Academy Health | February 4, 2008
James C. Robinson, Editor-in-Chief, Health Affairs
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Fewer Stents Implanted in June, Signaling Impact of New Studies
Wall Street Journal, July 20, 2007
Boston Scientific and Consultant Settle a Lawsuit
New York Times, November 17, 2007
Medtronic, Again Questioned Over Payments to
Doctors, Is Subject of Senator’s Inquiry
New York Times, September 27, 2007
Orthopedic-Device Firms Show Millions Paid to Consultants
Wall Street Journal, November 1, 2007
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Medtech challenges to value based healthcare
Current policy initiatives
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Data improvement
Physician conflicts of interest
Price transparency
Medicare payment
Stakeholder opportunities
− Hospitals
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Health plans
Medical device firms
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MedTech is dynamic, innovative sector faced with fragmented purchasers, cost-unconscious demand
Inadequate data
Misaligned incentives and payment methods
Organizational fragmentation
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Policy Initiatives for
• Comparative effectiveness funding, new center?
− Broad or narrow view of comparative effectiveness?
− What role, if any, for comparative cost and efficiency?
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Medicare: Coverage with evidence development (CED)
Encourage further development of registries?
FDA: heightened attention to safety, long term risks
− Defibrillators, drug-eluting stents
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Policy Initiatives for managing
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Major settlement with ortho firms over consulting ties
− How will this affect other high-cost medical devices?
Response from professional societies
− American College of Orthopaedic Surgeons (AAOS)
Model of full disclosure from state pharmacy rules
Continued attention to self-referral in specialty hospitals
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Policy Initiatives for promoting
Device firm’s invoice statement:
Acceptance of this invoice and all information contained in this invoice by the recipient and its employees reflects agreement to treat this invoice and all information contained in this invoice as confidential, use only for the purposes of payment, and not release to any third party without written consent.
Orthopedic Network News, October 2007.
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Transparency in Medical Device Pricing Act of 2007
− Senator Grassley (IA), October 2007
Gingrich et al. attention to Guidant,
ECRI litigation
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Policy Initiatives for improving
• Continuing debate over splitting the Sustainable
Growth Rate (SRG)
• DRG updates for tech-intensive admissions
− Charge compression; new technology add-ons
• Holding the line against carving out devices from
DRGs
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Stakeholder Opportunities for
I. Supply Chain Management:
 Price negotiations with vendors
 These require ability to move market share, in turn requiring cooperation by physicians
 Difficulty negotiating off list price for new devices
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Technology assessment committees in hospitals
Divisions and conflicts between physicians and hospitals
 Continued major variation in prices paid
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Stakeholder Opportunities for
II. Physician relationships
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Hospitals and physicians compete over ambulatory surgery, diagnostic, and testing facilities and equipment
Specialty hospitals and physician-owned general hospital
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Renewed proof of value of medical groups, employment
Seek transparency and/or limits on conflicts of interest
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Stakeholder Opportunities for
III. Service lines (ortho, spine, cardiac)
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 Restructure hospital according to how patients experience them
Data collected on service line level allows analysis
Analysis permits improvement in quality and efficiency
Cooperation of MDs is essential
Cooperation with device firms would be helpful
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Stakeholder Opportunities for
 Plans currently emphasize benefit design
 Neither HMO nor CDHP structures influence devices
 Discussion of tiered formulary approach
 “Value-based insurance design” (VBID)
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First dollar coverage of preventive services in CDHP
Reference pricing approach to medical device choice?
 Incentives for appropriate, informed choice of procedure?
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Stakeholder Opportunities for
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Neither FFS nor capitation addresses challenges posed by medical devices
Episode pricing faces challenges:
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How to bundle the MD with the hospital?
Base package price on average costs or evidence-based guidelines? Costs v. prices.
Hospitals are moving in the opposite direction, unbundling (carving out) devices from per diems, case rates, and emphasizing stop loss, discounted charges
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Stakeholder Opportunities for
Short term opportunities
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Embrace comparative effectiveness
 Registries, comparative trials, cooperative studies
Retrench from aggressive sales directed at surgeons?
Attitude towards price transparency ?
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Stakeholder Opportunities for
Longer term opportunities:
Will device firms come to see hospitals and health plans as customers, in addition to surgeons and patients?
 Partner with hospitals on service lines
 Partner with insurers on dealing with appropriate use, benefit design, episode pricing methods
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When used appropriately, medical devices offer breathtaking value to patients and to society
There exists considerable controversy over appropriate utilization, pricing, conflicts-of-interest
This is a major arena for either conflict or cooperation among hospitals, physicians, health plans, and medical device firms
Public policy is in ferment; future directions unclear
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