2011 0406 Making Money By Creating Value In Healthcare Webinar

The medical device industry’s most trusted source for professional online training.

Wednesday, April 6h, 2011

MAKING MONEY BY
CREATING VALUE IN HEALTHCARE
-OR –

WHY INDUSTRY WILL REVOLUTIONIZE HEALTHCARE

A WMDO informational webinar
Presented by KARIN ROOF, M.B.A., M.S.
Principal, MedLinX MedTech Consulting, LLC

The webinar will begin in a few moments. Please wait.

Copyright © 2011 wmdo.org

Healthcare is Screaming for Change

Where Will Effective Solutions Come From?

Sources: http://www.cms.gov/NationalHealthExpendData/02_NationalHealthAccountsHistorical.asp; www.santarosaconsulting.com/SantaRosaTeamBlog/
post/2009/12/11/Health-Care-Delivery-In-The-United-States-e28093-Feverish-Pace-or-Just-Suffering-From-Fever.aspx


Who Will Fix It?


Outline for Today

Making Money by Creating
Value in Healthcare

 Value in Healthcare
 The Need for Solutions
 Technology & Market Trends
 Focus Areas: Chronic Disease
& Prevention
 Why Industry?


VALUE IN THE NEED FOR TECHNOLOGY & KEY AREAS WHY
1 HEALTHCARE 2 SOLUTIONS 3 MARKET TRENDS 4 FOR FOCUS 5 INDUSTRY?

Value in Healthcare

Source: New York, 23 April 2009. http://www.ey.com/GL/en/Newsroom/News-releases/Media---News-Release---Failing-to-demonstrate-value-of-
innovation-is-top-risk-facing-life-sciences-sector--according-to-Ernst---Young



Used to be…

See a Develop a
Need Product



Creating Value in
Healthcare is Cost
Complicated… Complex
Sophisticated
Clinical
Technologies
Needs

HealthCare Regulatory
Reform Environment

New
Comparative
Overwhelmed
Effectiveness
Customers
Research
Quality -
Criteria
Technical &
Clinical



Unique Requirements: Clinical / Regulatory



What is Value?

In healthcare lingo, it is often referred to as
Cost / Benefit



Key Problems in the U.S.

 C-O-S-T The four letter word in U.S. Healthcare.

 Pharma & MedTech Tech are NOT the direct culprits

 Inferior results, in spite of high spending & high tech

 Large % of the population in uninsured, making access to
healthcare problematic



Growth in US Healthcare Expenses is Unsustainable
In 2009, the US spent $2.5 trillion on health care, representing 17.3% of the GDP, up from 16.2% in 2008.

Sources: http://stats.oecd.org/Index.aspx?DataSetCode=HEALTH ; http://en.wikipedia.org/wiki/Health_care_in_the_United_States.


It’s Healthcare Delivery, not Technology, That Drives Cost…
2008 U.S. Health Expenditure: $2.3 trillion ($billions)
$800
$700
$600
$500
$400
$300
$200
$100
$-

American Well: The Doctor Will E-See You Now CASES | ELIE OFEK, RON LAUFER | MAR 30, 2010.



Healthcare Delivery vs. Drugs & MedTech
2008 U.S. Health Expenditure: $2.3 trillion ($billions)
$2,500

87% of Total
$2,000

$1,500

Technology
$1,000 represents
3% of Total

$500
13% of Total

$-
HC Delivery Drugs & MedTech

American Well: The Doctor Will E-See You Now CASES | ELIE OFEK, RON LAUFER | MAR 30, 2010.



Spending Alone Does not Increase Value

More spending
does not equal
more quality



How Did We Get Here?



4 Models for How Healthcare is Paid For

National Health Insurance Socialized Medicine

A gov’t payer that citizens pay into, with Healthcare financed & provided by gov’t,
private providers. (Canada.) through tax payments. No medical bills;
gov’t is sole payor. (Great Britain,
Scandinavia, Italy, Spain, U.S. VA
System.)
In the U.S.: A mixed bag… but
funding has essentially provided
unconstrained resources for
healthcare, pharma & medtech

CONSUMER PAYS Out-of-Pocket
Private Health Insurance Patient pays for care. (Poorest
countries, like Cambodia, rural India.)
Plans funded by employers and
employees through payroll deductions,
but cover everyone. (Germany, France,
Belgium, Switzerland, Japan, Latin
America)

Source: T.R. Reid, The Healing of America: A Global Quest for Better, Cheaper, and Fairer Health Care. 2009, The Penguin Press.


The U.S. Healthcare Payment System: Fragmented

Working < 65 – Private Health Insurance Military Personnel, V.A., or Native
Private health insurance plans funded by Americans – Socialized Medicine
employers and employees through payroll Healthcare financed & provided by the
deductions. (Like Europe, but the system doesn’t gov’t, through tax payments. No medical
cover all.) bills; gov’t is sole payer. (Like UK)

>65 Retired – Medicare “National Health 45 million uninsured Americans - Out-of-
Insurance” Pocket (16%)
Gov’t payer that citizens pay into, with private Patient pays for care. (Poorest countries, like
providers. (Like Canada) Cambodia or rural India)
Source: T.R. Reid, The Healing of America: A Global Quest for Better, Cheaper, and Fairer Health Care. 2009, The Penguin Press.


Key Trends are Driving Future Direction

 U.S. Healthcare Reform

 Comparative Effectiveness Research

 Health Information Technology

 Consumer Driven Demand

 Shift in Innovation to Emerging Markets



Healthcare Reform in the U.S.: What it Means

 Individual mandate: everyone
Expand must be insured.
coverage  2014: Insurance “exchanges”
(MA, OR models).

 To “Accountable Care”
and Healthiness
Change
Insurers
Behavior

 More customers, more restrictions
 Better drug benefits; Less to Medicare
 No recission, denying pre-existing
Advantage Medicare / conditions, lifetime limits, and
 Ounce of Prevention – no out-of-pocket Medicaid limited rate increases
 LTC & coordination between Medicare & changes
Medicaid

Source: LANDMARK, The Inside Story of America’s New Health-Care Law and What It Means for Us All, The Washington Post, 2010.


Paying For It: Proposed $938 billion over 10 years

Taxes
 Higher Medicare payroll tax: 1.45  2.35% for >$200k
 New Medicare tax on investment income  3.8%
 New tax on “Cadillac” plans

Spending Cuts
 Eliminate excess Medicare
Penalties & fees Advantage plans
 For employers not providing health insurance  Slow increases in Medicare
 Pharma, med device, and insurance co. fees payment rates

Source: LANDMARK, The Inside Story of America’s New Health-Care Law and What It Means for Us All, The Washington Post, 2010.


Comparative Effectiveness Research (CER)

Provide evidence-based data to inform decision-making for patients, providers,
and payers
What • Compares benefits and risks of two or more therapies
• Prioritizes treatments for review with high cost and concerns about
evidence, value & overutilization
More value for health care dollar
Why • U.S. has more spending than any other country – but poorer outcomes
• Improve current spending – and slow spending growth
Multi-year, multi-billion dollar effort in U.S.
• Progressive expansion of CER framework expected to link
When & How reimbursement to value evidence
• CER likely to evolve over 3-7 year timeframe to increase standards
In place & expanding around the world (UK, FR, Australia, Brazil, U.S.)
Where (Considered in Japan, China)

Source: Kenneth Stein address, LifeScience Alley Annual Conference, Dec. 8th 2010.


Initial National Priorities for CER

Source: Initial Priorities for Comparative Effectiveness Research, IOM, 2009. http://books.nap.edu/openbook.php?record_id=12648&page=100


The U.S. is Implementing Health Information Technology (HIT)

HIT-Enabled Health Reform
Achieving Meaningful Use

2009 2011 2013 2015
HIT-Enabled Health Reform
Meaningful Use Criteria

HITECH
Policies 2011 Meaningful
Use Criteria
(Capture/Share
data) 2013 Meaningful
Use Criteria
(Advanced care 2015 Meaningful
process with Use Criteria
decision support) (Improved
Outcomes)



Where is payment for Healthcare going?

High deductible insurance Developing nations without
plans insurance systems

CONSUMERS
PAY



Where Is MedTech Innovation Going? Shifting to Emerging Markets



Price Waterhouse Cooper’s
Medical Technology Innovation Scorecard

The race for global leadership - assessment of nine countries’ capacity
and capability for medical technology innovation: Brazil, China,
France, Germany, India, Israel, Japan, United Kingdom, U.S.

Key findings:
The medtech innovation ecosystem, long centered in the US, is
moving offshore.

US consumers aren’t always the first to benefit from new medical
technology and could eventually be last.

The nature of innovation is changing as developing nations become
the leading markets for smaller, faster, more affordable devices that
enable delivery of care anywhere at lower cost.

Source: http://www.pwc.com/us/en/health-industries/health-research-institute/innovation-scorecard/index.jhtml



PWC Innovation Scorecard: U.S. vs. China

5.5

Source: http://www.pwc.com/us/en/health-industries/health-research-institute/innovation-scorecard/index.jhtml


Two Hot Focus Areas

 Chronic Disease Management

 Prevention



Where is the $? What can Technology Impact?

Chronic Disease Burden*:
• > 100 million Americans
have Diabetes, Kidney
Disease, Hypertension,
and/or Cardiovascular
Disease
• 2 of 3 Americans are
overweight; 1 in 5 is Obese
• Chronic diseases account
for 96% of Medicare
Spending
• Complications from chronic
disease account for ~75%
of US healthcare spending!

Source: An Unhealthy America: The Economic Burden of Chronic Disease. Milken Institute, Oct. 2007.


Chronic Disease Management Example

Congestive Heart Failure

1 in 5 Americans >40 will develop
Heart Failure
Expensive chronic disease
with repetitive hospital visits
Management metrics can prevent
hospitalizations and increase Quality
of Life



Prevention is another Hot New Area in Healthcare



Why Industry? Innovation is the Key to Success

 Money is no longer an unlimited resource in healthcare.

 Reducing the cost of healthcare in all markets, but especially
uninsured and emerging markets, is key.

 Cost Effectiveness Research will drive innovation that is
VALUABLE in terms of Benefit / Cost.

 Innovation will migrate to lower-cost, efficient solutions that utilize
wireless and internet technologies.

 Industry, not government, is capable of innovating market-
based solutions that creatively satisfy stakeholder needs.



Example: Wireless Technology

QualCom’s

Source: http://www.westwirelesshealth.org

Objective for Industry


Outline for Today

Making Money by Creating
Value in Healthcare
Conclusion – THANK YOU

 Value in Healthcare
 The Need for Solutions
 Technology & Market Trends
 Focus Areas: Chronic Disease
& Prevention
 Why Industry?



Questions & Answers

Please type your question in the chat box located to the lower left of your screen.

Due to time restrictions, we can not guarantee an answer to every question during this session.
Please note that many questions will be answered by following the more extensive courses at WMDO.
Thank you for your comprehension.



Be sure to check out the online course:

Creating Value in Healthcare
WMDO has created especially for medical device professionals the online
course: “Creating Value in Healthcare course” to get you up and on the right
track now.

This course is designed to orient learners to the most fundamental sources of
value in healthcare. It provides high level context on healthcare customers /
stakeholders and the care continuum. Understanding at this high level is
intended to enable industry to maximize the value their products/services
provide, and hence provide the basis for solid industry positioning for a
profitable long-term business model. By briefly examining examples of
companies who have succeeded and failed in creating value, it is hoped that
learners will prevent making similar mistakes themselves.

Available now at:

www.wmdo.org


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