Medical technology CEOs believe government healthcare incentives are misaligned with industry trends toward shorter and less frequent hospital stays.
At the end of March, I had the pleasure of joining leaders of healthcare and medical device companies at the AdvaMed 2015 CEO Summit in Aventura, Florida. The summit’s goal is to discuss public policy issues that affect the medical technology industry. This year, I found the summit to be an invaluable opportunity for networking with fellow life sciences professionals and a chance to gauge key industry concerns.
One recurring topic of conversation among CEOs was the lack of alignment between healthcare incentives and the transformative industry changes on the horizon. We discussed the major trends toward improving patient outcomes, reducing the number and length of hospital visits and empowering patients to take a more active role in their own healthcare, and how these trends still do not consistently gel with current hospital payment structures and incentives.
In Europe, where they have a single payer system, with governments and payers jointly paying for healthcare services, conditions are ripe for these sorts of changes and countries are actively looking for ways to reduce the percentage of GDP they spend on healthcare. But in the United States, in a healthcare system that is more fragmented, healthcare providers are paid for the services they provide, and the payments they earn for lengthier and more frequent hospital stays are very lucrative and, for many hospitals, outweigh re-admittance penalties they have to pay for illnesses such as heart disease.
During the summit we also talked about the necessity of changing this business model and about how to inspire healthcare leaders to think beyond the immediate pressures of the next quarter, to longer-term planning and solutions. One suggestion was for healthcare providers to create an entity outside of the regular day-to-day business to gain a different perspective; another was to watch what is happening in Europe and apply the lessons they learn here.
My recommendations for medical device providers are threefold:
Determine a business strategy, whether that is as a solutions company or category killer.
Recognize that big data is here and that information services around products will only help to boost sales.
Anticipate that government will continue to get incentives wrong and that policies and regulations such as medical device industry taxes will inhibit industry transformation—and respond by building a nimble and efficient business, based on an orderly back office and reduced costs.
I found the discussions on these topics with industry leaders quite inspiring as their companies enter a period of transformation in the medical technology industry, and I look forward to continuing the discussions as they navigate through this period of significant change.