5 doomed meddevice strategies in 2012

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© TIGI 2012 All rights reserved 5 Medical Device Strategies Doomed to Fail in 2012 Presented by Gunter Wessels, Ph.D., MBA [email protected] @gunterwessels on twitter Partner, TIGI February 29, 2012 MedDevice Group

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Webinar slides for "The 5 MedDevice Strategies Doomed to Fail in 2012" presented by Gunter Wessels, Ph.D. MBA of TIGI on 2-29-12

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Page 1: 5 Doomed MedDevice Strategies in 2012

© TIGI 2012 All rights reserved

5 Medical Device Strategies Doomed to Fail in 2012

Presented by Gunter Wessels, Ph.D., MBA

[email protected]@gunterwessels on twitter

Partner, TIGI

February 29, 2012MedDevice Group

Page 2: 5 Doomed MedDevice Strategies in 2012

© TIGI 2012 All rights reserved

Failure Defined

• Sluggish growth

• Market share decline

• Price/margin erosion

• Commoditization

• Diminished profitability

Page 3: 5 Doomed MedDevice Strategies in 2012

© TIGI 2012 All rights reserved

The Big 5

1. Pricing Confidentiality Agreements

2. Additional Salespeople

3. Geographic Market Assignment

4. Appeal to Physician Preference

5. Feature-Advantage-Benefit Sales and Marketing

Page 4: 5 Doomed MedDevice Strategies in 2012

© TIGI 2012 All rights reserved

1. Pricing Confidentiality Agreements

• Price Benchmarking

• Group Purchasing Organizations

Page 5: 5 Doomed MedDevice Strategies in 2012

© TIGI 2012 All rights reserved

Competing in Healthcare in 2012

Maximize

Maximize

Incr

ease

Off

set

Minimize

Page 6: 5 Doomed MedDevice Strategies in 2012

© TIGI 2012 All rights reserved

1. Pricing Confidentiality Agreements

Price Benchmarking

• Group Purchasing Organizations

• Consulting Organizations

• Federal Supply Schedule

Page 7: 5 Doomed MedDevice Strategies in 2012

© TIGI 2012 All rights reserved

1. Pricing Confidentiality Agreements

REMEDY:

• Controlled Pricing Policy

• Justified Product/Service Variants

• Specified GPO Agreements

• At-Risk Contracts

Page 8: 5 Doomed MedDevice Strategies in 2012

© TIGI 2012 All rights reserved

2. Additional Salespeople

• Market Consolidation

• Mergers & Acquisitions

Page 9: 5 Doomed MedDevice Strategies in 2012

© TIGI 2012 All rights reserved

U.S. Healthcare Spending$2.5 Trillion in 2009 and 2011

Investment $156B

Public Health $77B

Administration $163B

Durable Medical Equipment $78B

Home Healthcare $68B

Nursing Care Facilities $137B

Rx Drugs $250B

Dental & Other Care $292B Physician & Clinical Services $506B

Hospital Care $759B

Page 10: 5 Doomed MedDevice Strategies in 2012

© TIGI 2012 All rights reserved

Persistent Downward Trend

Number of Beds and Beds per 1,000 population

Page 11: 5 Doomed MedDevice Strategies in 2012

© TIGI 2012 All rights reserved

Stable

AHA Hospital Market5795 Registered Hospitals in 2009

Consolidating

Declining

Consolidating

Page 12: 5 Doomed MedDevice Strategies in 2012

© TIGI 2012 All rights reserved

Systemization in Acute Care

Number of U.S. Hospitals in Health Systems

Page 13: 5 Doomed MedDevice Strategies in 2012

© TIGI 2012 All rights reserved

3. Geographic Market Segmentation

Page 14: 5 Doomed MedDevice Strategies in 2012

© TIGI 2012 All rights reserved

3. Geographic Market Segmentation

Centralized vs. Local Control

• CMS rule draft favors centralized control

• Opposed by MD and RN groups; Favored by AHA and FACHE

Page 15: 5 Doomed MedDevice Strategies in 2012

© TIGI 2012 All rights reserved

Medicare Hospital Market

Critical Access Hospitals1290 Facilities

3.8% of Discharges

Source: Medpac 2011 based on 2009 Discharge and Facility Count Data

Large Urban1310 Facilities

45% of Discharges

Other Urban1092 Facilities

38% of Discharges

Rural Referral124 Facilities

4% of Discharges

Sole Community394 Facilities

6% of Discharges

Medicare Dependent195 Facilities

6% of Discharges

Rural <50 Beds102 Facilities

<1% of Discharges

Rural >50 Beds153 Facilities

2% of Discharges

4660 Medicare Providers in 2009

Page 16: 5 Doomed MedDevice Strategies in 2012

© TIGI 2012 All rights reserved

The Rise of Accountable Care

ACO Success Depends on Relationships and Power

“Appropriateness” of intervention & guiding Patient utilization

Cost vs Outcome of intervention

Speciality Group

Primary Care

PhysicianGroup

Hospital

Tertiary Care

Facility

Mental Health

Services

Home Health

Services

Multi-Speciality Group Practice

Page 17: 5 Doomed MedDevice Strategies in 2012

© TIGI 2012 All rights reserved

The Rise of Accountable Care

Beds/ 1,000 population Prominent ACOs

Source: Premier GPO News releases

Page 18: 5 Doomed MedDevice Strategies in 2012

© TIGI 2012 All rights reserved

ACO Distribution

ACO’s by State ACO’s by MSA

Source: Levitt Partners Analysis

Page 19: 5 Doomed MedDevice Strategies in 2012

© TIGI 2012 All rights reserved

ACOs are a “New Layer of Healthcare”

• An unseen care coordinating organization

• Built upon a powerful Physician group

• How will hospital executives react?

• If they run a tertiary facility

• If they run a community facility

• If they are a for-profit health system

• If they are a critical access facility

Evolved Care Delivery System

Page 20: 5 Doomed MedDevice Strategies in 2012

© TIGI 2012 All rights reserved

2. More Salespeople & 3. Geographic Market Segmentation

REMEDY:

• Integrated Coverage

• Corporate Accounts

• Flexible Resources

• Mobile Hyper-specialists

• Clinical, Operational, and Financial Focus

Page 21: 5 Doomed MedDevice Strategies in 2012

© TIGI 2012 All rights reserved

4. Appeal to Physician Preference

• Ray of Light for the Physician Payment Sunshine Act--Forbes

Page 22: 5 Doomed MedDevice Strategies in 2012

© TIGI 2012 All rights reserved

Physician Sunshine Act 2011

• Mandatory reporting of “Transfers of Value”

• Manufacturers and GPOs report

• Meals, travel, speaker fees etc.

• Includes Physician Owned Distributors

• Penalties are Fines for non-reporting and inaccurate or incomplete reporting

• Implementation delayed until 2012

Page 23: 5 Doomed MedDevice Strategies in 2012

© TIGI 2012 All rights reserved

Physician Sunshine Act 2011

• General Report Contents

• Name, Date, Associated Device, Drug etc.

• Type of contribution, including Charitable

• Anything over $10 is reported

• Physician Owned Distributors Reports

• Ownership attestation

• Investment disclosure

Page 24: 5 Doomed MedDevice Strategies in 2012

© TIGI 2012 All rights reserved

Physician Sunshine Act 2011

FINES

• Normal Failure to Report

• Minimum $1,000; Maximum $10,000 for each instance

• Maximum of $150,000 for annual failure to report

• Knowing Failure to Report

• Minimum $10,000 and Maximum $100,000 for each instance

• Maximum $1,000,000 annual failure to report

Page 25: 5 Doomed MedDevice Strategies in 2012

© TIGI 2012 All rights reserved

4. Appeal to Physician Preference

REMEDY

• Evidence-based Influencing

• IDN/IHN Focus

• Selling Economic Value

• GPO contracting and coverage

• Revised account management

Page 26: 5 Doomed MedDevice Strategies in 2012

© TIGI 2012 All rights reserved

5. Feature-Advantage-Benefit

Page 27: 5 Doomed MedDevice Strategies in 2012

© TIGI 2012 All rights reserved

REMEDY: A Balanced Approach

Page 28: 5 Doomed MedDevice Strategies in 2012

© TIGI 2012 All rights reserved

REMEDY: What are the Hurts

ClinicalUtility

OperationalEfficiency

FinancialPerformance

Department

Allocated Revenues and

Expenses

Equipment, Facilities,

Technology

Evidence-Based Medicine

Service Line

Favorable Market Conditions

Community Outreach and

Marketing

Definition of Services

Facility

Adequate EBITDA Margin

Staffing Skill-Mix Required

MD/RN/AH

Growing or Reducing

Services Offered

Capitalization, Debt Service,

Leverage, Acquisitions

Resource Coordination

Care Coordination and

Service Line Portfolios

IDN/System

Market Power Aggregation with

Suppliers and Payers

Shared Services and Process Outsourcing

Population Management

and Cooperation

ACO/Network

Page 29: 5 Doomed MedDevice Strategies in 2012

© TIGI 2012 All rights reserved

What to do...

1. Upgrade skills: Business Acumen, Evidence-Based Medicine, Salesmanship, RFP Strategy

2. Update the playbook: Corporate Accounts, GPO Contracts, Coverage Models

3. Revise the forecasts: Plan for Rebuilding, Customer Attrition, Margin Compression

4. Assess and Develop Talent: Specialists, Generalists, Managers, and Support

5. Commercialize Innovations: New Care Delivery Models, Improved Patient Flow, Increased Quality

Page 30: 5 Doomed MedDevice Strategies in 2012

© TIGI 2012 All rights reserved

Questions

Page 31: 5 Doomed MedDevice Strategies in 2012

© TIGI 2012 All rights reserved

Use Code: “2012MedDevice”

• $500 credit on a TIGI course

• $500 credit on a TIGI consultation

• A Hospital Clinical, Operational and Financial Profile Scorecard Report (Free)

As a participant today:

Page 32: 5 Doomed MedDevice Strategies in 2012

© TIGI 2012 All rights reserved

Thank You

Gunter Wessels, Ph.D. MBA

Partner & Healthcare Practice Principal

[email protected]

@gunterwessels on twitter

www.tigi.net

813-968-0070