How Device Manufacturers Can Evolve Alongside The Shifting Provider And Payer Landscape
By Edward Black, founder and principal, Reimbursement Strategies
By Daniel A. Lace, Reimbursement Strategies, LLC.
Your customer’s world is changing rapidly. Consider this: What would your company do if you found it nearly impossible to converse with the medical professionals most likely to order your product for patient care? How would you pivot to launch new products, develop improvements, or understand the context of clinical use?
That worrisome scenario looms larger as fundamental healthcare transformation continues to unfold in the United States. The transition from fee-for-service to value-based, or “flat fee,” reimbursement between health plans, hospital systems, and medical groups is well underway, even as some parts of the Affordable Care Act are encountering viability challenges (e.g., Accountable Care Organizations [ACOs], exchange plans).
Historically, fee-for-service arrangements allowed hospital facilities to bill costs and receive payments under various contracted reimbursement scenarios, like diagnosis-related groups (DRGs) or fee schedules that transferred most of the risk to the payer; a medical device may have been explicitly or implicitly covered as part of the coding for that care. Now, however, as value-based reimbursement becomes a more pervasive reimbursement mechanism, every care component cost (from paper clips and medical personnel to drugs and devices) is a target for cost management.
Greater Emphasis On Product Cost Impact — Device manufacturers increasingly are under pressure to establish the product’s value to the provider. If a product can be shown to support revenues, reduce costs, or positively impact the provider’s margin, its use will be promoted. If not, the product will garner significantly less interest.
A New Engagement Strategy Is Necessary — As cost management pressures mount for provider decision-makers in specific local markets, manufacturers may find themselves “locked out” of face-time meetings to discuss a product’s merits, in addition to the desired sale of the product itself. For that reason, companies should consider changing engagement strategies today to maintain a positive, helpful relationship in key facilities and systems tomorrow. The obvious commercial goal is to position each product such that it will be more likely to remain available to physicians without restriction. But the relationships themselves are at risk, and this more subtle objective is ever more critical in the long term. Without a relationship, there can be no dialogue!
Interacting with tomorrow’s health system requires more than an exercise in pricing and discounting through the system’s group purchasing organization (GPO) — it requires a willingness to delve into the details. That said, a continued willingness to work within the existing procurement, trade, and discount environment remains important.
Meaningful Engagement With Decision-Makers — Creating fruitful relationships with leaders in payers, local hospital systems, or medical group provider organizations requires medtech to invest in liaisons that inspire understanding beyond the “features and benefits” of a product or the clinical context of its use. It requires teams that know how to ask pertinent questions and listen to the answers, especially around obstacles like financial concerns, contracted payers, and patterns of reimbursement that are impacting these decisions.
This leads to both sides working more collaboratively, securing the trust and rapport of a more cohesive team. Discussions move from “sales” to “solutions,” with greater problem-solving and operational efficiency for the facility. The parties can agree on the product — disease hypothesis and the data required to prove its veracity; they can agree on how to gather the necessary data, and they will be more willing to meet to reach a rational conclusion.
For the Provider, “People Time” is Money — This process of gathering and understanding the context of product selection requires a time investment, both for the provider and the manufacturer. Increasingly, provider executives see these meetings as costs that require management, especially when the clinicians (doctors, nurses, physician assistants, or pharmacists) are employees. At every meeting, for every interaction, there is a “people time” cost to the provider for holding court with manufacturer. Consequently, more than ever before, providers are simply restricting access to cut costs.
A Reasonable Strategy Involves Managing Small Paid Projects — Much of the dialogue between the provider and the manufacturer should incorporate an understanding of the provider’s environment: the kinds of patients seen, challenges that may relate to reimbursement, operational efficiency, existing product options and preferences, and current policies and procedures. The time consumed in understanding context and determining how (or whether) to make different product selections a priority is similar to any project management framework. Build the engagement strategy around the project.
The professional time and materials invested for the system typically are consumed in the following step-wise process, involving multiple team members:
- Planning the agenda
- Meeting with the parties
- Gathering facts and data
- Evaluating immediately available facts and retrospective data
- Reviewing hypothesis and/or change proposals
- Developing a test plan to implement change and gather data for the hypothesis
- Implementing the plan and gathering the new/additional data
- Analyzing the data
- Meeting interim milestones
- Communicating results and conclusions
This process is the same in virtually all complex clinical decisions. After all is complete, nothing else may change, including GPO or payer product price discounts or purchasing patterns, but the manufacturer and the provider each have a better understanding of each product’s relative value. They also have a greater understanding of the other side’s perspective. Some projects may not go through all 10 steps, and involve only the first four components.
Fair Market Value Compensation — More manufacturers and providers envision paid projects as a means to compensate the provider for real, measurable costs, and to move the needle on value assessment and “safety & medical effectiveness” questions. Compliant documentation, artifact retention, and legitimate project goals should keep regulatory concerns to a minimum.
Pilot Projects Getting Started — This paid project management approach is gaining a foothold in the marketplace as hospital systems seriously consider strategies to contain costs. Engagement framework management tools, capable of advancing these kinds of projects by forward-leaning manufacturers and interested provider entities or systems, are available in the marketplace. A technical platform that addresses both tactical and strategic elements is needed for both sides to manage this process well. Utilization of engagement frameworks will allow medtech to more easily work with payers and providers, and to accelerate strategic relationships.
About The Author
Daniel A. Lace, MD, CPE, FAAPL is chief medical officer at Reimbursement Strategies, LLC. He has over 20 years of experience as a healthcare executive across a range of managed care, pharmaceutical, device, diagnostic and consulting businesses, having served as chief medical officer and other senior leadership positions in global pharmaceutical and device companies, as well as in national managed care organizations. He can be contacted at DLace@Reimbursement-Strategies.com