A clear change occurring in the healthcare landscape is shifting patient treatment to more decentralized care. As device manufacturers feel the pressure of value-based reimbursement models and penalties for hospital readmissions, they must be able to provide the market with products, services and solutions that undoubtedly improve outcomes.

“Value is being defined not only by clinical differentiation at the moment of intervention but also on the total outcome of a patient’s health and treatment,” said Brian Williams, director, Strategy at PwC. “In that environment, diagnostics and device manufacturers now have to look beyond the traditional product focus, and also understand how they incorporate services and solutions into the value equation. To do that effectively requires not only skills in product development, but also new skills around partnerships, collaboration and data sharing.”

During a recent discussion with MedTech Intelligence, Williams talks about the change in mindset and new capabilities device manufacturers will need to navigate what PwC calls the “New Health Economy”.

MedTech Intelligence: During an upcoming panel at AdvaMed, you will be expanding on the following: “Device manufacturers must decide whether to offer solutions or discrete products and understand the operating model implications associated with the decision in particular the partnership model necessary to provide solutions.” What exactly does this mean for manufacturers?

Brian Williams: They have a couple things to consider for first time:

• Medtech players have a new set of competitors and new entrants that are attacking healthcare from a different angle—technology, software and hardware companies that are bringing a faster innovation cycle to healthcare.
• The growing emergence of value and outcomes-based reimbursement schemes are putting pressure on their traditional products to define value more holistically—that being the outcome.

Thus far we’ve seen a migration in which medtech companies have traditionally had services as part of their offering (where they would train clinicians) to value-based outcomes and reimbursement models. I have to understand how the consumer is engaged, how they’re accessing healthcare (i.e., maybe not in the same critical settings, but elsewhere), and how I am enabling efficiency, cost savings and improved outcomes to the traditional customer (the provider) that I’ve sold to historically.

We’re seeing medtech companies shift from [providing just] the training and educational resources to layering capabilities on top of that (service-based offerings). We’ve seen 7 out of 10 [companies] start to offer service-based offerings, and it’s really an acknowledgement of the transformation that’s occurring. A smaller group (5 out of 10) say they need to offer customized solutions that might be independent of traditional product offerings. We think that’s a fundamental shift in understanding for device manufacturers. [Williams is referencing the report by PwC’s Health Research Institute, “Beyond the device: From producer to problem solver”]

MTI: Are different skills required based on this shift?

Williams: We think that device manufacturers will continue to need the skills that have made them successful, which are clinical differentiated products. In addition, medical device companies will need some new capabilities and skills, a fundamental one being the ability to collaborate or partner with other companies and providers. Few medtech companies are software companies, app developers or consumer-focused companies. There are new entrants with well-developed skills that lack the clinical insight and capabilities medtech companies offer. By collaborating and bringing their clinical knowledge to software, technology and consumer understanding, that collaborative space is where medtech companies will be able to capture value in addition to their product innovation skills.

Medtech companies will have to develop partnership and collaboration skills. They will have to develop new innovation tools and capabilities—to innovate faster; more holistically (not just the product but the things that are built around the product that help manage or minimize the onset of a condition); and within the operating model there will be a host of skills that need to be considered:

• How to package products, services and solutions together and offer those to market in a holistic way
• How to share economics with partners
• How to make the solutions turnkey for the consumer and the provider/partner
• How to deliver those products to market
• How to support the service once they’re in market

For example, if I have a partnership with a software company: How do I ensure that updates to the software, an app, that works with my device to help manage a disease, are done in a timely fashion and are compliant, and that the data are captured in a compliant way, but then provide back to me, the medical device manufacturer, insights that guide my product development and innovation efforts?

MTI: What challenges do medtech companies face in defining and capturing value beyond the intervention?

1. Williams: It touches on several aspects [challenges] of the conventional device business:
2. Defining who are my customers today and who could they be tomorrow. For example, as large retailers move into the primary care space (which could be a venue for early intervention or preventive care and also be used for readmission and compliance monitoring after the procedure), they represent potential new customers and also potential competitors for the service offering.
3. Data and analytics captured to inform on how to improve efficiency or effectiveness. For example, if my product is used within a surgical suite, how do I make that engagement more efficient and effective, [and ensure that] the data analytics captured from consumer devices and other tools pre- and post-intervention improve outcomes and lower total cost.
4. How do I optimize the clinical workflow. If we think of new care settings and retail being another new venue to access care, how does that information and interaction between a consumer and clinician inform the clinician that is responsible for the care of that patient? And, how does that inform the device manufacturer as they consider their partnership strategy and their product design?
5. Finally, patient centricity, or consumer centricity. The growth of high-deductible plans and the expectation that consumers will be more engaged and more responsible for their care is forcing device manufacturers to not only have the capability that exists today in terms of selling to a clinical market, but also an understanding of how those tools and solutions integrate into a consumer driven healthcare environment that we call the new health economy. It requires a very different set of skills and interfaces to understand how the consumer is assessing value, how they’re using products, and how that definition of value by the consumer is aligning to the value proposition that a medical device and diagnostic manufacturer might offer their traditional clinical customers.

MTI: How should companies be working with providers and other partners in the healthcare ecosystem to ensure they’re capturing and sharing the right data?

Williams: It represents an enormous set of challenges, because in healthcare there are a host of requirements around the use of data and consumer data. We also have to understand that consumers have become more digital in their consumption and engagement in platforms. Their willingness to share information with different parties is evolving. There needs to be an acknowledgement about the regulatory landscape, [along with] an understanding of the evolution of consumer attitudes around data, which connects directly to value and perceived value of any potential solution that this offers. Device manufacturers have to first develop the understanding of consumer appetites; second understand that the clinical data, which has been the sole lens that we have viewed healthcare historically, is not a complete view into the health of the individual. It’s only by understanding the continuum of an individual across the continuum of care that we can start to appreciate the kinds of data that could be helpful in understanding what products, services and solutions are ultimately beneficial to any one person with a particular disease. In that environment, there’s an awful lot of data being collected. For example, consumer devices that may say I took 12,000 steps today: That data point on its own is essentially meaningless; I may need to take 15,000 steps or 5,000 steps—there’s a great degree of variability of individuals relative to the health impact of one particular metric. It’s putting that metric in context of other metrics that the consumer may be using to manage their health or that may be recommended to them by caregivers or clinicians. [It’s about] having access to the broader data sets and then understanding which data points are needed at which point in time and to whom is that particular set of information of value and how much.

So, no one party will own the data. It’s accessing the data, understanding who is capturing what pieces of information, and then what data elements are used by which party at what points in time start to highlight the need for device manufacturers to establish these partnerships and to understand when and where it’s of value—that informs me of my value proposition as a device manufacturer.