Digital health, mHealth and the Internet of Things (IoT) are more than just buzzwords in the medtech industry; they are already enabling the development of technologies that give clinicians and physicians the ability to diagnose conditions earlier with more accuracy, provide more personalized treatment decisions, and manage chronic conditions with better intelligence. However, these technologies are creating a challenge within the healthcare reimbursement environment, according to Glenn Snyder, leader of Deloitte LLP’s medical technology practice. “Getting a new technology that may be something a patient can use at home and avoid an office visit is hard to reimburse today. What’s changing now in the environment with MACRA (Medicare Access and CHIP Reauthorization Act) is it’s doing the same things for positions as what the ACA essentially did for the payers and health systems. That’s really important, because physicians are at the front line of defining how we conduct healthcare and now they will be incentivized to focus on quality and outcomes,” says Snyder. “Regardless of near-term reimbursement, it will create an opportunity for physicians to look at these innovations and say, even if I don’t have a formal reimbursement mechanisms, if this innovation can help me improve outcomes and quality, ultimately help the patient and help my practice succeed, I’m going to look at it. The legislation creates an opportunity in that for healthcare innovators to create new solutions and devices that can be mutually beneficial in that regard.”
In a Q&A with MedTech Intelligence, Snyder provides his perspective on the changes happening in the healthcare environment and what that means for innovation for medical device manufacturers.
MedTech Intelligence: How should device manufacturers be adapting to the Internet of Things movement in healthcare?
Glenn Snyder: Some device manufacturers have looked at innovation as being very engineering driven and clinically focused, but product feature and functionality oriented. Frankly, a lot of industries do that—medtech isn’t alone in this. What’s happening here both in terms of how the advent of IoT enables us to look at more of a solution rather than just a “dumb” device. Once you put a sensor into any device—increasingly sensors will be embedded in many traditionally clinically “dumb” devices—it’s only done with the intention to collect data that is useful, meaningful and will help improve quality or outcomes. Once you’re doing that, you have to think about how you’re going to collect that data; little bits of data aren’t that helpful (I call them data puddles). I need to combine puddles of data together to create a pool from which I can dip into and try to draw insights. Then you have to think about what other kinds of data to combine it with to increase utility of the data and draw true insights that help with care management. Companies have to think about that.
They have to think about how they’re going to store and interrogate the data, and ultimately one of the biggest challenges is translating those insights into action—honestly, patient compliance to prescribed action is one of our biggest challenges in the healthcare industry. Whether it’s at the basic level talking about simple diet and exercise disciplines that have been preached for years, staying on a regimen of the specific medication, or perhaps co-surgical ambulation and exercise for a joint replacement that is needed to rebuild the muscle strength to keep the new joint intact. You also want to define compliance persistence, adherence—that’s one of biggest challenges, too.
Companies have to think about that comprehensive information value loop—meaning they’re really thinking about a solution rather than a product and a product attribute, which is the historical definition of innovation. It fundamentally changes the lens on innovation to be broader. If you think about all those components (data capture, mixing it with other sources of data that you may not own, data storage and analysis, and then what you do in terms of prescribing an action), chances are you’re not going to be able to do that completely on your own; you’ll have to partner with other organizations to do that effectively. That whole innovation lens means you’re not just thinking in a lab with engineers and scientists working to solve a clinical problem; you’re thinking at a much bigger systems-level solution that involves different types of thinking and different types of assets that you need to pull into it to be effective.
The second factor is how you make money based on the system. Today most medical technology products are sold by selling the individual product per unit. But increasingly as the healthcare system pushes risk down as low of a level as it can, medical technology companies are being asked to take on risk too. So the question is, can they start looking more comprehensively at a solution and an outcome and get paid on a risk basis for an outcome versus just on an individual unit of product? That mindset is not applicable to all medtech products.
“In the Florence Nightingale days of healthcare, the nurse did the vast majority of things for patients. We frankly didn’t know that much about cellular behavior and genetics, anatomy, and physiology—it was a much more basic level of information. Fast forward 150 years, technology has enabled us to get a lot deeper into those subject areas, and our knowledge about our ability to do things has expanded dramatically, but with that has expanded complexity.” – Glenn Snyder, Deloitte
MTI: What dynamic are you seeing between payers and providers relative to medical technology?
Snyder: On one hand, providers know that the changes in healthcare reform are going to continue to put the pressure on them to manage their bottom line effectively. With that there’s been a significant wave of consolidation—hospital consolidation as well as individual physicians are increasingly becoming employees, either employees of a hospital (hospitalists) or part of a bigger medical group. For newly minted MDs, the vast majority are becoming employees [of hospitals] rather than individual practitioners.
With all these consolidation trends, you’re seeing a substantial increase of focus in managing the buying process for hospitals and large physician groups with a greater level of sophistication. In the past, hospitals might have someone doing procurement half the time and unloading trucks the other half the time, so the procurement was tactical. Increasingly as the systems are consolidating, they’re taking on and establishing a chief procurement officer role with a level of sophistication that hasn’t been seen in the industry. They’re getting people with procurement expertise from retail and other industries where they have very sophisticated analytical capabilities. They’re also tapping external agencies that aggregate pricing information across industry and creating great visibility into device pricing trends and ranges.
To all of that, medtech companies are coming under tremendous price pressure by health systems and integrated physician practices to be able to justify why their price might be above a range or above average. The whole nature of the relationship between medtech companies and the hospital and physician has changed. Previously it was with the clinician or the individual physician very directly, but increasingly so you may have a physician who is acting on behalf of a much bigger group of physicians, making decisions as a gatekeeper and decision maker, or a procurement person who is taking the lead role but still with clinical input into the process. For someone with a differentiated product, that makes it difficult for them to get to the right people and articulate the story of product differentiation and value proposition. On one hand the need to articulate value proposition is greater than ever, but access and ability to tell clinicians who might value the value proposition greater is reduced.