in which costs were being minimized was no longer raw material costs. Instead, performance against outcomes-oriented reimbursement measures and minimizing re-hospitalizations was the clear focal point for cost reduction. This signal was strong for everyone we surveyed, and especially strong for members of an accountable care organization or participants in voluntary CMS programs.
This might seem subtle, but for people who have been working in the industry for many years, it’s not. It’s a pretty big shift, and as suppliers to the industry, we find this very exciting. It’s the best news that I’ve heard in a long time.
For many years, our industry has focused on incremental innovation as a means to enable pricing and life cycle management. We coated everything with silver, miniaturized it and added wireless to it. But with this shift in hospital priorities, that innovation is finding a whole lot more value—helping hospitals to improve performance on outcomes and quality metrics.
INFOGRAPHIC: Hospitals Primed for Medtech Partnerships
Now we need to go further. We need to develop value propositions in a way that our customers will actually understand them, focusing on things that they actually care about, in language that they use and using metrics that they regard as meaningful. We also need to offer services that allow them to take the best advantage of what we have on offer, perhaps by changing protocols, training or staff behaviors.
Forward-thinking companies are starting to dabble and experiment with this. We’ve all heard about Stryker’s money-back guarantee on its SurgiCount system, or Medtronic’s cath lab management services in Europe. Other medtech manufacturers are piloting new programs, too. But the marriage of product and service, consulting, training and measurement—this isn’t easy stuff.
And there’s so much more work to do. The study also uncovered that our hospital customers are naturally skeptical of their industry vendors. Medtech has spent years haggling over price, focusing on the clinician with no regard for financial pressures and battling over the introduction of expensive new products whose innovative value is questionable. It’s hard to overcome so many years of being on opposite sides of the table, but the opportunity is clear. We need to get more creative in what we offer, more articulate in how we describe it, and more innovative in how we measure and monetize it. We need to put resources against these programs so that they really start to move the needle. It’s our big chance.
Have a look at the article that my colleague Yuta Ito and I wrote based on the study’s findings, "Hospitals Have Spoken: How Medtech Can Benefit From Affordable Care Act's Focus on Outcomes," I welcome your thoughts and comments.