By James Varelis, Ben Comer, and Anna Fishbon, PwC
There is no shortage of unmet needs among key stakeholders in healthcare. Insurers and health systems are struggling to improve quality and lower costs. Physicians are looking for help managing the onslaught of incoming data, and consumers are demanding ease and convenience in their healthcare experiences. Findings from a new PwC Health Research Institute (HRI) report show that the medtech industry is uniquely positioned to convert those needs into new business opportunities.
Medtech’s role in healthcare is changing in concert with an explosion of technological discovery, downward pressure on healthcare spending, and a sharpened focus on value. As hospitals and health systems grapple with value-based payments and new quality requirements, medical device and diagnostic companies are serving as enablers, reaching across the healthcare ecosystem to offer services that engage patients in real time, improve physician performance, and demonstrate value beyond any one device, diagnostic, or technology. Indeed, an HRI analysis of the top 10 medical device companies found that seven of the 10 have undergone organizational changes to reflect a shift toward service-based offerings; five of the 10 now offer customized solutions independent of their product offerings.
Evolving Customer Demands
Historically, the medical device industry has sold its products primarily to provider customers in clinical settings, such as hospitals and physician practices. However, healthcare delivery is shifting outside of traditional venues as more consumers begin to use remote care options, and new technology is making it possible to minimize doctor and hospital visits.
As patients further embrace their transition from passive healthcare recipients to empowered consumers, medtech manufacturers must consider both the clinician and the end user in solution designs. Products and services designed to integrate seamlessly into the physician workflow and optimize provider operations are more likely to be adopted, according to a 2015 HRI survey of clinicians. However, patient perspective also must guide development efforts, and leading medtech companies are prioritizing patient-centricity in solution design.
Implications For Medtech
Medical device and technology manufacturers have to confront these shifting customer demands, if they haven’t already. Both established medtech players and newer entrants should consider these four factors when designing their offerings and contracting with customers:
1. Decide whether to offer solutions or discrete products
The decision to expand beyond device production — and a manufacturer’s core capabilities — and start offering broader solutions necessitates a shift in manufacturers’ commercialization models. Conversations about device attributes should be closely aligned with broad customer objectives and patient needs. Developing product agnostic solutions beyond core services such as device training, maintenance and warranty coverage, can help manufacturers meet evolving customer needs. Not every device manufacturer will choose to launch broad new solutions, but the customer and patient perspective should be fully ingrained into all product design efforts.
The decision to expand beyond device production involves a variety of factors, including existing capabilities, device segment, and market opportunity. However, the key determinate must be the manufacturer’s vision for growth. Companies that don’t have the capacity to offer a broad solution may still be able to package discrete products with other services via partnership. Acquisitions are another means by which a manufacturer can bring in new capabilities to help facilitate the launch of broader customer solutions.
2. Make new connections across (and outside of) the healthcare ecosystem
Traditional device companies are starting to expand their offerings to include services-based solutions, and new entrants are filling gaps in the patient journey and user experience. To gain capabilities necessary to meet customers’ needs, manufacturers should consider partnering with other players
The type of partner(s) will vary based on each manufacturer’s unique solutions. For example, device makers looking to incorporate data and analytics, or to develop connected solutions, will benefit from the capabilities of technology and telecommunications firms. Medtech firms creating devices for use in conjunction with drugs may consider collaborations with pharmaceutical companies.
3. Prepare to enter into value-based contracts and assume risk for outcomes
Medical device manufacturers have the opportunity to help healthcare providers fulfill value-based contracts with private insurers and government payers. Medtech firms must monitor developments in the health insurance sector and actively discuss their customers’ preferences.
The appetite for risk-sharing agreements varies widely among health systems, according to local market forces and executive leadership. Medtech manufacturers should seek out customers that plan to participate in CMS’ episode-based payment initiatives, for example. Medtech companies should customize offerings to support the objectives of individual customers.
4. Develop devices capable of delivering data back to providers
Physicians will view devices that deliver data — along with automated, relevant, and actionable insights — as far more valuable than devices that do not. While real time data may not be relevant to all device segments, incorporating data capture, cloud storage and communication features into offerings such as diagnostics solutions and remote patient monitoring tools may increase the attractiveness and effectiveness of these solutions. Consumers, not just physicians, also are interested in remote solutions: according to a PwC HRI survey, two-thirds of consumers are interested in receiving care from a healthcare provider at home.
The Opportunity Ahead
Stakeholders throughout the healthcare ecosystem are looking for innovative solutions to address complex challenges. Medical device and technology manufacturers have the unique opportunity to help solve some of these problems. Medtech companies must consider expanding beyond the device, collaborating with other players (healthcare or otherwise), incorporating value into their contracts, and integrating data and analytics functionality into their solutions. To successfully capitalize on changing healthcare stakeholder needs in the new health economy, medtech must begin with customer preferences as the starting point of innovation.
About The Authors
Jim Varelis is a partner in PwC's health industries and is the leader of medical technologies global advisory practice.
Ben Comer is a senior manager in PwC's Health Research Institute (HRI).
Anna Fishbon is a research analyst in PwC's Health Research Institute (HRI).