Regardless what shape health policy takes under the new administration, the pressure on health systems to deliver better care for more patients at a lower cost will remain. Shared accountability may be the only way the healthcare system can truly succeed.
All stakeholders must be accountable, including suppliers. Hospitals want to know: will suppliers be there to prevent their fall?
Many suppliers – including those that long-benefitted from charging premiums for incremental technology that may or may not improve care – are responding to customer needs and embracing shared-risk contracts. This blog post is devoted to a few of the vendors that are stepping up and embracing shared accountability in a big way.
Disclaimers: I’m not saying they’re perfect. But the companies profiled below are debuting the type of shared-risk contracts hospitals are asking for. And I believe we can learn something from their ventures.
Prodigo Solutions and Stryker Corporation are both Inprela clients.
Medtronic was one of the first med tech giants to come to the table with a value-based offering. In 2013, they announced a Hospital Solutions group that would target operational efficiencies and cost savings in the cardiology department of hospitals. The offering has continued to expand. According to the company website, the business model is “based on taking an active role with long-term partnerships that hinge on risk- and value-sharing methods as well as predictable ‘fee-per-procedure’ models.”
Stryker Corporation’s CEO Kevin Lobo acknowledged last spring the company needed to take a radical approach to change the all-too-familiar narrative in the med tech industry in a press interview: “’In the old days, we were a feature benefit company just like everyone else—make me a better one of these and charge a premium price,’ he said of what innovation meant in the recent past. ‘Those days are over.’” The company announced last year it will refund the purchase price of products designed to prevent the occurrence of retained surgical sponges during surgery if they don’t live up to their promises. Essentially, Stryker will share accountability for poor outcomes with its hospital partners.
Shared-risk models aren’t just for the giants. Smaller, innovative companies are banking on value-based offerings translating into big business.
Health Catalyst announced a deal with Allina Health in 2016 to provide data warehousing, analytics and outcomes improvement technology and services. Twenty percent of Health Catalyst’s potential revenue is dependent upon its ability to deliver better outcomes and lower costs at Allina. According to press reports, for every $8 of savings or “revenue enhancement” Health Catalyst can deliver to Allina, the technology company will earn $2.
Prodigo Solutions is targeting a top area of spend leakage in health systems – supply contract noncompliance. The average IDN (integrated delivery network) is leaving millions of dollars in volume discounts and rebates on the table. The Pittsburgh-based company helps IDNs and health systems optimize contract compliance and drive significant supply chain cost savings through software products and technology services. If health systems don’t save what’s projected, they don’t pay a dime.
We hope this is just the beginning. The healthcare system has a lot to gain from a no-holds-bar approach to innovation and the reinvention of business models being explored by entrepreneurial companies and med tech giants alike. Your customers are asking for it; how will you share in their risk?