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Brian Chapman
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Value-Based Purchasing: Are You Ready?

Posted by Will Randall on March 23, 2017




shutterstock_275900153.jpgSeveral forces are driving significant changes in the healthcare market, prompting a shift towards value-based healthcare: The reimbursement landscape is changing.

The days of the fee-for-service model are numbered, despite some delays in CMS’ transition to alternative payment models. The dominance of GPOs driving prices downwards seems to be waning. Provider consolidation continues, creating centralized decision-making units that focus increasingly on quality, outcomes and total costs over physician and clinical preferences. Furthermore, “patient empowerment” continues to increase, with consumers of healthcare services having greater choices about where they elect to receive treatment. As Kevin Lobo, CEO of Stryker, said in a recent post on the DeviceTalk blog: “In the old days, we were a feature benefit company just like everyone else: ‘Make me a better one of these and charge a premium price.’ Those days are over.”

The shift towards value-based healthcare continues to accelerate, creating increasing pressure on medtech companies to demonstrate that their products and services can add the right value in this new environment.

Lots of Talk. How Much Action? 

Value-based care is all over the headlines. Many medtech players have set value-based healthcare as a clear strategic priority. Orthopedics companies, in particular, are increasing their focus on value, and are doing so under a spotlight as the CMS-driven push towards bundled payment and quality measures for hip and knee replacements, known as the Comprehensive Care for Joint Replacement model, has forced their hands. In a category where the product itself arguably isn’t the primary driver of outcomes, the focus is no longer on product innovation but on managing the quality and cost of the entire episode of care.

But it isn’t just about the joint replacement model, hips and knees. Increasingly, medtech companies, including Abbott and Johnson & Johnson Medical Devices, are responding to the challenge of differentiating their offerings in a value-based world. Those with the largest, most diverse portfolios will face the biggest challenges when working to demonstrate their value, and they’ll likely find that the journey to proving that value won’t be an easy one.

Are You Ready? 

Providers are ready, and manufacturers are talking the talk, but there are few widely documented success stories today—only lots of challenges or false starts. And plenty of questions remain: How can you be sure that your offering will be successful in a value-based world? Will a big investment in a service/solutions/partnership model really be the right answer? Will you be able to demonstrate that your portfolio or products can add value to providers by improving patient outcomes and quality?

We’re starting to see some trends in what providers are looking for. Some of those fundamental customer needs won’t be surprising, but it will be surprising how few manufacturers can clearly demonstrate that their offerings meet those needs in a value-based world.

In my next blog post, I’ll share more about some of the key success factors that medtech manufacturers will need in order to evolve their value propositions and offerings to adapt to this changing environment. Stay tuned!


RELATED CONTENT 

ARTICLE: Positioning Key Accounts at the Center of Medtech's Commercial Model

BLOG POST: The Year That Medtech Looks Inward


  

Topics: medtech, abbott, Will Randall, value-based care, value-based purchasing, J&J Medical Devices, Stryker

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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
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