Medical tech investments reflect shifts in reimbursement models

Dive Brief:

  • Investors are turning their attention to cost-saving medical technologies even if they have not produced evidence that they improve outcomes, according to a Health Affairs blog post published Monday.

  • Investments had previously been concentrated on businesses developing and selling “big-ticket” items preferred by provider purchasers who generally did not consider financial performance.

  • The shift reflects broader trends occurring in healthcare, such as the shift toward value-based care and physician employment at hospitals.

Dive Insight:

Policies that penalize health systems for certain outcomes and that encourage care in outpatient settings are shaping the medical technology market, wrote Josh Baltzel, a venture capitalist, and James C. Robinson, an economist at University of Alabama. In this environment, businesses that can help health systems cope with the shift toward value-based care are the ones targeted by investors.

One medical technology garnering attention can help to reduce false-positive sepsis diagnoses by up to 90%, according to Baltzel and Robinson. This is attractive to hospitals because they can reduce costs associated with unnecessary use of antibiotics resulting from false-positives, which is being targeted by payers. Another is a device that allows providers to more readily treat sinusitis in outpatient settings.  

“Venture capitalists are paid to predict, and in some cases to create, the future,” Baltzel and Robinson wrote. “The pattern of their investments may be an early indicator for a new health care system that rewards efficiency as well as quality in assessment, pricing, and use of new medical technology.”

It is not clear how large a share of the market cost-reducing innovations mentioned have compared with traditional “big-ticket” items like artificial joints, spinal implants, and cardiac pacemakers. However, two recent reports suggest that 2016 was a big year for digital health investments. Several big name investors were active in the market, according to a report from StartUp Health. Additionally, more medical technology startups received funding in 2016 than in previous years, according to a report from Rock Health.

Filed Under: Health IT