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5 Medical Device Strategies
  Doomed to Fail in 2012
             Presented by
      Gunter Wessels, Ph.D., MBA
          gunter@mytigi.net
       @gunterwessels on twitter
             Partner, TIGI

          February 29, 2012
          MedDevice Group
            © TIGI 2012 All rights reserved
Failure Defined

•   Sluggish growth
•   Market share decline
•   Price/margin erosion
•   Commoditization
•   Diminished
    profitability


                      © 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


                   © TIGI 2012 All rights reserved
1. Pricing Confidentiality Agreements


•   Price Benchmarking
     •   Group Purchasing Organizations




                    © TIGI 2012 All rights reserved
Competing in Healthcare in 2012

                                 Maximize




                                              Offset
              Minimize




            © TIGI 2012 All rights reserved
1. Pricing Confidentiality Agreements


Price Benchmarking
  •   Group Purchasing Organizations
  •   Consulting Organizations
  •   Federal Supply Schedule




                   © TIGI 2012 All rights reserved
1. Pricing Confidentiality Agreements

REMEDY:
  •   Controlled Pricing Policy
  •   Justified Product/Service Variants
  •   Specified GPO Agreements
  •   At-Risk Contracts




                    © TIGI 2012 All rights reserved
2. Additional Salespeople


•   Market Consolidation
•   Mergers & Acquisitions




                   © TIGI 2012 All rights reserved
U.S. Healthcare Spending
                     $2.5 Trillion in 2009 and 2011
                                Investment $156B
                       Public Health $77B

              Administration $163B                                                  Hospital Care $759B


Durable Medical Equipment $78B

      Home Healthcare $68B


Nursing Care Facilities $137B




               Rx Drugs $250B




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




                                         © TIGI 2012 All rights reserved
Persistent Downward Trend

Number of Beds and Beds per 1,000 population




                 © TIGI 2012 All rights reserved
AHA Hospital Market
 5795 Registered Hospitals in 2009




          © TIGI 2012 All rights reserved
Systemization in Acute Care

Number of U.S. Hospitals in Health Systems




              © TIGI 2012 All rights reserved
3. Geographic Market Segmentation




             © 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
                              © TIGI 2012 All rights reserved
Medicare Hospital Market
                           4660 Medicare Providers in 2009
      Critical Access Hospitals                                               Large Urban
             1290 Facilities                                                  1310 Facilities
          3.8% of Discharges                                                45% of Discharges




 Rural >50 Beds
  153 Facilities
2% of Discharges

 Rural <50 Beds
  102 Facilities
<1% of Discharges
                                                                             Other Urban
   Medicare Dependent                                                       1092 Facilities
      195 Facilities                                                      38% of Discharges
    6% of Discharges

                    Sole Community
                      394 Facilities
                    6% of Discharges          Rural Referral
                                               124 Facilities
                                             4% of Discharges



                                       © TIGI 2012 All rights reserved

                    Source: Medpac 2011 based on 2009 Discharge and Facility Count Data
The Rise of Accountable Care

                                                           Tertiary
Speciality
                                                            Care
 Group
                                                           Facility

 Primary
                                                            Mental
  Care                  Multi-Speciality
                                                            Health
Physician               Group Practice
                                                           Services
 Group

                                                            Home
Hospital                                                    Health
                                                           Services


     ACO Success Depends on Relationships and Power
“Appropriateness” of intervention & guiding Patient utilization
               Cost vs Outcome of intervention
                         © TIGI 2012 All rights reserved
The Rise of Accountable Care

Beds/ 1,000 population                                  Prominent ACOs




                      © TIGI 2012 All rights reserved

                     Source: Premier GPO News releases
ACO Distribution
ACO’s by State                                        ACO’s by MSA




                    © TIGI 2012 All rights reserved

                 Source: Levitt Partners Analysis
Evolved Care Delivery System

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




                                                  © 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

                     © TIGI 2012 All rights reserved
4. Appeal to Physician Preference

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




                  © 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

                      © 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

                       © 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

                        © 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

                  © TIGI 2012 All rights reserved
5. Feature-Advantage-Benefit




          © TIGI 2012 All rights reserved
REMEDY: A Balanced Approach




          © TIGI 2012 All rights reserved
REMEDY: What are the Hurts
                 Department         Service Line                       Facility        IDN/System           ACO/Network

                                                                                     Care Coordination        Population
                                                                 Growing or
      Clinical   Evidence-Based      Definition of                                         and               Management
                                                              Reducing Services
                    Medicine          Services                                         Service Line              and
       Utility                                                    Offered
                                                                                         Portfolios          Cooperation




                   Equipment,        Community                  Staffing Skill-Mix                          Shared Services
 Operational                                                                             Resource
                    Facilities,     Outreach and                    Required                                 and Process
                                                                                        Coordination
  Efficiency       Technology        Marketing                    MD/RN/AH                                    Outsourcing




                                                                                                             Market Power
                                                                                     Capitalization, Debt
    Financial Allocated Revenues   Favorable Market           Adequate EBITDA                               Aggregation with
                                                                                     Service, Leverage,
                                                                                                             Suppliers and
Performance and Expenses              Conditions                  Margin
                                                                                        Acquisitions
                                                                                                                Payers




                                               © 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

                      © TIGI 2012 All rights reserved
Questions




  © TIGI 2012 All rights reserved
As a participant today:

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)




                      © TIGI 2012 All rights reserved
Thank You

  Gunter Wessels, Ph.D. MBA

  Partner & Healthcare Practice Principal

  gunter@mytigi.net

  @gunterwessels on twitter

  www.tigi.net

  813-968-0070




  © TIGI 2012 All rights reserved

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5 Doomed MedDevice Strategies in 2012

  • 1. 5 Medical Device Strategies Doomed to Fail in 2012 Presented by Gunter Wessels, Ph.D., MBA gunter@mytigi.net @gunterwessels on twitter Partner, TIGI February 29, 2012 MedDevice Group © TIGI 2012 All rights reserved
  • 2. Failure Defined • Sluggish growth • Market share decline • Price/margin erosion • Commoditization • Diminished profitability © TIGI 2012 All rights reserved
  • 3. 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 © TIGI 2012 All rights reserved
  • 4. 1. Pricing Confidentiality Agreements • Price Benchmarking • Group Purchasing Organizations © TIGI 2012 All rights reserved
  • 5. Competing in Healthcare in 2012 Maximize Offset Minimize © TIGI 2012 All rights reserved
  • 6. 1. Pricing Confidentiality Agreements Price Benchmarking • Group Purchasing Organizations • Consulting Organizations • Federal Supply Schedule © TIGI 2012 All rights reserved
  • 7. 1. Pricing Confidentiality Agreements REMEDY: • Controlled Pricing Policy • Justified Product/Service Variants • Specified GPO Agreements • At-Risk Contracts © TIGI 2012 All rights reserved
  • 8. 2. Additional Salespeople • Market Consolidation • Mergers & Acquisitions © TIGI 2012 All rights reserved
  • 9. U.S. Healthcare Spending $2.5 Trillion in 2009 and 2011 Investment $156B Public Health $77B Administration $163B Hospital Care $759B Durable Medical Equipment $78B Home Healthcare $68B Nursing Care Facilities $137B Rx Drugs $250B Dental & Other Care $292B Physician & Clinical Services $506B © TIGI 2012 All rights reserved
  • 10. Persistent Downward Trend Number of Beds and Beds per 1,000 population © TIGI 2012 All rights reserved
  • 11. AHA Hospital Market 5795 Registered Hospitals in 2009 © TIGI 2012 All rights reserved
  • 12. Systemization in Acute Care Number of U.S. Hospitals in Health Systems © TIGI 2012 All rights reserved
  • 13. 3. Geographic Market Segmentation © TIGI 2012 All rights reserved
  • 14. 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 © TIGI 2012 All rights reserved
  • 15. Medicare Hospital Market 4660 Medicare Providers in 2009 Critical Access Hospitals Large Urban 1290 Facilities 1310 Facilities 3.8% of Discharges 45% of Discharges Rural >50 Beds 153 Facilities 2% of Discharges Rural <50 Beds 102 Facilities <1% of Discharges Other Urban Medicare Dependent 1092 Facilities 195 Facilities 38% of Discharges 6% of Discharges Sole Community 394 Facilities 6% of Discharges Rural Referral 124 Facilities 4% of Discharges © TIGI 2012 All rights reserved Source: Medpac 2011 based on 2009 Discharge and Facility Count Data
  • 16. The Rise of Accountable Care Tertiary Speciality Care Group Facility Primary Mental Care Multi-Speciality Health Physician Group Practice Services Group Home Hospital Health Services ACO Success Depends on Relationships and Power “Appropriateness” of intervention & guiding Patient utilization Cost vs Outcome of intervention © TIGI 2012 All rights reserved
  • 17. The Rise of Accountable Care Beds/ 1,000 population Prominent ACOs © TIGI 2012 All rights reserved Source: Premier GPO News releases
  • 18. ACO Distribution ACO’s by State ACO’s by MSA © TIGI 2012 All rights reserved Source: Levitt Partners Analysis
  • 19. Evolved Care Delivery System 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 © TIGI 2012 All rights reserved
  • 20. 2. More Salespeople & 3. Geographic Market Segmentation REMEDY: • Integrated Coverage • Corporate Accounts • Flexible Resources • Mobile Hyper-specialists • Clinical, Operational, and Financial Focus © TIGI 2012 All rights reserved
  • 21. 4. Appeal to Physician Preference • Ray of Light for the Physician Payment Sunshine Act-- Forbes © TIGI 2012 All rights reserved
  • 22. 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 © TIGI 2012 All rights reserved
  • 23. 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 © TIGI 2012 All rights reserved
  • 24. 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 © TIGI 2012 All rights reserved
  • 25. 4. Appeal to Physician Preference REMEDY • Evidence-based Influencing • IDN/IHN Focus • Selling Economic Value • GPO contracting and coverage • Revised account management © TIGI 2012 All rights reserved
  • 26. 5. Feature-Advantage-Benefit © TIGI 2012 All rights reserved
  • 27. REMEDY: A Balanced Approach © TIGI 2012 All rights reserved
  • 28. REMEDY: What are the Hurts Department Service Line Facility IDN/System ACO/Network Care Coordination Population Growing or Clinical Evidence-Based Definition of and Management Reducing Services Medicine Services Service Line and Utility Offered Portfolios Cooperation Equipment, Community Staffing Skill-Mix Shared Services Operational Resource Facilities, Outreach and Required and Process Coordination Efficiency Technology Marketing MD/RN/AH Outsourcing Market Power Capitalization, Debt Financial Allocated Revenues Favorable Market Adequate EBITDA Aggregation with Service, Leverage, Suppliers and Performance and Expenses Conditions Margin Acquisitions Payers © TIGI 2012 All rights reserved
  • 29. 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 © TIGI 2012 All rights reserved
  • 30. Questions © TIGI 2012 All rights reserved
  • 31. As a participant today: 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) © TIGI 2012 All rights reserved
  • 32. Thank You Gunter Wessels, Ph.D. MBA Partner & Healthcare Practice Principal gunter@mytigi.net @gunterwessels on twitter www.tigi.net 813-968-0070 © TIGI 2012 All rights reserved

Editor's Notes

  1. Great to be here.Thank you to MedDevice and Joe Hage2012 and beyond are going to be challengingWe’ve noticed some responses and they’re not goodWe did a poll and we’re going to dig into not only what, but why
  2. Group our discussion of 2 and 3—especially in the remedy
  3. Big deal, and could become illegalPurpose for a confidentiality agreement—manage special casesThis has become a dominant practice and allegations of discriminationSometimes these devices get charged directly to medicare…and they’re seeing different prices
  4. Range is staggering for the same device
  5. ConsolidationLess call points, less decision makersHigher