How will new paradigms in healthcare financing impact your sales process?

The new joint venture recently announced by Anthem and seven prominent Southern California healthcare systems, Vivity, is not good news for medical device companies selling premium priced innovation and/or expensive “commodity” products.  Consider this another shot across the bow, along with the merger announcement between Advocate Healthcare and NorthShore University Healthcare (Chicago) and/or BCBS bundled payment models emerging in Georgia, North Carolina and Rhode Island for hips and knees.  A new approach to sales and marketing will be needed in response to these new healthcare financing initiatives.

Vivity aligns the incentives of the payer (to control costs) with the healthcare provider (to offer care) for the purpose of sharing profits.  This is not good news for medical device companies selling premium priced products without credible proof of benefit.  Under these new payer-provider arrangements, the first question every facility administrator will ask a sales rep, “What will our profit margin be if we use your product?”  Unless your sales reps can show objective peer-reviewed evidence of clinical superiority and a reduction in current spending, your sales process will not pass a facility’s Value Analysis review.  As these new financial incentives take shape, administrators will myopically focus on how to immediately reduce direct costs.  While the long-term desire is to reduce overall healthcare spending by reducing the incidence of readmissions, reoperations, and infections, facility administrators at Accountable Care Organizations (ACOs) will have only one goal in mind – to achieve profitability as soon as possible.  According to recent press coverage, Vivity healthcare providers and Anthem will divide all profits or losses, giving each skin in the game to effectively manage patient care.  The plan will use a capitation model, essentially assigning a fixed per-member per-month figure to each beneficiary. Administrative costs and other expenses will be subtracted from the premium risk pool, and if costs are kept in check, all the founders will see profits.

The train has left the station!  A new paradigm in healthcare financing is here and will reshape how medical devices are sold in 2015.  Payer and administrator leverage over physicians will negatively impact access to new technology, innovation and minimally invasive alternatives.  While this control over physician decision-making is distressing, it is inevitable.  For those of us who believe innovation is the path to improving care, patient access will require substantial peer-reviewed evidence and persuasive payer communications.  Please call for additional information and personal assistance.