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Today, the health care industry appears to be facing an inherent tension. On one side, many consumers – both as patients and caregivers – are demanding new, more efficient technology solutions. On the other side, medtech companies are still trying to figure out when and how to innovate under the new value proposition. While the incentives around value-based care are emerging, the health care industry is still trying to figure out its innovation strategies.
This uncertainty has left many medtech companies assessing how best to invest in innovation while balancing the need to generate stakeholder value.
The growing aging population, higher prevalence of obesity and chronic disease, greater preference to age in the home, and increasing interest from caregivers are driving consumer demand for products and technologies. Deloitte’s 2016 Survey of US Health Care Consumers reveals that many consumers (seven in 10 surveyed) are interested in health care Internet of Things (IoT) technologies. Additionally, 82 percent of respondents reported that they would prefer to age-in-place rather than move to a care facility or in with a family member.
Despite personal hesitancy in using certain technologies, our survey found that more consumers say they are likely to use sensor technology, telemedicine, and remote monitoring technology when caring for others.
At the same time, health care reform and the move toward value-based care are fundamentally changing the system and how it pays for services and products. New payment models – shared savings, bundled payments, shared risk, and global capitation – are emerging. The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) is moving the industry in this direction even more rapidly than before – not only impacting physicians, but most health systems also.
Under new value-based care payment models, medtech companies have a new opportunity for reimbursement. Physicians may be willing to spend more on technologies and devices that can help them succeed under risk-based models – which will provide bonuses for physicians tied to improved patient outcomes.
These payment models are redefining who will make purchasing decisions for medtech products. For example, under commercial bundled payment initiatives, payers rather than physicians may be making purchasing decisions. Under both commercial and Medicare models, hospitals received a fixed payment for all of a patient’s health care services starting with the patient’s admission and including services after they leave the hospital. That payment is meant to cover services for the patient, including the physicians, hospital, skilled nursing, home care services, rehabilitation, mid-levels, virtual care, and therapeutic and diagnostic services. These models reward lower costs and better outcomes – rather than encouraging additional services like the fee-for-service model.
Value-based care payment models could change the way physicians and health systems integrate technology into care delivery. When judged not only on meeting cost targets for an episode of care, but also on patient outcomes, many health care providers will look for new products and solutions that help them achieve these goals. Health systems will want clinical information about the solutions to better inform decisions on what products to adopt. Only products that demonstrate high quality and have appropriate evidence to support improved patient outcomes may make the cut under these models.
Given the tension between consumer demand and the uncertain reimbursement landscape, what is the path forward for medtech companies?
Well, as a first step, they shouldn’t wait for the incentives to fully change. Companies need to continue to innovate and bring novel therapies and diagnostics to market, while exploring solutions and supporting services that deliver economic value propositions for achieving improved outcomes for specific patient populations. One way to target economic value is by partnering with provider systems and health plans that are adopting new reimbursement models and risk-based contracts. Segmenting the market to understand which organizations are on the leading edge of value-based care can help leaders target their products. The insights gathered through segmentation should also help to reduce the uncertainty around emerging payment models.
Additionally, medtech companies should consider developing new relationships with consumer-oriented groups. Community-based organizations and patient advocacy groups could help gain buy-in with seniors, who are less likely than millennials to adopt but are typically the primary user of home-health devices. These organizations may also be on the forefront of creating tools and materials to support patients’ decisions on how to use technology for care.
Today’s health care system is gearing up to support medical IoT technologies, and many consumers want to use them. Medtech companies that can tap that consumer demand to build solutions that bend the health care cost curve may be better positioned in this new world. While the right market incentives won’t be in place overnight, companies can’t wait until the industry has “tipped” to experiment with new solutions and models. The time to do that is now.
About Glenn Snyder
Glenn Snyder leads Deloitte LLP’s Medical Technology practice with 25+ years of experience in medical technology, biotech, and specialty pharmaceuticals. He helps clients grow through organic and inorganic means by entering new geographic markets, and expanding into new product/service areas. Glenn also helps clients improve brand/commercial effectiveness by articulating product economic value, applying innovative pricing, updating the commercial model, and rationalizing distribution networks. To read other articles from Glenn and leaders in Deloitte’s Life Sciences and Health Care practice, please visit and subscribe to the View from the Center blog.