Surviving the Shift to Bundled Payments

Whether we like it or not, bundled payments are here. With this shift comes both challenges and opportunities for medical device companies. By their very nature, most medical device companies are engineering and marketing focused. We develop cool widgets and sell them to surgeons. But, there is a new reality. The healthcare landscape is changing and the companies taking a proactive approach to adjusting to these changes will capture a larger share of the market.

The Comprehensive Care for Joint Replacement Model (CJR), coming out of the Affordable Care Act (ACA), aims to test bundled payments and quality measurements for the complete “episode of care” for total hip and knee replacements. While this initially only impacts orthopaedic joint replacement companies, if successful, this model of value-based care is likely to be implemented in cardiovascular and spinal surgery next, and may well be extended eventually to all major surgical disciplines.

Thus far, the response of the major orthopaedic joint replacement companies to the advent of CJR has mostly centered on service offerings. The strategy here is to increase volume and capture market share. Much like a traditional consulting firm, the major orthopaedic players have added departments and programs aimed at orthopaedic service line improvements and surgical services optimization. These programs go well beyond just selling a product. They integrate themselves into the entire surgical value chain by identifying more ways to drive demand, improve OR efficiency, increase surgical capacity, decrease variability, and streamline the surgical process. In addition, some of these programs are even involved in helping align surgeons and hospitals through co-management agreements.

How Smaller Med Device Companies Can Survive

While a full-line consulting arm may be beyond the reach of smaller medical device companies, other strategies can be used to survive the shift to bundled payments. Since quality and outcomes are a cornerstone of the new payment models coming out of the ACA, one approach will be to create or partner on data outcomes. Although true, robust clinical studies are often impractical in terms of cost and time for most small to mid-sized companies, there is still value in less comprehensive outcomes data. Collecting scores for parameters such as pain, function, and disability need not be over-complicated or time consuming. Already a number of niche companies provide outcomes data collection apps and services geared toward physicians and the device industry. This data can then be used by individual surgeons and their respective hospitals to demonstrate the quality and value of their care.

An additional benefit to the device companies: The use of aggregate data for negotiations with payers, surgeons, and hospitals to demonstrate the benefits of their products. Having demonstrable outcomes may well be essential in the new era of bundled payments.

Change is never easy. But for those companies and individuals that are creative and solutions-minded, the Affordable Care Act is not to be feared. Instead, it presents an opportunity for growth that the best will capitalize upon.

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