By Robert Schultz
Hospital executives are increasingly involved in decision-making when it comes to their organizations’ medical device spends and are looking for ways to collaborate with medtech to drive value, according to a panel of hospital CEOs at the MassMEDIC annual conference this week in Boston.
"Without C-Suite involvement, many decisions were based on surgeons’ preferences. That is not the case anymore," said Trish Hannon, president & CEO of Boston’s New England Baptist Hospital. "If we are not better and have better outcomes with this particular [new] device, implant, etc., then we are going to say no. The context is, as the payment systems change, we are now in the risk business. We are managing provider risk, but also the risk associated with outcomes depending upon the contract with the payer. That payer contract is no longer just the health plan, it’s also Medicare, and they are the largest purchaser of medical devices in the country."
Hannon said her hospital, a leading orthopedic center, recognizes the need to work with next-generation technology companies who promise better health outcomes.
"While the Johnson & Johnsons (NYSE:JNJ) are fabulous organizations, there are also some folks who are newcomers and we want to make sure they have a seat at the table," she said.
"At our institution, it’s not a dissimilar process," added Dr. Bruce Auerbach, president & CEO of Sturdy Memorial Hospital in Attleboro, Mass. "Even though C-suite has an intimate involvement in what is going on, I can’t stress enough that smaller companies need to get information to the end users."
The new healthcare environment means payment contracts are being managed and structured differently, Hannon and Auerbach noted. At New England Baptist, Hannon said, the hospital put together a joint venture with a medtech company.
"We together manage the care and we manage the contracts. We make the decisions together to decide what impacts and devices to use, so we can be certain we are creating value. Enhanced outcomes at the right cost creates a lot of value. We are at risk for readmission, post-acute care, etc., that previously the insurance company was responsible for. Every single element needs to be understood as to whether it is creating value," she explained.
At Sturdy Memorial, a non-profit acute care facility, the hospital takes "episode-of-care risk" with a fixed payment., Auerbach said.
"That fixed payment puts us at risk for 6-week or a 90-day term," he said. "They guaranteed the savings that we were going to get. They guaranteed a portion of their fee as a savings, and anything over and above that there was gain sharing for both entities."
Medtech makers, Auerbach said, should look to devices that lower hospital’s labor spends.
"If you have a product that is going to reduce labor costs, that’s huge for us," he said. "If we can have a partnership in that, whereby if you don’t realize that [cost savings], there’s a partial payment, that would be attractive to us as an institution as well as others in the Commonwealth."
Hannon said her organization is particularly interested in 3D printing.
"I think it’s going to be a huge game-changer. The mass customization of replacement tissues is very, very important. I think it will be a revolution for patients to have greater mobility, capability, it will change the nature of medicine," she said.
For Auerbach, the cutting edge involves "all of the work that is being done in the space where we can use smart technology and where we can capture data and have it input directly in the EHR and be utilized by staff to facilitate the work they do, and reduce the ‘grunt work’ that they spent a lot of time and effort doing, as well as things that can ensure that staff have more time to be at the patient bedside."
"That’s where the rubber meets the road, as far as we are concerned. It’s the clinicians meeting with the patients," Auerbach noted. "All of the technology and devices that allow home monitoring of patients, so we can know more what is going on, and we can address the population health needs, so we can manage chronic comorbid arrangement. While we are not in risk sharing arrangements, we are penalized for readmissions."
Hospital consolidation is also an important concern, Hannon added.
"Consolidation in the provider industry is growing rapidly, because the cost structures can’t be borne by the revenue streams. The role of the community hospital in the future is to promote wellness and to serve that population for primary and secondary care," she said. "If you fast-forward 5 years from now, there are 4,000 in the country and that number will change drastically. The only way to survive is through consolidation. Think about that in your considerations in selling to hospitals."
"There are many things around devices and technology that may force us to not be an independent organization. Things like electronic health records are just too expensive and break the bank," Auerbach added.
"Our future is based on partnerships and we believe in partnerships across the spectrum. We want to continue to lead the nation in what we do and that cannot happen without partnerships. The holy grail is to the take the fixed costs out of your organization as quickly as possible. Fixed costs have been a burden for a long time. The solutions that industry can bring through partnerships or through new business models are really quite welcomed," Hannon said in concluding the discussion.