- Email: [email protected]
Medical device innovation and the value analysis process
ARTICLE IN PRESS
Medical device innovation and the value analysis process Heidi Krantz, RN, BSN,a Barbara Strain, MA, CVAHP,b and Jane Torzewski, RN, MAN, MBA, CVAHP,c Baltimore, MD, Charlottesville, VA, and Rochester, MN
Heidi A. Krantz, RN, BSN is the Director of Value Analysis at Johns Hopkins Bayview Medical Center in the Johns Hopkins Health System. Barbara Strain, MA, CVAHP is the Director of Value Management at the University of Virginia Health System. Jane Torzewski RN, MAN, MBA is a Senior Category Manager for the Mayo Clinic Physician Preference Contracting team. She previously was a Senior Clinical Value Analyst on the Mayo Clinic Value Analysis team. (Surgery 2017;j:j-j.) From the Support Services Administration,a Johns Hopkins Bayview Medical Center in the Johns Hopkins Health System, Baltimore, MD; Supply Chain Management,b University of Virginia Health System, Charlottesville, VA; and Medical Device Contracting Team,c Supply Chain Management, Mayo Clinic, Rochester, MN
THE
FUNDAMENTAL OBJECTIVE OF A HEALTH CARE ORGANI-
is to provide for the needs of its patients. Currently, health care organizations are faced with many challenges in caring for patients, including increasing costs, a fundamental shift from volume-based to value-based reimbursement, and increasing complexity in Medicare payments. At times, the need to provide the best care for the patient is seemingly at odds with the fundamental fiscal responsibility to provide care at a sustainable level. Grappling with this intersection of quality care at a cost that is accessible to the patient or providers is a challenge that is only becoming more complex and unclear. One key aspect of this challenge is making deliberate choices on what products and services are needed to provide best-in-class care at an affordable cost. ZATION
VALUE ANALYSIS PROCESS The operational and clinical leadership who manage products and services for operative and procedural areas within a health care facility are familiar with requests to evaluate new products and equipment, whether from a well-known supplier or from a new supplier. These requests typically come from physicians or their proxy (eg, head of service, study coordinator) who have an interest in reviewing technology. Health care organizations frown on Accepted for publication April 11, 2017. Reprint requests: Jane Torzewski, RN, MAN, MBA, CVAHP, Senior Category Manager, Mayo Clinic, 200 First Street SW, Rochester MN, 55906. E-mail: [email protected]. 0039-6060/$ - see front matter http://dx.doi.org/10.1016/j.surg.2017.04.006
requests that come directly from a supplier who infers they are acting on behalf of a physician. Whether a physician is employed directly by the health care organization or by group affiliation, their interest in providing care is foremost. Controlling the introduction of new products and equipment is critical to efforts at supply expense reduction that most health care organizations undertake; new technology and the next generation of products that are already in use frequently cost more and can push the cost of a procedure past the threshold of current reimbursement. Many organizations have implemented some type of formal framework to guide the review and decisionmaking processes that analyze the cost and clinical outcomes expected from the use of that product or equipment in the care of patients. This methodology is known as value analysis, and in many organizations, there is a dedicated clinician or clinical team who manages this process. The definition of value analysis by the Association for Healthcare Value Analysis Professionals recognizes the need to incorporate evidence-based clinical outcomes into the evaluation of products, services, and equipment: “Healthcare value analysis contributes to optimal patient outcomes through an evidenced-based systematic approach to review healthcare products, equipment, technology and services. Using recognized best practices, and in collaboration with organizational resources, value analysis evaluates appropriate utilization, clinical efficacy, and safety issues for the greatest financial value.”1 The 5-step process of value analysis typically includes initiative SURGERY 1
ARTICLE IN PRESS 2 Krantz, Strain, and Torzewski
identification, gathering of data and business intelligence, analysis and decision recommendation, implementation, and compliance. DATA AND ANALYTICS Data, including financial information and cost comparisons as well as clinical outcome data, preferably from randomized controlled trials, represent a critical aspect of this process. Such information determines the value proposition and justification for use of the device. The value analysis professional strives for a balance between clinical evidence, price effectiveness, and outcomes, which is delivered as an overall value package. Indeed, such an analysis should also be entertained critically when a new innovation is being considered prior to any attempt at further evaluation.2 VALUE ¼ Quality
ðoutcomes; safety; servicesÞ Costs
CLINICAL-BASED EVIDENCE The chicken or egg. The cornerstone of value analysis is rooted in ascertaining how the product, technology, or service may contribute in the most effective manner to the overall practice of caring for a patient in the appropriate health care setting. As Deming so appropriately said, “In God we trust, all others must bring data.” Data comes in all sorts of sizes and shapes and is not limited to dollars and cents. Too often, suppliers are very keen to point out how they can save money over their competitor selling the same or a similar product, but often they cannot articulate the clinical benefit. Suppliers and entrepreneurs alike must funnel their enthusiasm over their new technology into a cohesive and compelling story that leads with clinical purpose and outcomes. Providers are looking for peerreviewed literature or premarket studies conducted by creditable institutions with an “n” of statistical significance, which provide at the minimum the hook to get their “foot in the door.” Value analysis professionals use a variety of resources to flesh out key talking points, such as institutional experts in subject matter, objective, clinical-based subscription services for evidence resource consolidation, group purchasing organization participant provided services, and health care-based online or brick and mortar libraries just to mention a few. The heart of the value analysis process consists of a series of questions posed to the key stakeholder who is requesting the introduction or
Surgery j 2017
development of a new product, technology, or practice to the care environment: How will overall care, practice, or processes be improved? Who are the key end users and do you have their support? What considerations of patient or staff safety need to be considered? What training will be required? What products will be replaced or what additional accessories will be required? Where will the product or technology be used?
The physician innovator who wants to start the process of development or who wants to adopt their new device into practice needs to consider product evaluation well before devoting time, effort, and money into their innovation. The process of value analysis may or may not be used as the decision-making framework; however, these decisions are made generally in a multidisciplinary committee setting. Once clinical equality or advantage has been determined, crucial conversations centered on total value follow. Determining if the opportunity presented is evolutionary, revolutionary, or disruptive is essential in working through the process flow. Value analysis professionals often are approached by suppliers who assert if an organization utilizes their product instead of a competitor, then the organization will save money. Regardless if the product is “equal” to that of current competitors, there are other drivers of cost: cost of conversion, training of staff, inventory overhead/reduction, updates required in the computer systems, as well as the contracting considerations discussed later in this article. Rewarding suppliers by paying increased prices for bringing new products to market with features that may not improve care or safety is not aligned with provider strategies. Evolution of this type is not of Darwinian magnitude. Consider the revolutionary MRI-compatible defibrillators and nonMRI-compatible defibrillators, which were focused around patient and staff safety. Rather than choosing the right product using an algorithm based on who might need a future MRI, the suppliers in this industry “space” jockeyed quickly to assure they had devices to make current and future clinical care decisions easier and safer. Another set of revolutionary examples are drugeluting stents. These devices presented a similar clinical effect, not only in supplanting open cardiac procedures with a minimally invasive approach, but also introducing a wholesale change
ARTICLE IN PRESS Surgery Volume j, Number j
in geography where the procedures would be used and by whom. New billing codes were developed, and in some instances standalone cardiac centers were born. “Disruption” is a relatively new term to describe what is shaping modern day delivery of health care. When one thinks of disruption it is associated with the likes of Apple, Microsoft, NASA, Google Earth, and the Internet. When it is applied to health care, its influencers are the Affordable Care Act, quality, and total cost of care. (See case study for details.) FINANCIAL ANALYSIS The chicken has legs. This process of value analysis assures that the financial aspects of the introduction or development of new products/ technologies/services make sense. Of course, truly substantial clinical improvements trump finance; however, if this clinical improvement is not a balanced decision for all the right reasons, then overall institutional strategies become flawed. Financial analysis ranges from simple head-to-head product costs to complex reimbursement based on the payer mix weighed against the outcomes. To simply replace one product for another with the same quality and no training requires fewer approvals and calculations of annual volume and differences in cost. The caveat is that the difference in cost must be of a magnitude of savings determined by the provider. Through experience, some organizations use a base savings range of 5% to 20% to cover the cost/effort dynamic. Variation along the value continuum toward complex analyses range from replacing 2 to 3 products with one product to standardizing clinical practice involving use of an entire class of supplies, such as hemostatic agents, operative mesh, vessel sealing and ultrasonic cutting, and platforms for the utilization of clinical services, such as blood products, laboratory tests, imaging, and pharmaceuticals. The most complex analysis is when a technology moves the care dynamic out of the inpatient setting, or in an extreme case, prevents patients from acquiring other medical conditions. These rigorous processes of value analysis reflect the laudable goal of decreasing the total cost of care. CONTRACT COMPLIANCE When we talk about new technology and contract compliance, it can raise a red flag initially. A majority of the time, a hospital or health care system will have a current agreement in place for a
Krantz, Strain, and Torzewski 3
product or technology that may compete with the new technology being considered. The real question, however, that providers need to ask is what are the benefits from the new technology? Value analysis professionals must first ask “what does this new invention or technology replace or will it not replace any current technology or product”? This question provides a starting point to identify if requesting the new technology will compete with any current contractual agreement. A hospital or health system will most likely have agreements with suppliers such as one or more of the following: marketshare (certain percentage of the targeted business portfolio), a dollar volume (a certain dollar amount to be spent for the identified portfolio of product or technology), or a pricing agreement with no specific commitment. Although the new technology or invention can be better than “sliced-bread,” if a health system has a current committed arrangement with an incumbent supplier, many consequences can affect the health system, such as any financial increase, a necessary change in clinical practice and its consequences (education, safety concerns, etc.), or operational considerations. Contract compliance is one of the key steps in the process of value analysis when reviewing a newly proposed supply, device, or technology. If a health system cannot make a change due to a contractual obligation to adopt the new technology, then the new technology most likely will not be adopted at that time. It may be some time before the health system can identify a solution to obtain a financially positive direction and be able to move forward with the new technology. PRACTICE INTEGRATION Practice integration is becoming more and more prevalent in health care systems across the United States. As clinical practice continues to merge specific service lines, this alignment migrates the practice and products within the health system. Practice integration within health care systems can determine if a new technology or device is adopted into practice. Many physicians only now are beginning to understand that providing the best clinical care to their patients comes with an obligate cost of doing business. Calling a health system a “business” has been taboo in the past, yet health systems, insurance companies, Medicare, and Medicaid are all facing financial constraints, and revenue limits are predetermined and set.
ARTICLE IN PRESS 4 Krantz, Strain, and Torzewski
As an example, in the State of Maryland, Global Budget Revenue is the method of payment, and Maryland has capped revenue regardless of the volumes a hospital may see.3 The Health Services Cost Review Commission in Maryland regulates and sets the rates for all payers including Medicare and Medicaid and unlike other states, has not adopted a value-based model of health care. The majority of academic medical centers have incorporated a process of value analysis in an attempt to decrease the cost of supplies and capital acquisition. Many health care professionals have become part of Association for Healthcare Value Analysis Professionals as this organization has begun to set standards and processes in the health care field. CONFLICT OF INTEREST Many health care organizations have robust internal resources to assist and guide physician innovators in the established processes and criteria to evaluate potential proposals. These organizations also have strict guidelines regarding conflict of interest that protects the institution and clinical review process. Ethical considerations at both the institutional and individual level are paramount at this level. At the individual level for example, during a clinical trial phase, the physician innovator cannot be the principal investigator and cannot be part of the process of patient recruitment. Certain institutions permit inventors to evaluate FDA-cleared/approved prototypes clinically when these evaluations do not require approval by the Internal Review Board and are not part of a formal clinical trial. Inventors should check with their institution to verify relevant participation policies. Patients enrolled in innovator/investigator-sponsored studies must be informed of the association the organization and investigator has with the commercial entities. Patients can contact an organization’s Conflict of Interest Review Board for information regarding the relationships with commercial entities their physician may have. Physician innovators generally are not included in the decision-making process that an operative or procedural committee undertakes to evaluate new products. At the institutional level, many organizations have strict guidelines prohibiting the collection of royalties on internal sales of an innovative device that was fostered and supported through the internal resources of the organization. In addition, there is usually a strict firewall between the organization’s division of Supply Chain
Surgery j 2017
Management and the unit that is responsible for fostering and supporting physician innovation. This firewall is designed to assure no conflict of interest between the staff managing the procurement and payment process for supplies and equipment used within a health care organization and the staff responsible for driving successful physician innovation that results in marketable products. REIMBURSEMENT Before spending time, effort, and potentially monies for the startup, physician innovators need to consider realistically how the cost of their new innovative concept or product impacts the total cost of a procedure or treatment regimen. Questions concerning reimbursement from both public and private payers are a critical factor in determining if a new technology or product will be evaluated/funded or allowed to be included as part of the practice and standard of care for a procedure. Oftentimes, an investor or a business partner may elect to not move forward with support of a new device because of the uncertainty that surrounds the potential revenue stream of an unreimbursable device. National Coverage Determinations are necessary for Medicare coverage. National Coverage Determinations are a result of a robust, evidenced-based process that includes one publication of a randomized controlled trial. Coding is also a part of the reimbursement process, and without the proper coding, products are not and may never be paid for. Devices that are not eligible currently for reimbursement at the time they are being considered for evaluation or addition to inventory are not necessarily rejected. If there is a compelling case to utilize the device based on the collected and analyzed data, the committee may allow use of the device despite the cost considerations. CASE STUDY Pulling it all together. Let us discuss a specific line of innovation as an example. There has been an explosion of products based on the growing technology of neurostimulation. Although the technology itself is not new, neurostimulation is now being applied to a variety of medical conditions brought about by the growth in the geriatric population, increase in neurologic disorders, and side effects of medications, in addition to the world of obesity. It is expected that this market will grow by 12.9% from 2016 to 2022.4
ARTICLE IN PRESS Surgery Volume j, Number j
Fig. Complications of obstructive sleep apnea.
The commonly known uses of stimulation are for pain (muscle and spine), brain-related conditions, urinary and fecal incontinence, epilepsy, and hearing loss to name a few. This case study will focus on a neurostimulation device for the treatment of Obstructive Sleep Apnea (OSA). OSA, if not diagnosed or goes untreated, can lead to a variety of other conditions as depicted in Fig.5,6 An effectual treatment for OSA might revolutionize the delivery of care by focusing on preventing a multitude of conditions. One such treatment device consists of an implantable stimulator,5,6 similar in size, design, and function to a cardiac defibrillator, along with 2 leads that function together to keep the airway open. This device was presented to a value analysis team whose mission was to address perioperative services. At the first meeting, the team reviewed the general premise of the request, which required additional information, such as reimbursement, alternate treatments, total costs, and overall predicted outcomes. Once the required information was gathered, the physician champion was invited to attend the meeting to review the clinical aspects of OSA as it related to use of this device compared with current therapies, procedures, and other devices. Usual therapies for OSA range from weight loss, smoking cessation, and certain medications, and a nighttime use of Continuous Positive Airway Pressure machine to an operative procedure that removes tissue, repositions the jaw, or places implants into
Krantz, Strain, and Torzewski 5
the soft palate. The implantable system being evaluated was not intended to take the place of traditional therapies as a standard; however, for those patients who cannot tolerate or do not care to use Continuous Positive Airway Pressure, this procedure can be a viable option. Finance presented the coding information for the new device/procedure, the pricing was documented in a contract, and the decision was made to move forward with scheduling patients for the procedure. The team agreed that throughout the next year, the patient outcomes, prevention of treatments for other conditions, and financial profit/loss would be monitored periodically, and then the device would be re-evaluated. It is an understatement that the delivery of health care is facing critical challenges related to financial stability while striving to provide “best in class” care. These hurdles must be met while simultaneously meeting the fundamental objective of health care, which is to provide for the needs of patients. Use of a systematic process for evaluating innovative technology and products will aid health care organizations in meeting their strategic mission. New innovations create a cascade of interrelated decisions, processes, and functions, which coalesce into seamless delivery along the care continuum. Innovative products that have limited trial data and clinical research are at a disadvantage in the typical process of value analysis, but are not necessarily dismissed. If this product fills a critical need for which no existing product or equipment is serving, there may be a convincing cause to evaluate and adopt the device. Consideration of the degree to which the product or a potentially new innovative idea improves patient care and patient satisfaction is also part of the decisionmaking process, but other financial concerns and a value-based analysis do and will play an important part in this decision. KEY RECOMMENDATIONS Become well-acquainted with the process, policies, and guidelines your organization has for evaluating new technology and new products. Follow the rules! Be patient with the process; the process within your organization for reviewing new product requests may take several months and is often superseded by more critical activities. Be prepared to show the value your device can bring in terms of a decrease in net episode of care costs, improved patient care, enhanced patient or staff
ARTICLE IN PRESS 6 Krantz, Strain, and Torzewski
safety, or filling a critical need no existing product is serving. REFERENCES 1. Association for Health Care Value Analysis Professionals. 2016. Available from: http://www.ahvap.org/?page=about_ahvap. 2. Managed Care. Value = (quality + outcomes)/cost. Available from: http://www.managedcaremag.com/archives/2015/8/ value-quality-outcomes-cost.
Surgery j 2017
3. Hogan L, Rutherford BK. Health Services Cost Review Commission. Available from: http://www.hscrc.maryland.gov/ index.cfm. 4. PS Market Research. Available from: www.psmark etresearch.com/market-analysis/neurostimulation-devicesmarket. 5. Ashwani M. Healthy heart: care for heart. Available from: http://www.heartquery.com/obstructive_sleep_apnea. 6. Inspire Medical Systems, Inc. Available from: https://www. inspiresleep.com/.
Medical device innovation and the value analysis process Heidi Krantz, RN, BSN,a Barbara Strain, MA, CVAHP,b and Jane Torzewski, RN, MAN, MBA, CVAHP,c Baltimore, MD, Charlottesville, VA, and Rochester, MN
Heidi A. Krantz, RN, BSN is the Director of Value Analysis at Johns Hopkins Bayview Medical Center in the Johns Hopkins Health System. Barbara Strain, MA, CVAHP is the Director of Value Management at the University of Virginia Health System. Jane Torzewski RN, MAN, MBA is a Senior Category Manager for the Mayo Clinic Physician Preference Contracting team. She previously was a Senior Clinical Value Analyst on the Mayo Clinic Value Analysis team. (Surgery 2017;j:j-j.) From the Support Services Administration,a Johns Hopkins Bayview Medical Center in the Johns Hopkins Health System, Baltimore, MD; Supply Chain Management,b University of Virginia Health System, Charlottesville, VA; and Medical Device Contracting Team,c Supply Chain Management, Mayo Clinic, Rochester, MN
THE
FUNDAMENTAL OBJECTIVE OF A HEALTH CARE ORGANI-
is to provide for the needs of its patients. Currently, health care organizations are faced with many challenges in caring for patients, including increasing costs, a fundamental shift from volume-based to value-based reimbursement, and increasing complexity in Medicare payments. At times, the need to provide the best care for the patient is seemingly at odds with the fundamental fiscal responsibility to provide care at a sustainable level. Grappling with this intersection of quality care at a cost that is accessible to the patient or providers is a challenge that is only becoming more complex and unclear. One key aspect of this challenge is making deliberate choices on what products and services are needed to provide best-in-class care at an affordable cost. ZATION
VALUE ANALYSIS PROCESS The operational and clinical leadership who manage products and services for operative and procedural areas within a health care facility are familiar with requests to evaluate new products and equipment, whether from a well-known supplier or from a new supplier. These requests typically come from physicians or their proxy (eg, head of service, study coordinator) who have an interest in reviewing technology. Health care organizations frown on Accepted for publication April 11, 2017. Reprint requests: Jane Torzewski, RN, MAN, MBA, CVAHP, Senior Category Manager, Mayo Clinic, 200 First Street SW, Rochester MN, 55906. E-mail: [email protected]. 0039-6060/$ - see front matter http://dx.doi.org/10.1016/j.surg.2017.04.006
requests that come directly from a supplier who infers they are acting on behalf of a physician. Whether a physician is employed directly by the health care organization or by group affiliation, their interest in providing care is foremost. Controlling the introduction of new products and equipment is critical to efforts at supply expense reduction that most health care organizations undertake; new technology and the next generation of products that are already in use frequently cost more and can push the cost of a procedure past the threshold of current reimbursement. Many organizations have implemented some type of formal framework to guide the review and decisionmaking processes that analyze the cost and clinical outcomes expected from the use of that product or equipment in the care of patients. This methodology is known as value analysis, and in many organizations, there is a dedicated clinician or clinical team who manages this process. The definition of value analysis by the Association for Healthcare Value Analysis Professionals recognizes the need to incorporate evidence-based clinical outcomes into the evaluation of products, services, and equipment: “Healthcare value analysis contributes to optimal patient outcomes through an evidenced-based systematic approach to review healthcare products, equipment, technology and services. Using recognized best practices, and in collaboration with organizational resources, value analysis evaluates appropriate utilization, clinical efficacy, and safety issues for the greatest financial value.”1 The 5-step process of value analysis typically includes initiative SURGERY 1
ARTICLE IN PRESS 2 Krantz, Strain, and Torzewski
identification, gathering of data and business intelligence, analysis and decision recommendation, implementation, and compliance. DATA AND ANALYTICS Data, including financial information and cost comparisons as well as clinical outcome data, preferably from randomized controlled trials, represent a critical aspect of this process. Such information determines the value proposition and justification for use of the device. The value analysis professional strives for a balance between clinical evidence, price effectiveness, and outcomes, which is delivered as an overall value package. Indeed, such an analysis should also be entertained critically when a new innovation is being considered prior to any attempt at further evaluation.2 VALUE ¼ Quality
ðoutcomes; safety; servicesÞ Costs
CLINICAL-BASED EVIDENCE The chicken or egg. The cornerstone of value analysis is rooted in ascertaining how the product, technology, or service may contribute in the most effective manner to the overall practice of caring for a patient in the appropriate health care setting. As Deming so appropriately said, “In God we trust, all others must bring data.” Data comes in all sorts of sizes and shapes and is not limited to dollars and cents. Too often, suppliers are very keen to point out how they can save money over their competitor selling the same or a similar product, but often they cannot articulate the clinical benefit. Suppliers and entrepreneurs alike must funnel their enthusiasm over their new technology into a cohesive and compelling story that leads with clinical purpose and outcomes. Providers are looking for peerreviewed literature or premarket studies conducted by creditable institutions with an “n” of statistical significance, which provide at the minimum the hook to get their “foot in the door.” Value analysis professionals use a variety of resources to flesh out key talking points, such as institutional experts in subject matter, objective, clinical-based subscription services for evidence resource consolidation, group purchasing organization participant provided services, and health care-based online or brick and mortar libraries just to mention a few. The heart of the value analysis process consists of a series of questions posed to the key stakeholder who is requesting the introduction or
Surgery j 2017
development of a new product, technology, or practice to the care environment: How will overall care, practice, or processes be improved? Who are the key end users and do you have their support? What considerations of patient or staff safety need to be considered? What training will be required? What products will be replaced or what additional accessories will be required? Where will the product or technology be used?
The physician innovator who wants to start the process of development or who wants to adopt their new device into practice needs to consider product evaluation well before devoting time, effort, and money into their innovation. The process of value analysis may or may not be used as the decision-making framework; however, these decisions are made generally in a multidisciplinary committee setting. Once clinical equality or advantage has been determined, crucial conversations centered on total value follow. Determining if the opportunity presented is evolutionary, revolutionary, or disruptive is essential in working through the process flow. Value analysis professionals often are approached by suppliers who assert if an organization utilizes their product instead of a competitor, then the organization will save money. Regardless if the product is “equal” to that of current competitors, there are other drivers of cost: cost of conversion, training of staff, inventory overhead/reduction, updates required in the computer systems, as well as the contracting considerations discussed later in this article. Rewarding suppliers by paying increased prices for bringing new products to market with features that may not improve care or safety is not aligned with provider strategies. Evolution of this type is not of Darwinian magnitude. Consider the revolutionary MRI-compatible defibrillators and nonMRI-compatible defibrillators, which were focused around patient and staff safety. Rather than choosing the right product using an algorithm based on who might need a future MRI, the suppliers in this industry “space” jockeyed quickly to assure they had devices to make current and future clinical care decisions easier and safer. Another set of revolutionary examples are drugeluting stents. These devices presented a similar clinical effect, not only in supplanting open cardiac procedures with a minimally invasive approach, but also introducing a wholesale change
ARTICLE IN PRESS Surgery Volume j, Number j
in geography where the procedures would be used and by whom. New billing codes were developed, and in some instances standalone cardiac centers were born. “Disruption” is a relatively new term to describe what is shaping modern day delivery of health care. When one thinks of disruption it is associated with the likes of Apple, Microsoft, NASA, Google Earth, and the Internet. When it is applied to health care, its influencers are the Affordable Care Act, quality, and total cost of care. (See case study for details.) FINANCIAL ANALYSIS The chicken has legs. This process of value analysis assures that the financial aspects of the introduction or development of new products/ technologies/services make sense. Of course, truly substantial clinical improvements trump finance; however, if this clinical improvement is not a balanced decision for all the right reasons, then overall institutional strategies become flawed. Financial analysis ranges from simple head-to-head product costs to complex reimbursement based on the payer mix weighed against the outcomes. To simply replace one product for another with the same quality and no training requires fewer approvals and calculations of annual volume and differences in cost. The caveat is that the difference in cost must be of a magnitude of savings determined by the provider. Through experience, some organizations use a base savings range of 5% to 20% to cover the cost/effort dynamic. Variation along the value continuum toward complex analyses range from replacing 2 to 3 products with one product to standardizing clinical practice involving use of an entire class of supplies, such as hemostatic agents, operative mesh, vessel sealing and ultrasonic cutting, and platforms for the utilization of clinical services, such as blood products, laboratory tests, imaging, and pharmaceuticals. The most complex analysis is when a technology moves the care dynamic out of the inpatient setting, or in an extreme case, prevents patients from acquiring other medical conditions. These rigorous processes of value analysis reflect the laudable goal of decreasing the total cost of care. CONTRACT COMPLIANCE When we talk about new technology and contract compliance, it can raise a red flag initially. A majority of the time, a hospital or health care system will have a current agreement in place for a
Krantz, Strain, and Torzewski 3
product or technology that may compete with the new technology being considered. The real question, however, that providers need to ask is what are the benefits from the new technology? Value analysis professionals must first ask “what does this new invention or technology replace or will it not replace any current technology or product”? This question provides a starting point to identify if requesting the new technology will compete with any current contractual agreement. A hospital or health system will most likely have agreements with suppliers such as one or more of the following: marketshare (certain percentage of the targeted business portfolio), a dollar volume (a certain dollar amount to be spent for the identified portfolio of product or technology), or a pricing agreement with no specific commitment. Although the new technology or invention can be better than “sliced-bread,” if a health system has a current committed arrangement with an incumbent supplier, many consequences can affect the health system, such as any financial increase, a necessary change in clinical practice and its consequences (education, safety concerns, etc.), or operational considerations. Contract compliance is one of the key steps in the process of value analysis when reviewing a newly proposed supply, device, or technology. If a health system cannot make a change due to a contractual obligation to adopt the new technology, then the new technology most likely will not be adopted at that time. It may be some time before the health system can identify a solution to obtain a financially positive direction and be able to move forward with the new technology. PRACTICE INTEGRATION Practice integration is becoming more and more prevalent in health care systems across the United States. As clinical practice continues to merge specific service lines, this alignment migrates the practice and products within the health system. Practice integration within health care systems can determine if a new technology or device is adopted into practice. Many physicians only now are beginning to understand that providing the best clinical care to their patients comes with an obligate cost of doing business. Calling a health system a “business” has been taboo in the past, yet health systems, insurance companies, Medicare, and Medicaid are all facing financial constraints, and revenue limits are predetermined and set.
ARTICLE IN PRESS 4 Krantz, Strain, and Torzewski
As an example, in the State of Maryland, Global Budget Revenue is the method of payment, and Maryland has capped revenue regardless of the volumes a hospital may see.3 The Health Services Cost Review Commission in Maryland regulates and sets the rates for all payers including Medicare and Medicaid and unlike other states, has not adopted a value-based model of health care. The majority of academic medical centers have incorporated a process of value analysis in an attempt to decrease the cost of supplies and capital acquisition. Many health care professionals have become part of Association for Healthcare Value Analysis Professionals as this organization has begun to set standards and processes in the health care field. CONFLICT OF INTEREST Many health care organizations have robust internal resources to assist and guide physician innovators in the established processes and criteria to evaluate potential proposals. These organizations also have strict guidelines regarding conflict of interest that protects the institution and clinical review process. Ethical considerations at both the institutional and individual level are paramount at this level. At the individual level for example, during a clinical trial phase, the physician innovator cannot be the principal investigator and cannot be part of the process of patient recruitment. Certain institutions permit inventors to evaluate FDA-cleared/approved prototypes clinically when these evaluations do not require approval by the Internal Review Board and are not part of a formal clinical trial. Inventors should check with their institution to verify relevant participation policies. Patients enrolled in innovator/investigator-sponsored studies must be informed of the association the organization and investigator has with the commercial entities. Patients can contact an organization’s Conflict of Interest Review Board for information regarding the relationships with commercial entities their physician may have. Physician innovators generally are not included in the decision-making process that an operative or procedural committee undertakes to evaluate new products. At the institutional level, many organizations have strict guidelines prohibiting the collection of royalties on internal sales of an innovative device that was fostered and supported through the internal resources of the organization. In addition, there is usually a strict firewall between the organization’s division of Supply Chain
Surgery j 2017
Management and the unit that is responsible for fostering and supporting physician innovation. This firewall is designed to assure no conflict of interest between the staff managing the procurement and payment process for supplies and equipment used within a health care organization and the staff responsible for driving successful physician innovation that results in marketable products. REIMBURSEMENT Before spending time, effort, and potentially monies for the startup, physician innovators need to consider realistically how the cost of their new innovative concept or product impacts the total cost of a procedure or treatment regimen. Questions concerning reimbursement from both public and private payers are a critical factor in determining if a new technology or product will be evaluated/funded or allowed to be included as part of the practice and standard of care for a procedure. Oftentimes, an investor or a business partner may elect to not move forward with support of a new device because of the uncertainty that surrounds the potential revenue stream of an unreimbursable device. National Coverage Determinations are necessary for Medicare coverage. National Coverage Determinations are a result of a robust, evidenced-based process that includes one publication of a randomized controlled trial. Coding is also a part of the reimbursement process, and without the proper coding, products are not and may never be paid for. Devices that are not eligible currently for reimbursement at the time they are being considered for evaluation or addition to inventory are not necessarily rejected. If there is a compelling case to utilize the device based on the collected and analyzed data, the committee may allow use of the device despite the cost considerations. CASE STUDY Pulling it all together. Let us discuss a specific line of innovation as an example. There has been an explosion of products based on the growing technology of neurostimulation. Although the technology itself is not new, neurostimulation is now being applied to a variety of medical conditions brought about by the growth in the geriatric population, increase in neurologic disorders, and side effects of medications, in addition to the world of obesity. It is expected that this market will grow by 12.9% from 2016 to 2022.4
ARTICLE IN PRESS Surgery Volume j, Number j
Fig. Complications of obstructive sleep apnea.
The commonly known uses of stimulation are for pain (muscle and spine), brain-related conditions, urinary and fecal incontinence, epilepsy, and hearing loss to name a few. This case study will focus on a neurostimulation device for the treatment of Obstructive Sleep Apnea (OSA). OSA, if not diagnosed or goes untreated, can lead to a variety of other conditions as depicted in Fig.5,6 An effectual treatment for OSA might revolutionize the delivery of care by focusing on preventing a multitude of conditions. One such treatment device consists of an implantable stimulator,5,6 similar in size, design, and function to a cardiac defibrillator, along with 2 leads that function together to keep the airway open. This device was presented to a value analysis team whose mission was to address perioperative services. At the first meeting, the team reviewed the general premise of the request, which required additional information, such as reimbursement, alternate treatments, total costs, and overall predicted outcomes. Once the required information was gathered, the physician champion was invited to attend the meeting to review the clinical aspects of OSA as it related to use of this device compared with current therapies, procedures, and other devices. Usual therapies for OSA range from weight loss, smoking cessation, and certain medications, and a nighttime use of Continuous Positive Airway Pressure machine to an operative procedure that removes tissue, repositions the jaw, or places implants into
Krantz, Strain, and Torzewski 5
the soft palate. The implantable system being evaluated was not intended to take the place of traditional therapies as a standard; however, for those patients who cannot tolerate or do not care to use Continuous Positive Airway Pressure, this procedure can be a viable option. Finance presented the coding information for the new device/procedure, the pricing was documented in a contract, and the decision was made to move forward with scheduling patients for the procedure. The team agreed that throughout the next year, the patient outcomes, prevention of treatments for other conditions, and financial profit/loss would be monitored periodically, and then the device would be re-evaluated. It is an understatement that the delivery of health care is facing critical challenges related to financial stability while striving to provide “best in class” care. These hurdles must be met while simultaneously meeting the fundamental objective of health care, which is to provide for the needs of patients. Use of a systematic process for evaluating innovative technology and products will aid health care organizations in meeting their strategic mission. New innovations create a cascade of interrelated decisions, processes, and functions, which coalesce into seamless delivery along the care continuum. Innovative products that have limited trial data and clinical research are at a disadvantage in the typical process of value analysis, but are not necessarily dismissed. If this product fills a critical need for which no existing product or equipment is serving, there may be a convincing cause to evaluate and adopt the device. Consideration of the degree to which the product or a potentially new innovative idea improves patient care and patient satisfaction is also part of the decisionmaking process, but other financial concerns and a value-based analysis do and will play an important part in this decision. KEY RECOMMENDATIONS Become well-acquainted with the process, policies, and guidelines your organization has for evaluating new technology and new products. Follow the rules! Be patient with the process; the process within your organization for reviewing new product requests may take several months and is often superseded by more critical activities. Be prepared to show the value your device can bring in terms of a decrease in net episode of care costs, improved patient care, enhanced patient or staff
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safety, or filling a critical need no existing product is serving. REFERENCES 1. Association for Health Care Value Analysis Professionals. 2016. Available from: http://www.ahvap.org/?page=about_ahvap. 2. Managed Care. Value = (quality + outcomes)/cost. Available from: http://www.managedcaremag.com/archives/2015/8/ value-quality-outcomes-cost.
Surgery j 2017
3. Hogan L, Rutherford BK. Health Services Cost Review Commission. Available from: http://www.hscrc.maryland.gov/ index.cfm. 4. PS Market Research. Available from: www.psmark etresearch.com/market-analysis/neurostimulation-devicesmarket. 5. Ashwani M. Healthy heart: care for heart. Available from: http://www.heartquery.com/obstructive_sleep_apnea. 6. Inspire Medical Systems, Inc. Available from: https://www. inspiresleep.com/.