The changing surgical landscape: how medical device developers can compete in a value-based system

Tighter regulatory scrutiny coupled with healthcare’s emphasis on improved outcomes has put pressure on medtech companies to adjust business models. To stay competitive, medical device developers must re-imagine what they bring to market.

The shift toward value-based reimbursement in the US (and similar models internationally) affects all aspects of healthcare processes and procedures - medical devices included.

In a McKesson Corporation survey, United States healthcare providers reported 36 percent of their business had a value-based payment arrangement. By 2021, they expect that number to reach 60 percent.

Woman lying in a hospital bed

What is value-based reimbursement?

Value-based reimbursement programs hinge payment on quality and efficiency of care. With bundled payments, a key pillar of value-based care, instead of receiving payment per use, as with the traditional fee for- service model, healthcare providers receive one payment covering all aspects of treatment. The care continuum stretches from pre-op, through surgery, to post-operative care and rehabilitation. Hospitals that consistently produce better outcomes, aka high performing hospitals, keep a larger share of the incentive.

Value-based care turns the traditional 60 or 90 day revenue cycle on its head. However, with US healthcare costs comprising 17.8 percent of the 2015 gross domestic product, and rising, the shift to value over volume is necessary to control costs and improve outcomes.

To deliver more value at a lower cost, healthcare organizations are expanding services to offer more urgent care and wellness clinics, telehealth services and outpatient facilities. By keeping patients out of the hospital and reducing recovery time, patients get better health at a lower cost. Healthcare organizations can protect margins if they can promote fewer readmissions and complications and shorter length of stay.