The Pacemaker

AUTHORS

Andy-kach_thumbnail
Andy Kach
Principal
Bhargav_Mantha_thumbnail Brian_Chapman_thumbnail
Brian Chapman
Principal
Maria_thumbnail Matt-Scheitlin-London_thumbnail Tobi_Laczkowski_thumbnail Will_Randall_thumbnail

Latest Posts

The Shakeout of 2020: The Year That Small Changes Emerge From the Big Hype

Posted by Brian Chapman on January 13, 2020



4022_MPS_Brian_2020Predictions_Blog-1With a new year and a new decade underway, it’s a great time to trot out my latest healthcare predictions. Perhaps one of the areas that healthcare’s transformation will be most evident is in the transfer of power across care settings. In the US, hospitals will lose a high number of orthopedic and cardiac procedures—and their corresponding profits—to ambulatory settings. Headline-grabbing trends like AI, big data and robotics are on the list, too, and although their individual impact on the sector will be meaningful, it likely won’t measure up to the hype. Finally, medtech will take advantage of the decade’s fresh start by modernizing its business approach and finally entering the digital age. Here’s how these five trends will alter the way that medtech companies do business and make decisions in the coming years.

1. Ambulatory surgery centers might just be the straw that breaks the camel’s back. As the US healthcare system continues to undergo change, procedures are being pushed out of the hospital. This trend isn’t entirely new, but it was buffeted by CMS and UnitedHealthcare last year and the shakeout is poised to be immense in 2020. The list of procedures approved by CMS for the ambulatory setting is really quite shocking and the likelihood of differential rates accelerating this transition is high. Some hospital systems and payers, or course, are better positioned to benefit from the shift. But in general, I expect we’ll see major fall-out.

As more ambulatory surgery centers perform the orthopedic and cardiac procedures once handled exclusively by hospitals, tremendous financial pressure will mount. Hospitals are already contending with overcapacity and rickety finances, and I think that this trend is going to hit big in 2020. If you take this trend to its endpoint, hospitals will be responsible for caring only for the most sick and complicated patients, plus maybe trauma and maternity, which happen to also be the most litigious areas. Hospitals will watch as their most unprofitable parts bloom and their profits walk out the door to ASCs.

The adverse effects will be felt most significantly by rural hospitals and those already under pressure. We eventually might see CMS try to put the brakes on the trend when so-called critical access hospitals start closing their doors, but the genie will already be out of the bottle when the favorable costs are clear to private payers. Compounding the disruption is that medtech companies are ill-prepared to sell to this customer. Ambulatory surgery centers often are very fragmented and have different buying incentives than typical medtech customers.

The shift from hospitals to ASCs is a uniquely US trend. I don’t see a similar shift happening in countries with government-owned hospitals because the shakeout would impact government employees so profoundly. In short, we’re looking at potential negative financial implications for what is often medtech’s most profitable market.

2. AI gets big by going small. Artificial intelligence has been tipped to transform nearly everything it touches: It’s going to be driving our cars, landing our planes, reducing recidivism, and of course, transforming healthcare. AI has already proven its worth in applications like predicting musical tastes, feeding our binge watching habits and optimizing supply chains, but big-ticket changes are much harder in healthcare.

Tapping AI to reduce medical mistakes or tackle healthcare waste has obvious appeal. In fact, when we sit back and simply view the big picture, it’s hard to understand why AI adoption hasn’t already been widespread and swift. But healthcare doesn’t move that quickly and the industry has deeply entrenched work processes and preferences. Stakeholders have built moats around their interests and there’s no quick or easy path across them. As if that weren’t enough, the other obstacles that AI faces are trust and transparency.

Then there’s the question of whether AI is poised to send healthcare workers to the unemployment line. The John Henry story of man versus machine is going to start to get old. Every big comparative study of AI versus experts seems to end with the question, “what’s next?”, to which the answer is elusive. The barriers to sending the human experts home in favor of machines are just too great.

Real AI advances will be ubiquitous in 2020, but they won’t attract a lot of attention. Instead of big, visible moves, but we’ll start to see small changes such as improved alarms and monitoring on the hospital floors, faster triage in the ER, more fruitful chart reviews to help facilitate referrals, more rapid adaptation of clinical standards and enhanced identification of clinically relevant events. In short, we’ll hear less about big studies with cataclysmic implications and instead see more expansive but subtle transformation of how we work. The AI revolution is happening under the radar.

3. We’ll finally get some answers to our questions about robots in healthcare. Promising to improve surgical precision and reduce errors in operating rooms, robotic surgery continues to attract massive investments. In fact, many of the major orthopedics companies have purchased robotics companies and Medtronic and Johnson & Johnson are barreling ahead to do battle with Intuitive. Countless startups are contributing to a growing and rich pipeline. Forecasts show that the CAGR could range from 8.5% to 24.4% over the next few years. Either way, it’s a major growth area.

Despite all the hype, big investments and flurry of acquisitions, robotic surgery is being used in less than 2% of global surgeries and in less than 10% of US surgeries. Robotic surgical solutions have long been criticized as expensive and unnecessary “toys” for surgeons—a marketing ploy at best. The space will, of course, continue to evolve but in 2020 we’ll start to see data that proves certain robots can actually improve surgical procedures—especially if we can let go of the notion (at least for now) that surgery will be entirely conducted by a robot. Instead, we’ll see robots step in for the procedural steps that best lend themselves to automation. I’m no surgeon but I expect that modular designs for high-volume, routine procedures that involve pre-procedure planning with predictable anatomy will dominate. In short, orthopedics.

4. We’ll need to brace ourselves for a big battle over patient data. The power of healthcare data is a well-recognized trend that grew in prominence in 2019. For better or for worse, Google is in it in a big way. As the scope of the company’s current entanglements comes to light, we’re all getting a little uneasy. While Apple has tried to cultivate a better reputation for respective privacy, I can’t help but be unnerved by the long list of institutions—more than 400 at last count—that support Apple health records. Amazon joined the data game with Comprehend Medical which, even if the e-commerce giant has been quiet, is a major move into the space. Roche bought Foundation Medicine and Flatiron Health in major moves to change diagnostics and oncology.

What’s coming in 2020? A big battle among these behemoths, but also stoked by regulators who are getting increasingly annoyed by big tech companies and their dominance. Additionally, the health systems themselves will join the fray this year. This is under-the-radar but health systems are becoming increasingly aware that health data could well represent a new source of differentiation, and eventually revenue, and have begun to become much more guarded with their data. Shots will be fired in 2020.

5. Digitally mature medtech companies will gain the edge. Closer to home, 2020 will be remembered as the year that medtech companies woke up to the need to elevate their digital know-how in many areas. Digital maturity will be a differentiator, while R&D and world-class sales forces will become table stakes.

The best companies will be those that use analytics to guide their decision-making in pricing, selling, marketing and clinical trials. They will leverage digital marketing in ways that go far beyond email blasts and CRM. They will manage partnerships with other players in the ecosystem that go well beyond their traditional surgeon stakeholders. They will proudly implement a data strategy, and very clearly know what it means and how they derive value. I plan to dive deeper into this topic throughout the coming year, sharing deeper insights into how and why medtech companies need to make this switch. I believe that we’ll look back at 2020 as an inflection point: the year that digital leaders separated from the laggards.

Thank you for allowing me to share my five predictions about how the healthcare industry could transform this year and throughout the entire decade. While we’ll have to wait to see how accurate my prognostications are, the one guarantee is that change is coming. In the meantime, have a wonderful and healthy 2020!

Topics: Brian Chapman, medtech commercial model, ambulatory surgery centers, AI in medtech, data and technology, orthopedic and cardiac procedures, digital maturity, robots in healthcare

Click here to subscribe to The Pacemaker

Leave a comment

AUTHORS
Brian_Chapman_thumbnail
Brian Chapman
Principal,
ZS Associates
Tobi_Laczkowski_thumbnail
Tobi Laczkowski
Principal,
ZS Associates
Will_Randall_thumbnail
Will Randall
Manager,
ZS Associates
Matt-Scheitlin-London_thumbnail
Matt Scheitlin
Associate Principal,
ZS Associates
Andy-kach_thumbnail
Andy Kach
Associate Principal,
ZS Associates
Bhargav_Mantha_thumbnail
Bhargav Mantha
Associate Principal,
ZS Associates
SUBSCRIBE

Get 'THE PACEMAKER' Updates

Subscribe to receive email notifications whenever new blog posts are published.

×

Subscribe by Email

Search by Topic

see all