mdi Consultants
It is extremely important that those who work in a medical device company know the various players they must deal with to achieve success. A provider is a person or institution who directly provides medical, surgical or health services and who bills an insurance company for services rendered and is paid for them in the normal course of business. The term provider is collective and includes physicians, surgeons, therapists, pharmacists, nurse practitioners, physician assistants, certified nurse midwives, ambulatory surgery centers, hospitals and any other ancillary care personnel.
Physicians are the most important influencers as to what new medical devices hospitals and suppliers will directly purchase from manufacturers.
Providers are typically supported by a billing staff to assist in processing claims and navigating the reimbursement processes.
Patients are usually thought of as the consumers of healthcare services.
The term ‘payer’ typically refers to an insurance company that is responsible for payment for healthcare services and products. In the U.S., there are publicly funded payers such as Medicare and Medicaid, and privately funded payers such as managed care companies (e.g., Aetna, Cigna, Anthem, United Healthcare, etc.). In general, the extent and range of benefits provided are governed by law in public payer systems and by contracts in the world of private payers. Office staff team members are the most knowledgeable about the reimbursement process within their own practices, laboratories, and the local payer communities because they work on the front lines of reimbursement every day. Establishing working relationships with these staff members is often a critical step for a manufacturer’s sales team to take.
Reimbursement in the U.S. health care system involves many different parties which often have conflicting objectives and motivations. Some stakeholders are driven by clinical outcomes, whereas others are driven by profit. Most parties fall somewhere in between. Providing new medical devices, procedures and services always has this underlying theme between all the stakeholders i.e., try to maximize clinical outcomes while simultaneously considering the increased financial impact of introducing the beneficial advances. This theme is also central to the development of reimbursement strategy, that is, how will healthcare services be covered, coded, and paid for, and how will the economics of the healthcare environment impact a new medical device’s adoption in the marketplace?
There are three essential stakeholder groups within the U.S. reimbursement environment:
- payers;
- providers;
- patients.
Collectively, these three groups must interact and coordinate their communications and efforts to ensure a seamless reimbursement of products and services. Since each stakeholder has a unique set of economic concerns and criteria, a one-size-fits-all approach to developing an economic positioning argument would be neither appropriate nor effective. Furthermore, stakeholders are not equal with respect to their effect and influence on the purchase, use, endorsement, or approval of a new device. Venture capital investors are concerned with return on investment, speed to market, the degree of competition, and the company’s plan for reimbursement strategy. The providers of healthcare services as a whole care about payment from insurers for their livelihood.
Regulatory authorities focus on the fact that the medical device does what it supposed to do and that it is safe, i.e., does not cause harm to individuals. Commercial payers, managed care organizations, self-insured employers, business coalitions, government payers are concerned about safety, proven effectiveness in clinical trials, coverage, quality, and outcomes. Patients and advocacy groups care about access, convenience, cost, and coverage. Group purchasing organizations are concerned about degree of adoption, quality, coverage and reimbursement.
An important conclusion from this is that the purchasing and payment decision is influenced by a variety of stakeholders, and so most manufacturing companies will have to market their product and its context-specific benefits to different groups at the same time. For example, an insurance company needs to be shown how the innovative product can reduce the overall costs of healthcare for a given health problem; a hospital, pharmacy or physicians’ clinic needs to know how the innovative product can increase efficiencies or operating margins compared with the total reimbursement they are given by the payers; and the patients must understand why the new product is better for them, especially if they can influence the usage decision.
Medical devices are typically sold through specialized distributors or through a direct sales force to hospitals, clinics and physicians. The device and related procedures are delivered in the hospital or clinic and payments from the insurers or the patient are collected by both the hospital and the physician. The hospitals and clinics pay for the devices and typically hold the inventory, getting discounts that have been pre-negotiated through group purchasing organizations or directly with the manufacturer. The insurers and government payers typically reimburse the care provider (who purchased the device; usually the hospital) or the specialized distributor, or else the payers reimburse the customer directly (this is not common) if the patients themselves paid entirely for the product or treatment (e.g., for home medical products or out-of-network costs).
Hope this helps,
Alan Schwartz and Dr. Vincent Jaeger
MDI Consultants