As the shift to value-based care ramps up, medical technology companies are joining hospitals and health insurers in effort to tie performance to payment incentives.
Medtronic has signed close to 1,000 contracts requiring the company to reimburse hospitals for select costs if its Tyrx antibacterial sleeve fails to prevent infection in patients who receive cardiac implants, the CEO Omar Ishrak recently told The Wall Street Journal.
The company also has a reimbursement arrangement with Aetna for evidence the company’s insulin pumps linking to improvements for diabetic patients when switching to the devices. Other value-based contracts are being considered.
The Minneapolis-based medtech giant is not alone. GE Healthcare and Philips are among other manufacturers tying payments to real outcomes. The move to value-based contracts and partnerships is a natural evolution of the broader shift to value-based care.
“Medical technology companies are very actively looking for opportunities to engage in new ways with hospitals and physicians, looking at ways to share in the risk these providers are facing with new payment models and share in the benefits as well,” Don May, executive vice president of payment and healthcare delivery policy at AdvaMed, said.
Those opportunities range from pricing arrangements like Medtronic’s Tyrx, where there’s one price for hitting a quality metric and a different price if it’s missed, to warranties on outcomes.
However, entering such arrangements involves a calculated risk as companies must rely on real-world evidence to prove out the benefits of their products.
“For a medical device (510k approval) there is slightly less variability compared to a randomized clinical trial of a bio/pharmaceutical product,” Andrei Gonzales, assistant vice president of product management and value-based payments at Change Healthcare, told Healthcare Dive via email. “However, they still have to ensure that they can effectively monitor these outcomes and attribute the outcome to the specific drug/device under agreement.”
Value-based partnerships form shared accountability
Another company taking the plunge into value-based care is GE Healthcare, which is looking at macro-level outcomes and aligning with clients to help them reduce the costs of care. That includes everything from the role GE’s imaging products play in providing care to product maintenance and location of devices to optimize utilization, said Helen Stewart, managing principal of GE Healthcare Partners, the global advisory arm of GE Healthcare.
Currently, the company has entered partnerships with six clients that assume significant risk based on how well products produce desired outcomes. Another three partnerships involve analytics-based “command centers” that equip patient flow decision-makers with data to avoid surges and ebbs in care.
Those nine partnerships comprise about $2 billion in committed outcomes over the past six to nine years, Stewart said, adding GE anticipates doubling that number this year and “moving to a higher scale over the next couple of years.”
The decision to embrace value-based care is a strategic one, Stewart said. “We stepped into this strategy because we needed a way to inform our product roadmap [and] investments, aligned not just to what is the most clinically relevant piece of equipment … but also around how those pieces of equipment deliver efficient quality care,” she told Healthcare Dive.
Others in the medical technology field share that outlook. Joe Robinson, health systems solutions leader at Philips, said the partnerships between health technology companies and health systems provide insights into workflows that can inform how new departments are designed and which technologies are adopted to provide seamless care within the hospital.
“In many of our long-term strategic partnerships, we work with our partners directly and have shared accountability for developing the technologies they need and successfully rolling out these large-scale projects,” Robinson wrote in an email.
To date, Philips has signed 10 long-term strategic partnerships worth nearly $2 billion with organizations including Augusta University Health, Phoenix Children’s Hospital and Banner Health.
For example, a 15-year, $300 million partnership with Augusta University Health aims to improve outcomes and reduce cost for millions of patients across Georgia and South Carolina.
Philips assumes risk and accountability for all aspects of the technology to meet the needs of the care delivery teams and incorporates changes management and an open innovation framework.
In the first 18 months, the partnership realized $7 million in savings versus “business as usual” procurement. That included replacing 800 imaging and patient care devices, related training and building a new telemetry facility with wireless monitoring devices and complete changeover from analogue to digital radiology.
A set of talking points
Providers and payers are looking at technologies differently than in the past, and manufacturers see the need to be part of that conversation.
“Our companies came to us a few years ago and said we want to talk about value,” May said. “We want to put ourselves in a position to be partners with hospitals and physicians and ACOs and participants in bundling and really help them improve the care for patients.”
The answer was the Value Initiative, a set of tools aimed at helping companies assess the value of a technology.
The framework focuses on four key drivers of value: clinical impacts, nonclinical patient benefits, cost-effectiveness and public and population health impacts. Questions could include whether a technology helps to reduce readmissions or infections, or if it improves throughput in the emergency room or operating room?
While large medtech companies are making headlines with their value-based arrangements, smaller manufacturers also are embracing the idea. Both face legal barriers, though, related to the Anti-Kickback Statute and Stark Law and what companies can and cannot do related to incentives that they provide to providers or patients for using their products or services.
Both laws were put in place to discourage collaboration between commercial businesses and hospitals and physicians that would drive utilization one direction or another. That poses a problem with value-based care models where the goal is an integrated approach to care delivery, May said.
To smooth the way, AdvaMed is proposing two changes to Anti-Kickback and Stark. The first would create a new safe harbor allowing price adjustments and services to be bundled with the product being sold — subject to appropriate safeguards — where the arrangement is dependent on the achievement of a measurable clinical or value outcome.
So, for example, a company may receive one payment the technology keeps readmission or infection rates at a certain level within the hospital. There could also be a year-end analysis whereby companies that lowered a quality metric or hit an outcome target receive a rebate or discount depending on the performance, May said.
The second proposal would create a safe harbor around warranties that allows companies to make certain clinical and outcome assurances while providing an appropriate remedy if those outcomes are not achieved. So rather than guaranteeing that the technology itself will work, the warranty promises there will be no readmissions or that a patient will go home within five days.
AdvaMed has submitted the proposals to CMS and is pushing them on Capitol Hill as well. “This is a multi-year strategy,” May said.
Value-based care best practices
Whatever approach companies take with value-based care, there inevitably will be risk. Following some best practices can ensure a happier outcome for devicemakers and their clients.
“Making sure we define the outcome as one where both organizations are aligned for success is critically important,” Stewart said. “We are very thoughtful around what is the vision we are going to create together and how can we co-resource it.”
The arrangement also has to fall to the clients’ bottom line, she adds.
“One of the things we had to get our head around was really aligning ourselves to metrics that are sometimes beyond our control,” Stewart said. “Health systems face a lot of things that are beyond their control. If we are truly going to partner with them to solve the problems that matter in healthcare, we have to do so by being open to live in the environment they live in.”
That means being able to adjust contracts quickly to things like changes in patient volume. “We can’t keep driving toward a goal that’s no longer relevant when something in their environment has changed,” she said.