What is Value for Medical Technologies?


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There have been lots of comments and discussions about value-based healthcare and its implications to all stakeholders. However, when defining the exact meaning of “value”, most of these conversations end on the typical conclusion that value equals (patient) outcomes divided by costs.

This should make things clear, right? Well, it might give us a good feeling when we simplify a concept to a mathematical equation. Yet, most of us do not even know how to start using it.

Take for example E=mc2, the famous equation in Albert Einstein’s Theory of Special Relativity. Have you seen it before? Certainly, but can you explain it?

In this article, we will focus on defining the meaning of value for medical technology by examining the concepts of ‘outcomes’ and ‘costs’, some pitfalls and the importance of prioritization to value.

Let’s get started.

Patient outcomes, not product features

The #1 most common pitfall for medical companies is to promote product features as value. One of our clients once mentioned that the value of their new product was that it came "in 5 different sizes”.

An immense amount of time and resources go to product research and the development of medical technology products. However, each product feature must be linked to one or more tangible product benefits otherwise it will be nothing more than a technical aspect.

For example, a smaller and equally effective surgical stapler may lead to a shorter surgical procedure, which is quantifiable and measurable in terms of benefits.

Once there is a list of (again) quantifiable and measurable benefits, we need to think about which ones of these are most relevant to the stakeholder you are talking to. Patient outcomes are the priority and need to be adapted to the proper stakeholder. Take for example the aim to have a patient leave the hospital as quickly as possible (measured in days) and consider how it could resonate to different audiences:

  • Doctor’s version: less invasive and shorter procedure (minutes)
  • Hospital administrator’s version: lower infection rates (incidence)
  • Payer’s version: shorter total hospitalization period (days)

Could these outcomes be achieved with a simpler, easy-to-use device? Probably, yes.

The question is which outcomes are most important for the stakeholder we are talking to? This starts with an understanding of their goals and needs, which is different from simply reading a list of technical features of a product.

No outcomes are created equal. Prioritize.

We usually don’t measure costs

It should be clear that in value what matters are the total costs of care and not specifically the price of a product. After all, medical technology represents about 7,5% of total healthcare costs in Europe and around 6% in the United States.

So let’s focus on the remaining 92,5% - 94% of healthcare costs, that don’t include medical technologies, but are influenced by them. What is the cost of a hospital day, a doctor’s salary, an ICU hour, logistics, etc?

Providers very rarely measure how much they spend on a per-patient basis. Even though most providers submit their annual cost-data so that authorities can determine Diagnosis-Related Group (DRG) tariffs and other reimbursement rates, very little time is taken to understand the actual cost impact of a shorter hospitalization or procedure.

The “your product is expensive” phrase constitutes a direct comparison of a certain technology to other products. It is the role of the industry to help educate providers on what the cost consequences are, and not only on the price, of using a certain medical technology. A hospital that spends 500 euros or more on a technology can, for example, avoid thousands of euros in non-reimbursed complications. (Note: if you believe all hospital complications are reimbursed, you better read our previous post “Are Readmissions Profitable?”)

Once again, it is all about the other 92,5% - 94%.

Providers have a good idea about their reimbursement and payments, but not about how much they spend. Find and prioritize your message on the most important costs.

Prioritize before talking

Don’t try to divide a certain number related to shorter surgery by the “cost” of a medical product. Put the Value = Outcomes/Costs aside for a moment.

Instead, understand which market needs (pain points) your product can address and what the cost consequences are.

The value of medical technologies are the solutions they give to relevant market needs while being affordable.

As mentioned in the last MedTech Europe Forum, value must be linked to affordability. And since most providers are not aware of their costs per patient it is likely they do not know they can already afford your product.

So next time you see the value = outcomes/costs equation don’t criticize it. Just imagine how you will determine and prioritize the outcomes and costs based on your market, and not on your technical brochure.

Have you defined the Value of your product? Do you know how to apply basic Health Economics to engage with purchasing agents or administrators? These skills and tools are becoming mandatory now, contact us if you need further advice on how to get started.