Healthcare Economics: Demand for Innovation

---

With dawn of a new era in healthcare in the United States, often referred to as Healthcare Reform, and with the passing of the Patient Protection & Affordable Care Act in 2010, the healthcare market saw a tectonic shift in how healthcare was going to be delivered (i.e. POC clinics, out-patient, telemedicine), but more importantly, how it was going to get paid for (i.e. Capitation, Bundles, quality metrics). New payment models and metrics began to emerge as we continued to move away from a fee-for-service methodology to paying (rewarding) for delivering higher quality and better outcomes with fewer mistakes. 

Much of what was putting pressure to "Reform" was a significant increased burden put on Medicare enrolments as the US population aged. With an aging population comes an increase in chronic disease, which would mean exponential increase in overall healthcare expenditures. In addition, demands for transparency showed that a significant amount of healthcare spend was attributable to poor quality, which leads to increased hospitalization, re-admissions and higher treatment costs. 

There were two thing for sure, reimbursements were being cut, and that costly mistakes would financially penalize the provider who could no longer simply pass  the costs to the government, insurers or patients. 

Embedded within Healthcare Reform, new terminology, acronyms and quality initiatives began to emerge, i.e. VBP, SKIP, MIPS, HAI's, Do NO HARM, ADR's, Capitation, Never Events, Exchanges, Press Gainey Scores, Bundled Payments, Obama Care, Value Analysis, Formularies, Risk Sharing, customer satisfaction suveys, Stark laws, Care Teams, standardization, etc., etc. which all ultimately had influence on decision making relative to which products, devices, medications and services a provider would pay for.

The challenge was that these new models rewarded quality yet, demanded lower costs; a formula not always easy to achieve. This forced many of the buying decisions out of the pure clinical, physician centric setting and into a committee based decision process. The term "VALUE," as allusive and subjective an idea that is, became the new mantra in healthcare decision making. There was now Value Based Purchasing and a Value Committee making decisions, but the problem for many was the term "Value" could be measured, and interpreted, in many ways, by different organizations. 

For some VALUE simple meant buying goods and services, including MD provided medical services, at a lower price, which was not really a new concept as manufactures and suppliers have felt margin pressure for years. Others, confused value with "risk sharing" which for many really meant cost shifting. Thankfully, there were others, that were more sophisticated,  who began looking at overall cost, and cost avoidance, as a measure of value, i.e. 

At the end of the day the real meaning behind  "VALUE" is = Do more with less!  

For many manufactures and suppliers, satisfying an undefined value metric, with limited access and a committee centric decision process left their businesses at risk. Many were relying on old, outdated sales methods, value propositions and relationships, which were traditionally reliant on a one-doc-at-a-time strategy and primarily focused on the "what's in it for the patient." 

The PRACTICE of medicine vs. The BUSINESS of medicine.  For many, this meant trying to get into the C-Suite! As a rep, the C-suite, or the only place in a hospital with a carpet, was something you would avoid. How is a CEO or CFO going to appreciate all the wonderful things my product can do ...at any price! What about how great the patient will feel? 

One would think that the "what's in it for the patient" should be the only consideration when it comes to healthcare .... but its not. There are new stakeholders, new initiatives, new quality metrics and less money, all that needed consideration, vetted and calulated. 

In addition, their value messaging relied more on "outcomes" vs. Value. They moved the cheese!  

1. No longer could a sales reps simply meet with a doctor and present their wears. They now had to become credentialed and granted access; 
2. No longer could a doctor simply order what he wanted, but now was forced to look at standardization and what was clinical acceptable vs. preferred;
3. What used to be individual buying preferences where now being decided by committees; 
4. New Stark & anti-kickback laws eliminated sales reps from trying to 'influance" individual buying decisions;
5. No longer was it just sinoky about a better product or better outcomes, it had to also be low cost. 

This emerging sea of government lead initiatives, and regulations, layered with reductions in payments left many private practice physicians and health system scrambling. This also left buying influences with a new perspective when considering product decisions and suppliers with a new challenge of how to appeal to a multi-disciplined committee. Better Patient Care + lower costs = Value.