The changing provider landscape: Demonstrating product value

Market access is key to all medical device companies, regardless of their stage in the business lifecycle. The reimbursement landscape is in a period of transition and a device manufacturer’s value proposition must be dynamic to account for continuous change. Economic value is now a requirement – not a “nice to have” – to complement clinical efficacy, and device manufacturers must determine the most effective way to showcase the economic value of their products.

Today’s landscape

According to the 2017 Health Leaders Media “Annual Industry Outlook: The Road to Value-Based Care,” 66 percent of healthcare organizations are either fully underway or experimenting with pilot programs to transition from fee-for-service (FFS) to value-based care (VBC). In this new reimbursement landscape, providers are focused on reducing costs by moving care to the lowest cost setting, reducing supply costs and preventing complications. At the same time, these providers want to improve quality of care through such methodologies as tracking performance and patient outcomes, reducing readmissions and increasing reliance on post-acute facilities and/or home services.

Concurrently, the physician reimbursement landscape is also changing. Fiercehealthcare.com estimates that 38 percent of physicians are employed by a hospital or health system, and this number is expected to reach 66 percent by 2022. As a result, hospitals have increased buying power for negotiated rates and more contracts are including quality bonuses. MACRA (Medicare Access and CHIP Reauthorization Act) is also having a significant impact on physicians, as reimbursements are changing to incentivize quality and cost-efficiency.

How are these changes impacting medical device manufacturers’ ability to gain market access for their products?

• Greater incidents of value analysis committees (VACs) and Group Purchasing Organization (GPO) partnerships have changed the selling process.
• With greater buying power, hospitals and health systems are utilizing fewer product types, meaning manufacturers must provide greater differentiation for their products.
• Buyers are increasingly looking for the economic and clinical benefits of devices. Issues such as the device’s impact on episode-of-care costs, readmissions, length of stay and recovery time are now being reviewed.
• Increased attention on bundled procedures means the potential for less (more specific) use of the device manufacturer’s product.
• Providers are transferring more risk to device manufacturers to give manufacturers more “skin in the game” with a device’s performance.

Alternatives for medical device manufacturers

In order to gain or maintain market access for their products, medical device companies must react to these marketplace changes. As health plans and providers continue to look for expanded value propositions, their reimbursement incentives are structured to seek the lowest cost device benefits similar to the following:

• Improved outcomes that reduce post-acute costs
• Reduced complications during a hospital stay and after discharge
• Limited readmissions
• Earlier discharges or discharges to a lower cost setting, such as the patient’s home
• Improved patient experience

There are numerous ways to demonstrate product value, and progressive medical device manufacturers have utilized a variety of methods to showcase their products’ value proposition. Some of these methods involve sophisticated data models, such as budget impact models (BIMs), longitudinal analyses and micro-costing. Other tools – such as clinical and economic dossiers, white papers and publications – involve narrative. In reality, no one method is a “silver bullet” to gaining market access, and in most situations, a combination of methods is most effective. The method(s) chosen most often depend on the available evidence and the audience.

An overview of the data-driven methods is provided below:

Budget impact model (BIM) – A BIM presents the economic impact of the device under current reimbursement constraints and guidelines. Factors commonly incorporated into the model include index cost, length of stay, readmission, discharge destination, complications and post-acute services.

Longitudinal analysis – Because providers are now financially responsible for longer episodes of care, longitudinal analyses must show outcomes compared to a propensity matched population using the standard of care. The device’s impact on 30-day readmissions and episode of care lengths applicable to current reimbursement trends are also included in the analysis.

Micro-costing – Micro-costing is beneficial in situations when costs are unknown, the standard of care requires additional procedures or supplies or when a new, often lower-cost competitor enters the market. The results of a micro-costing study are often turned into a peer-reviewed publication or whitepaper and can be incorporated into a BIM. Cost-to-Charge Ratios (CCR) must be addressed in micro-costing.

Narrative materials can also be utilized to demonstrate a device’s value proposition. Narratives are often found as dossiers, publications and white papers. Narrative materials compile evidence from multiple sources to provide a full value proposition and often do not require meeting directly with providers. These third party and/or peer-reviewed documents provide medical device companies with increased credibility for their products.

The most successful narratives include the following attributes:

• Written by an independent third party
• Discuss economic and clinical benefit
• Compare to a standard of care
• Tailored to a specific audience

Next steps

How does a medical device company determine the most effective value proposition method – the one that is most likely to gain or continue market access for their product? Companies should consider the audience (value analysis committees, physicians, post-acute providers, health plans, etc.) and tailor the message to the audience’s most immediate concerns.

Once the method has been determined, what are the best practices for presenting value proposition materials to providers? It starts with educating the sales team. They need to understand the components driving savings or revenue generation in a BIM or longitudinal analysis and be able to clearly articulate these to providers. Part of this education involves research to understand a hospital’s exposure to value-based reimbursement, hospital-specific quality metrics and any impact variances by product type (e.g., rural vs. urban hospitals). 

For more information on this topic, or to learn how Baker Tilly specialists can help, contact our team.