5 Doomed MedDevice Strategies in 2012

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


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



• Price Benchmarking
• Group Purchasing Organizations


Competing in Healthcare in 2012

Maximize

Offset
Minimize



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



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


2. Additional Salespeople

• Market Consolidation
• Mergers & Acquisitions


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


Persistent Downward Trend

Number of Beds and Beds per 1,000 population


AHA Hospital Market
5795 Registered Hospitals in 2009


Systemization in Acute Care

Number of U.S. Hospitals in Health Systems


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

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


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

The Rise of Accountable Care

Beds/ 1,000 population Prominent ACOs


Source: Premier GPO News releases

ACO Distribution
ACO’s by State ACO’s by MSA


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


2. More Salespeople &

REMEDY:
• Integrated Coverage
• Corporate Accounts
• Flexible Resources
• Mobile Hyper-specialists
• Clinical, Operational, and Financial Focus



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


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



• 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



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



REMEDY
• Evidence-based Influencing
• IDN/IHN Focus
• Selling Economic Value
• GPO contracting and coverage
• Revised account management


5. Feature-Advantage-Benefit


REMEDY: A Balanced Approach


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


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


Questions


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)


Thank You

Gunter Wessels, Ph.D. MBA

Partner & Healthcare Practice Principal

gunter@mytigi.net

@gunterwessels on twitter

www.tigi.net

813-968-0070


5 Doomed MedDevice Strategies in 2012

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