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As originally asked by Scott Nelson.

CMS has just begun to outline parameters for the Value-Based Payment Modifier, which will roll out between 2015 and 2017 and provide a positive or negative multiplier to payment rates based on quality and cost performance.

How will this affect medtech companies? And what should they be doing now in preparation for this new model of care?

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Pamela V. Falk
Techncal Writer & Optometrist — White Papers, Case Studies & More for the Medtech & Healthcare Industries
Howard, in my profession, Optometry, price shopping by patients who don’t have insurance is quite common. I believe that it is, to some extent, in Dentistry as well. In larger population centers it’s easily done. If a person doesn’t like the fee they see in an ad or hear on the phone, they just call the next practice down the street until they get a quote they like, or dislike the least.

For optometric services, even patients who have insurance with a percentage-of-fee copayment (as with Medicare) price shop to lower their out-of-pocket costs. Those who have a fixed copayment already have a “quote” because they know in advance what their copays are.

In these small-scale examples where patients choose their healthcare providers, they are often looking at price, not value. For third-party payers, though, value is a different animal.

I do agree with Greg that any value-based payment model is only as good as the metrics used, and that high-value performers will be unfairly penalized, no matter what their product, service, setting or mode of practice is.

Howard Edelman
Life Science Angels Co-Chair Medical Device & Digital Health Screening Committee
When was the last time you visited any health care provider tha provided you a quote prior to providing service? Would you allow your mechanic to do anything with providing a quote first?

Greg Eaton
Management Consultant | Technologist | Mentor | Strategic Adviser | Board Member | Corporate ReEngineering Expert
Any value-based payment model is only as good as the metrics used to determine value or lack thereof. If we prescribe too tightly these metrics we will undoubtedly penalize products or services that actually add value but don’t fit the metrics.

Comparing group performance without taking into account geographic and other demographic metrics will not yield fair results. I can see this system further stretching the divide between service levels in different communities.

Leaving aside the unfairness of penalizing individual exemplary practitioners because of their group’s performance, a zealous and talented individual who deals with extreme or difficult cases will be unfairly penalized as we move towards individual assessments.

Todd Staples, MBA
Account Representative, GYN at Medtronic
On further consideration of this issue, I think the discussion on “Value Based Products” is one that we need to look at as almost a stepping stone of sorts. It is becoming a more common theme talk about changing our healthcare model from a “Fee for service” model to a more “Health Maintenance” model. Many of the initiatives around telemedicine are designed to reduce drastically the instances where patients MUST physically walk into a medical facility. Others are designed to allow patients to go home sooner and increase the likelihood of that patient staying home for their entire recovery.

The point I want to make here is that the changes with CMS that are being phased in over the next few years are making it more absolutely clear that every time a patient walks into a facility and is delivered care – the delivery of that care represents RISK to the facility. In a fee for service model, where profit comes from high patient volumes, it is only a matter of time before those business models will have to change to reduce the risk that the high volumes represent. If (as a healthcare provider) I am being paid to maintain those patient’s health and deliver necessary care rather than being paid on how many procedure I do, then I am incentivized to reduce hospital beds, minimize unnecessary procedures and readmits, and most importantly providers would be more incentivized to engage patients earlier in their disease progression and do everything in their power to keep them home and out of the hospital. This transition is slowly happening, though telemedicine will still have resistance in the medical community if it results in fewer services being offered (procedures) in a fee for service system.

To quickly summarize, yes value based products are absolutely necessary today – but I think as we transition more and more to a health maintenance model here in the US, the value based product model will once again undergo change as we shift toward a risk reduction paradigm (High quality, low cost, low morbidity/mortality, low readmits, low complications, etc) for necessary procedures, and the big focus will become early patient intervention via various telemedicine initiatives to keep patient volumes low in the acute care setting. Everything about the ACA seems to be designed to reduce Acute Care patient volumes while increasing access to healthcare for all. Ultimately this will mean big changes for our industry, but once again, those that see the writing on the wall will succeed and those that resist will most likely fall behind.

Todd Staples, MBA
Account Representative, GYN at Medtronic
Scott – Great question, and one that start ups are typically being asked at inception these days before they see a penny of investor money. The real question comes down to value proposition. Of course we all think instinctively that to have a good value proposition a product or service has to be something completely innovative or new, but value can be derived from many different perspectives, and a medtech company can deliver that value in a number of different ways.

It is imperative that medtech start ups have a compelling value proposition that has some customer validation if they expect to get funding and be successful entering the market, especially with these new CMS VBPMs being implemented. Historically, these types of Value proposition approaches were used at various stages of the marketing effort, but increasingly in today’s landscape, they are prerequisites to even getting off the ground.

Paul Zalesky
Medical Specialty Consultant
This pending CMS approach plays right into the recently recognized need to conduct controlled clinical studies that also track cost, for both treatment and control groups.