Kyle Forcier, life sciences expert and former supervisor at Johnson & Johnson, explains what obstacles that medtech needs to overcome, even in a golden era.
create jobs 51/ shutterstock.com
524089942
Medical & data concept
Revolutionary technology advancements, a new purchasing dynamic, and alternative payment structures are shaking up the medtech sector. As a result, manufacturers face new complexities — and opportunities.
To remain competitive, medtech companies must embrace innovation in their products and their processes. Legacy practices will no longer suffice. Success depends on leveraging and protecting data, optimising pricing models, and pivoting to meet rapidly changing customer demands.
Factors influencing the medtech industry
Several emerging trends are dramatically influencing medtech:
Technology advancements
We are entering the age of robotics and wearables. Health systems are making bigger investments in robotics, indicating larger-scale implementation. Surgical robots enable less invasive procedures and faster recoveries, and other healthcare-related use cases like physical rehabilitation are emerging.
The proliferation of biometric and wearable devices offers new avenues for collecting real-world health data that could enhance diagnoses, personalise treatments, and further medical research. At the same time, digital therapeutics and at-home diagnostic technologies are rapidly advancing. More care providers are exploring ways to incorporate these devices into their practice.
These and other technological advancements are changing what, where, and how devices are used in a clinical setting. Medtech manufacturers must cater to this growing need.
A shift from standalone products to platforms
For decades, medtech manufacturers sold individual devices. Now, many companies offer more comprehensive platform-based solutions that can be connected and integrated with other devices. Medical device platforms typically have an ecosystem of products, software, and services, requiring a new organisational structure and payment methods. Traditional offerings still dominate the market, but the sales of connected products are quickly growing.
Alternative pricing models
Medtech manufacturers are implementing a much wider variety of payment models. For example, connected devices allow companies to sell managed equipment services or equipment as a service.
Ambulatory surgery centres (ASCs) and other outpatient clinics perform about 80% of surgeries but lack the resources of large health systems. Medical device manufacturers must find ways to charge ASCs less money for equipment upfront while still maintaining margins. Some potential financing options include subscriptions or pay-per-procedure plans.
Value-based contracts are also gaining popularity. In this structure, equipment payment amounts are tied to patient health outcomes. This pricing trend is driven by the desire to improve care, but this model also helps manufacturers prove a medical device’s value to potential customers.
Data privacy concerns
New technology unlocks opportunities to improve patient care — but also creates data and privacy concerns. Wearables, robotics, and at-home diagnostics collect vast amounts of sensitive user information that, while useful, require extra security and careful data management processes. Manufacturers and providers must institute proper consent protocols, encryption, and access controls to ensure user privacy and prevent breaches.
Platform-based products provide connectivity that enhances functionality while also increasing access points for potential cybersecurity threats. Mitigating these vulnerabilities means implementing adequate security infrastructure, network monitoring, access controls, and data governance. Manufacturers must build their devices with these considerations in mind.
Revenue management challenges
The seismic shift in payment models brings complexities in pricing, coverage, profitability analysis, and billing. Subscription and pay-per-use models create less upfront income, impacting revenue recognition and financial planning. Outcome-based and value-based contracts introduce revenue uncertainty, as outcomes can be hard to predict. ASCs and other small providers demand different pricing than larger institutions, resulting in a wider range of price points and contract structures.
Traditional spreadsheet-based revenue management processes were not built to manage these unknowns and variabilities. Medtech companies must adopt new tools and approaches for revenue optimisation, such as AI and automation.
Managing alternative contract and payment structures requires significant data, much of which lives in different business units. AI-powered software can remove silos by automating data retrieval and consolidation, creating a comprehensive database accessible to all stakeholders.
The single source of truth enables finance teams to easily crosscheck contracts and customer eligibility for accurate invoicing. Using data analysis, businesses can also:
- Define pricing guidelines tailored to products, care settings, and patient segments.
- Analyse trends and product performance.
- Model the impact of various value-based contracts on profitability.
This insight illuminates business opportunities, enables price optimisation, and improves agility while also reducing workloads and errors. Spreadsheets cannot deliver these results.
Performance data collection hurdles
Value-based pricing hinges on data, but fragmented healthcare systems, inconsistent data formats, and privacy regulations present hurdles to gathering performance metrics. With the move to outcome-based models, manufacturers must plan for how to collect, analyse, and report on performance data while keeping it private and secure.
The effort will require collaboration with health systems and other partners to obtain the data, technology to consolidate the information, and advanced analytics to derive meaning. Generating accurate performance metrics will allow medtech companies to improve patient outcomes while also demonstrating their product value.
Looking to the future
Rapid improvements in technology and care delivery will drastically alter the future of medtech, and value-based contracts will become increasingly common. Medtech companies must build agile and efficient processes to seize new opportunities, adapt to changes, and optimise revenue.
