Value-Based Healthcare in the Medical Devices Segment

Shifting the overall focus of healthcare from a reactive to a preventive model has been a long-time conversation in the industry, which also intensified during the COVID-19 pandemic. This conversation considers a transition from prioritizing healthcare production to instead focusing on patient value by moving to a ‘Value-Based Healthcare’ (VBHC) model. This, however, is not only limited to medicines or treatments. Medical devices must also become part of a results-driven model for VBHC to be successful. The importance of VBHC lays on the potential it has to improve the overall health of the population, “opening the possibility to reduce the burden on hospitals and bring relief to saturated health systems,” as Michael Barriga, General Manager and COO of Omron Healthcare, explained to MBN.

In a VBHC model, providers, including hospitals and physicians, are paid based on patient health outcomes. Although no country has fully implemented a VBHC agenda, there are different cases of successful adoption at different levels. Among its benefits, VBHC allows patients to spend less money to achieve better health. Patients with chronic diseases like cancer, diabetes, high blood pressure, COPD and obesity can report a quicker recovery or a better management of the disease, even avoiding it in the first place. As a result, patients require fewer doctor’s visits, medical tests and procedures, spending less on prescription medication as both near-term and long-term health improve.

Providers can also achieve greater efficiency and patient satisfaction through VBHC. While they may need to spend more time on new, prevention-based services, they spend less time on chronic disease management as a result. Another benefit is cost control for payers and risk reduction by dividing the risk among a larger patient population. A healthier population with fewer claims translates to less drain on payers’ premium pools and investments. Likewise, suppliers benefit from being able to connect their products and services to positive patient outcomes and reduced costs, an important selling proposition as national health expenditures on prescription drugs continue to rise.

A Matter of Access

Ana Riquelme, Executive Director of AMID mentioned to MBN, that for a sector sometimes not accessible to all segments of the population, like medical devices, “VBHC models are a way to break the access barrier and provide patients with access to innovative solutions.” Riquelme explained that many times, what guarantees the purchase of a medical device is the price, when it should be the benefit it provides to the patient.

This model is especially valuable in Mexico because, for a long time, companies and governments have worked on enhancing quality healthcare access, according to Alejandro Paolini, President of AMID, which means more patients having access to state-of the-art technology. This is tied to governmental budget and having a willing industry actively looking to innovate in business and payment models can be the first step toward a transformation in the healthcare sector. “VBHC is an are alternative to large initial investment usually coming from the government to provide patients with a wider chance for a positive outcome,” said Paolini.

Diagnosis: First Step

A successful medical devices sector within this transition begins with patients using medical devices as a diagnostics tool to detect an ailment at an early stage. Thus, “consumption of devices would continue to be high but they would be used as a preventive rather than a corrective tool. This model creates cost savings for health systems and for patients,” said Barriga.

Michael Porter, the professor behind the VBHC model, identifies diagnostics as the No. 1 metric to build a VBHC model. Testing ranges from signs and symptoms gathered during clinical examination to biochemical, pathologic and psychological analysis. Diagnostic testing should be based on a logical sequence of processes that allows doctors to identify a disease or exclude potentially incorrect conditions, he establishes.

While at first glance diagnostic devices can bring the clear benefits of detecting a disease or dismissing an erroneous condition on a symptomatic patient, their capabilities can go much further. Proper diagnosis enables to track patients’ progression, stabilize them and predict or improve their outcome. Furthermore, diagnostic tools open the door to personalized medicine that will allow the generation of specific treatments for an individual patient.

David Kersenobich, Director General of the National Institute of Health Sciences and Nutrition Salvador Zubirán (INCMNSZ), wrote for MBN that “in the management of a patient with diabetes mellitus, being able to perform in a single visit all interventions, such as that of the nutritionist, endocrinologist, dentist, ophthalmologist and physical therapist, reduces costs for both patients and the institution and promotes better attachment to treatment.”

There are encountered opinions to this model and its impact on the medical devices sector. An article by Medical Device Network (MDN) states that in a 2017 study, there was a decrease of US$5,577 (20.8 percent) in total spending per episode of lower-extremity joint replacement surgery between July 2008 and June 2015 at San Antonio’s Baptist Health System, which was participating in the VBHC model. Most of the hospital savings came from medical devices such as implants and supplies, which decreased to an average of US$1,920.68 (29 percent) per case. Accordant to MDN, these types of models are “likely to affect new devices markets that have technology that cannot clearly be demonstrated to have better outcomes and/or lower costs. In the long run, the key factor to win the market will be the cost effectiveness of devices.”

A study by Deloitte, meanwhile, measured the results of implementing a VBHC model in a hospital and a medical devices company, Medtronic and UnitedHealthcare, for insulin pump therapy. “The arrangement between the manufacturer and payer makes Medtronic’s device the exclusive pump for UnitedHealthcare plan members. That agreement has helped Medtronic gain new users while producing cost savings of 20 percent to 30 percent for UnitedHealthcare,” found the Deloitte article.

To achieve success in a VBHC market, device manufacturers will need to work with providers to control costs, while demonstrating value in terms of improved patient outcomes through new types of evidence as a preventive, rather than a corrective tool, as Barriga mentioned. Aligning the many definitions of value that each stakeholder holds is the biggest challenge in the transition to VBHC, according to the health consultancy company ICON. Patients and physicians might put the highest value on individual clinical efficacy and convenience, while payers and governments may not consider these as important as cost and population health impact.