Value-based care—the healthcare model designed to incentivize providers to improve patient recovery and reduce cost—is not news in California, an early adopter of the Affordable Care Act. The shift is also changing the approach to new-product adoption.
“[The Food and Drug Administration] approval means you’ve proved safety and efficacy. That’s no longer enough,” said Steve Maylish, chief commercial officer of Orange-based medical device product development and consulting firm Fusion Biotec Inc.
He said hospitals and physician practices are now taking a more systematic and evidenced-based approach to new technologies.
Real World
The rules of the game have changed, and medical device makers must plan for follow-on clinical trials to supply real-world evidence on their products to make them more marketable, said Providence St. Joseph Health Vice President of Supply Chain Justin Freed.
Healthcare supply chain management stocks providers’ needs and manages inventory. Freed said his role has grown in significance in the face of more and more payers tying reimbursement amounts to quality and cost performance.
That puts hospitals in the difficult situation of lowering operating and supply costs while continuing to improve patient recovery and satisfaction.
“It’s very real when we talk about outcome, and a big part of that is preventing patients from coming back to the hospital in the first 30 days after they are discharged,” Freed said.
Hospitals face a 30-day readmission penalty resulting in less money from Medicare.
“We look at it not just from a price perspective but the true value of cost reduction that the device provides across all aspects, [including] better recovery, reduced length of stay and a lower infection rate.”
Altura LLC Chief Executive Pete Fronte said he’s noticed an increased number of post-FDA approval clinical studies of drugs and devices. The Mission Viejo-based company works with healthcare organizations, research centers, and pharma, biotech and medical device companies to facilitate clinical studies, including patient recruitment and study implementation.
He said technologies are evaluated on their impact on patient recovery and hospital profitability, whether significant cost savings or additional revenue.
“Companies need to set aside budget for follow-on clinical studies as part of their product commercialization and marketing planning.”
He said it’s hard to include patient-recovery studies as part of a third-phase trial because, “what the FDA is looking for and what hospitals are looking for are different—the FDA, you just need to prove that the product is safe and that it works. But outcome data is more complex.”
Freed advised that “manufacturers have supply chain at the table early on” instead of going straight to a clinician or surgeon to market their products.
“Hospitals are definitely putting greater emphasis on [transparency on] all devices coming into hospitals, and we are trying to grow a forum to work with manufacturers and clinicians to understand the value that’s being pitched.”
Value Proposition
Irvine-based Modulated Imaging Inc. had value in mind when it positioned its light-based technology for patients with diabetes. The company’s proprietary spatial frequency domain imaging technology was developed by Chief Executive and Chief Technology Officer David Cuccia. Leveraging the concept that light absorbs and scatters differently for every wavelength, the technology uses “a thousand points of light,” Cuccia said, to penetrate and provide information on different biological tissues and materials’ properties, including the amount of oxygen in the blood.
“We looked at where [our technology] best fit, and it’s with early identification of diabetic foot ulcers,” said Vice President of Sales and Marketing Gary Marston. He said that while the condition can be diagnosed with a foot examination, currently available options don’t provide incentives for doctors. “Providers have several tests available, but they are time-consuming and have poor sensitivity, resulting in limited use,” he said.
Diabetic foot ulcers are caused by poor peripheral circulation and foot care. They’re difficult to heal and can lead to amputation.
“Medicare is doing the right thing moving into patient care, but for manufacturers like us, we are in a quandary because when we approach providers, we are asked if we have outcome data,” Marston said. He said the company sought provider partners early on and is working with several academic centers and Kaiser Permanente in Los Angeles on a few studies.
The company was originally housed in an incubator at the University of California-Irvine’s Beckman Laser Institute. In 2010, it launched the first generation Ox-Imager CS, which measures tissue health with a noncontact, light-based imaging system. In 2014, it expanded to its first commercial space in San Juan Capistrano. Fusion Biotec Chief Executive Bruce Sargeant helped Modulated with its second-generation Ox-Imager for detecting diabetic foot ulcers. He said the team designed the new version with the user in mind—the recent FDA emphasis on provider usability “focuses on reducing user errors.”
He said the device is smaller, easier to use and lower in price. The new device, the Clarifi Imaging System, received FDA clearance last month.
Collaboration
There’s no turning back from the value-based healthcare model, industry experts told the Business Journal. In 2015 the Centers for Medicare and Medicaid Services issued the Medicare Access and CHIP Reauthorization Act, which governs the Medicare payment system for providers via rewards to clinicians for value. The old fee-for-service model can encourage providers to add care, such as tests, procedures and inpatient stays, in order to generate more payments. It also gives bonus payments for participation in eligible alternative payment models, such as accountable care organizations and bundled payments. The models create more incentives for providers to participate in financial risk-sharing that ensures quality and better use of resources.
Currently, about 30% of all healthcare payments in the U.S. are tied to alternative payment models, according to an October report by the Health Care Payment Learning & Action Network. That’s projected to reach nearly 80% in five years.
Dr. David Armstrong, professor of clinical surgery at the University of Southern California and founder and co-director of the Southwestern Academic Limb Salvage Alliance at USC’s medical school, said “the average amount of time for [the school] to apply for a new device and have that be in our clinic is about six months.”
He said that as an individual clinician, there are technologies he’d like to get immediately, but that “it’s not a bad idea for our value analysis committee to evaluate these opportunities and see how they compare to existing data and the cost of available technology.”
Providers don’t want to buy in on a product without patient-recovery data, but the additional budget can be a strain for startup device companies. Armstrong said he believes the gap could be filled with a better alliance of academic institutions and private companies, including partnerships to co-develop devices and data.
