Dive Brief:
- Medical device manufacturers are enhancing guarantees to compensate hospitals if a device doesn't perform as expected, Reuters reports. Johnson & Johnson, Medtronic and St. Jude Medical are a few of the first to provide new guarantees; for example, some offer to share the cost of follow-up treatment related to their heart devices.
- Although specifics about the new guarantees are still being worked out, hospitals and manufacturers say they tie a guarantee to trackable health outcomes, according to Reuters.
- Hospitals are still looking for more robust performance guarantees, including covering surgery costs if a device needs replacement. Some view the new guarantees as the first step for manufacturers to share more of the financial risk of procedures.
Dive Insight:
As an example: Metronic is guaranteeing that the hospital infection rate for procedures performed with Tyrx, a mesh sleeve that surrounds a cardiac implant with antibiotics, will be lower than the infection level for similar procedures without it. If that isn't achieved, Medtronic will cover the costs of treating the patient's infection. The first agreements involving the guarantees were signed this year.
"We are really doing this to promote a technology and a benefit that we know exists, to remove any doubt and to speed up the market acceptance," CEO Omar Ishrak told Reuters. "Risk-sharing in our commercial transactions is going to be an increasing component going forward."
Currently, insurance companies and patients bear the costs for replacing a medical device, which is often settled via lawsuits with manufacturers. But hospitals are facing increasing pressure to account for unsuccessful procedures (e.g., Medicare reimbursement cuts if patients are readmitted and more transparent quality reporting) and are in turn pressuring device-makers. This kind of accountability is a pretty big shift—and a coup for providers.
"They [device makers] are taking a little bit of ownership with us in getting that operation done and getting that patient successfully through the recovery," said Dr. Michael Schlosser, a neurosurgeon and chief medical officer at HealthTrust, which is owned by a subsidiary of HCA.