How MedTech R&D can get ahead of the shift to value-based care

The global healthcare system is shifting to a patient-centric, value-based care model. Much of the world has already adopted this approach, but the COVID-19 crisis has exposed gaping flaws in the massively inefficient, market-driven system of the United States. MedTech Companies have a huge opportunity to establish themselves as transformational leaders and gain a sustainable competitive advantage. Or they can wait and run the risk of being disrupted and left behind. MedTech leaders now find themselves asking, “should we commit to value-based care, or wait-and-see what happens in the future?”

Their decision is partly linked to the healthcare reimbursement model:

The fee-for-service model is based on volume. The more procedures, tests, and therapies undertaken by providers, the more products sold by MedTech companies.

In contrast, a value-based reimbursement model gives providers a prospective per-individual per-month payment to care for a patient population. The financials for providers (and by extension, MedTech) are based on patient outcomes that result from a chosen care path. 

It is well-documented that the US healthcare system spends more per-capita on healthcare than other countries of similar wealth. Yet common patient outcome metrics such as mortality rate, management of preventable diseases, medical/lab errors, and safety of care are below average by comparison. 

There are many reasons for this outcome (too many to discuss here) and many layers of complexity, but the problem is well illustrated by this scenario:  

Over the past several decades healthcare spending has shifted from treating acute diseases to treating chronic ones. According to the Centers for Disease Control (CDC) the US spends upwards of 90% of its $3.5 trillion healthcare budget on treating chronic and mental health conditions. These include heart disease, stroke, obesity, and diabetes – all of which are preventable to a certain extent.

The percent of the population dealing with chronic disease in the US is nearly double that of other developed nations. We are missing a consistent approach: one that enables prevention and early intervention. Without this approach preventable conditions become chronic.

The fee-for-service model rewards “sick-care.” Once the patient is healthy, the healthcare industry stops getting paid.

The value-based care model rewards creating a healthier population while also taking care of those who are ill. More preventive therapies are covered, and if someone is sick they have to be cared for.

So, can MedTech companies improve patient outcomes on their own? Probably not. Afterall, it is the providers who order tests, prescribe treatments, and perform procedures. We need broader collaboration between MedTech companies and providers focused on patient outcomes.  While providers and insurers have reluctantly partnered, MedTech is still largely absent from the table.

Most MedTech companies collaborate with key opinion leaders (KOLs) to gain an understanding of clinical- and usability needs for new product design. However, KOL groups alone may not sufficiently represent the diverse needs of user- and patient populations. Moreover, the level of engagement at key decision points in the development process varies, and is often limited to a specific product under development instead of broader considerations for alternatives and long-term options. 

The shift to patient centricity and value-based care means that patient needs must be brought to the forefront in new product development. Most MedTech development teams can improve how they capture and reflect patient needs in business, clinical, and technical trade-offs throughout the development process. 

Patient needs vary over the course of the disease and treatment regime, but generally fall into three main categories: 

Clinical outcomes: getting an effective and efficient resolution to the medical problem.

Quality of Life: changes and impact to the patient’s daily life and independence during and after treatment.

Affordability: keeping the patient’s out-of-pocket costs reasonable.

To truly understand patient needs, companies must adopt more granular patient segmentation. The approach of developing one product and then indicating it for broad patient populations is suboptimal for reaching the best outcomes. More and more medical products will require tailored designs based on specific patient populations.

Taking a “platform” approach to product development – where a core product platform can be easily customized to specific customer populations, – will be a key enabler for R&D to deliver more targeted products efficiently and economically. The MedTech companies that master platform design, will have a competitive advantage.

Getting back to the question of whether, when, and how MedTech leaders should become active players in the value-based care arena… Each company needs to find its own answer. But for sure, the shift will require a change in product development practices including:

Partnering more closely with providers to better understand clinical practices, applications, and alternatives.

Increasing the focus on the patient, i.e. understanding the specific patient populations and their needs and preferences more realistically.

Developing mechanisms to bring the patient and clinician perspectives into critical decisions throughout the development process.

Adopting a platform approach to new product development.

The above elements will drive the need to develop, acquire, and improve internal capabilities, all of which will take time. The shift to value-driven innovation has already started, but the question is – are you ready?