Measuring Value of Medical Technology vs. Cost Neil Fraser President, Medtronic of Canada Chair, Ivey Centre for Health Innovation & Leadership Advisory Council
Some Definitions Health Care System Innovation Value
Health and Health Care: WHO definition
Health is a state of complete physical, mental, and social well-being and not merely the absence of disease or infirmity.
Health Care System is the organization of people, institutions, and resources to deliver health care services to meet the health needs of target populations.
The Goals of the Health Care System , are good health, responsiveness to the expectations of the population and fair financial contribution.
World Health Organization. Preamble to the Constitution of the WHO, adopted by the International Health Conference, New York, 19-22 June 1946
Pill-Popping to Bionic Man Condition Example Drugs Used Medical technologies as adjunct or replacement to drugs Ventricular arrhythmias Amiodarone Implantable Cardiac Defibrillator Atrial fibrillation Digoxin, coumadin, ca+ channel blockers Endocardial ablation Obesity Lipase inhibitors, appetite suppressants Bariatric surgery Depression Antidepressants Deep brain stimulation Parkinson’s disease L-Dopa Deep brain stimulation Acute MI Thrombolytic Coronary stents (primary angioplasty) End-stage heart failure Inotropic drugs Bridge to transplantation and destination ventricular assist devices
Government HC Region Purchase groups Professional Groups HC Rx Copycat Feds Med School HTA / F/P/ Local Intl. HTA Orgs. FDA EU / CE Specialist Hospital/ C-suite/ Foundation GP / FHTs Public / community Advocacy Politician Health Care System Patient
Is a continuous variable
Innovation ≠ Invention 1
With S-shapes logistics curve
1- Roger Martin, Dean Rotman School of Management, University of Toronto
Focus on Product Innovation and Leadership Professional CGM BG Meters Insulin Pump Therapy 1978 1977 2003 Professional CGM Gold 2005 Guardian RT 2007 2008 2006 1999 Paradigm REAL-Time, w/MiniLink Paradigm REAL-Time Guardian REAL-Time Yesterday Today 2009 2010 Veo (LGS) iPro2
Not an abstract ideal or code word for “Cost Reduction”
Defines framework for performance improvement in health care
Defined around the “Patient” in a “well-functioning” system
Creation of value for patients should determine rewards for all other stakeholders
Since value is defined as outcomes relative to costs, it encompasses efficiency
Michael E. Porter, What Is Value in Health Care? NEJM, 2010, 363, (26): 2477
Measuring Value in Health Care System
Depends on results, not inputs
Measured by the Outcomes achieved, not the Volume of services delivered,
Shifting focus from volume to value is a central challenge
Not measured by the process of care
Process measurement & improvement are important “tactics” but no substitutes for measuring outcomes 1
Cost reduction without regard to the outcomes achieved is dangerous and self-defeating, leading to false “savings” and potentially limiting effective care 1
Michael E. Porter, What Is Value in Health Care? NEJM, 2010, 363, (26): 2477
Myths and Facts:
Technological innovation is deemed to be the root of the cost escalation in health care
Medical technology makes a substantial difference in patients' quality of life, disability levels and mortality rates (Cardiac Pacemakers)
A wider group than just patients or health care professionals benefit from technological innovations in health care (Productivity)
It is reasonable to assess the contribution of medical innovation to the development of the economy and welfare as a whole
Between 2002 - 08
Direct medical costs increased by € 101 Bil.
Prevented loss of productive years with positive value of € 123 Bil. on GDP
Net societal gain = € 22 Bil.
“ We must not only regard health care spending as a cost factor, but need the full economic perspective”
German Ministry of Economics Affairs report on innovation impulses from health care economy – 09/03/2011
United States Example Direct Impact on U.S. Jobs 422,778 Overall Impact on U.S. Jobs 1.96 million
In 2008, the medical technology industry employed 422,778 people; generated $24.6 Bil. Payroll
Paid salaries 40% more than the national average ($58,000 vs. $42,000) and sold $136.0 Bil. worth of products
U.S. manufacturing employment decreased by 4.8% between 2007-08 due to the economic recession; medical technology employment decreased by 1.1%
Each medical technology job generates an additional 1.5 jobs
The U.S. Labor Department has projected that the biomedical engineer occupation will experience the largest percentage growth (72%) of U.S. occupations through 2018
State Economic Impact of the Medical Technology Industry. Report prepared for AdvaMed by The Lewin Group, Inc. July 7, 2010.
Realities of Medical Technologies
Front-end vs. amortized investments
e.g. Cath. Labs
Hospitals becoming short stay intervention facilities
Health human resource training
Increasingly displacing drugs for localized disease control
Less invasiveness and increased safety and effectiveness will drive demand
e.g. MAST in Spine surgery
Narrow time frame for market share
Advanced MRI and CT scanner for brain and vascular imaging enable more rapid diagnosis and treatment of stroke.
Increased emphasis on mammograms at an earlier age allows for earlier diagnosis and treatment.
Patients with insulin pumps and glucose monitors manage diabetes better, with greater adherence to regimens and less daily pain than conventional treatments.
Technology used to control blood glucose levels reduces diabetes-related complications
Eye disease by 76%
Nerve disease by 69%.
The Value of Investment in Health Care: Better Care, Better Lives. Report compiled for The Value Group by MedTAP International. 2008.
Facts and Numbers
Between 1980-2000, medical technology reduced hospital stays by 56% 1
Total knee replacements save an average of $77,000 / patient in lifetime health care costs, due to reduced need for custodial care. 2
Insulin pump therapy for diabetics saves approximately $18,300 / year compared with daily insulin injections. 3
Medical imaging to diagnose and treat stroke leads to better outcomes, shorter hospital stays, and nearly $800 million / year in savings. 4
Chronic pain treated with Spinal Cord Stimulator instead of conventional therapy saves up to $94,000 / patient. 5,6
Early detection of infection costs $200-$300, while treating a downstream blood infection can cost $30,000. 7
The Value of Investment in Health Care: Better Care, Better Lives, a study by The Value Group, 2004.
Gottlob, C., Pellissier, J., Chang R., et al. “Long-Term Cost Effectiveness of Total Knee Arthroplasty for the Treatment of Osteoarthritis.” American Academy of Orthopedic Surgeons annual meeting, February 1996.
CORE (Center for Outcomes Research) Diabetes Model. American Diabetes Association annual meeting; June 2005.
Johnson, S. C., “Effect of a U.S. National Institute of Health Programme of Clinical Trials in Public Health and Costs,” The Lancet, April 2006.
Bala MM, Riemsma RP, Nixon J Kleijen J. Systematic review of the (cost-)effectiveness of spinal cord stimulation for people with failed back surgery syndrome. Clin J Pain. 2008 Nov-Dec;24(9):741-56.
Kemler MA, Furnée CA. Economic evaluation of spinal cord stimulation for chronic reflect sympathetic dystrophy. Neurology. 2002 Oct 22;59(8):1203-9.
Alice Jacobs develops diagnostics that stand the test of time. Boston Women’s Business. Vol. 11 Issue 1. 2009.
Real faces of Health Care and their perception of the value of innovative technology Delphine Diabetes Insulin Pump Perry Parkinson's Deep Brain Stimulation Christine Long QT Syndrome Implantable Defibrillator Lin Diabetes Insulin Pump
Tele-monitoring and Electronic Medical Records
Need to shift perspective from cost to value
Societal welfare vs. Health Care system perspective