By Rob ten Hoedt
During the next decade, something will happen that has never occurred before in human history: there will be more people around the world aged 65 and older than children under the age of 5. Inevitably this means global healthcare spending will continue to rise, doubling as a percentage of GDP to almost 12 percent in 2060, according to a recent report from the Organization for Economic Cooperation and Development.
With such pressures placed on global health systems and economies, there is a need to look at new ways to explore sustainable business models across healthcare systems, hospitals, payers and governments around the world.
One such example is Medtronic’s global Integrated Health Solutions (IHS) offering, which was pioneered in Europe as Medtronic Hospital Solutions (focused on hospital operational efficiency). IHS is a new business that expands on Medtronic’s strategy to deliver services and solutions that drive economic value and benefits for customers in addition to clinical outcomes.
IHS started partnering with medical facilities over a year ago to help them improve the efficiency of cardiac catheter labs, which are expensive and logistically complex to run. We focused on four key areas: finance, optimization, management and growth. This means working with a hospital’s limited budget to help finance equipment purchases over long term contracts; applying lessons we’ve learned as a global company to streamline how work is conducted; manage equipment and utilize economies of scale for cheaper repairs as well as possibly bringing in a well-trained healthcare staff; and help raise the hospital’s profile with better patient recruitment.
By applying our vast therapy and disease state expertise while supervising this operation for hospitals, we have been able to advise hospitals on how to create efficiencies, address costs, and improve patient access and outcomes for a broader set of customers. This approach allowed us to help Maastricht University Medical Center in The Netherlands save about $6 million during the first year of the pilot program. In addition, based on the local success of IHS and similar programs in the UK, we’ve taken key learnings and are now expanding this program into other regions around the world.
Institutions can also benefit from gaining greater insight into how their top performing peers are successful at providing better outcomes for less. Some patients who come to a hospital with similar conditions and receive similar care will have different outcomes. Finding the reason behind this variability can lead to insights that help facilities improve outcomes for all their patients, at a lower cost. Medtronic’s work with facilities across the globe gives the company a view into the best practices by the best-performing institutions, allowing us to share these benchmarks to improve operations and attain clinical excellence while reducing costs.
Business model innovation and collaboration with governments, hospitals, payers and healthcare systems goes beyond developed markets. My colleagues in India continue to push the envelope on local partnerships focused on increasing value for patients.
The rapid rise of heart disease in India has earned the country the dubious distinction of “the cardiovascular disease capital of the world.” By 2020, the World Congress of Cardiology estimates that 40 percent of deaths in the country will be from heart disease, a staggering increase from its rate of 24 percent in 1990.
Many individuals and organizations have tried various ways of stemming this increase, without a breakthrough success. Medtronic wanted to help, but knew that more could be done to increase access to lifesaving therapies in the country. So we took a deeper look to get to the root of the problem, sought out partners who could contribute in ways we weren’t able to, and most important, tried to create a sustainable system that would reach those unlikely or unable to seek help.
Our solution, a program called “Healthy Heart for All,” began in September 2010, with the goal of increasing access to lifesaving therapies. Collaborating with the consulting firm Innosight, we interviewed 100 doctors, nurses, hospital personnel and patients in the country. Affordability, as expected, was one hurdle. Other barriers included improper diagnoses; lack of patient knowledge about the state of their health; and overall confusion and difficulty navigating the health system.
To better educate the at-risk population, Medtronic deployed a direct-to-consumer campaign, advertising a hotline number for information on trucks, billboards and other public spaces. We offered free diagnostic clinics, and collaborated with influential members of the community to further raise awareness and encourage participation. Telemedicine allowed us to reach and diagnose more people than we could have in person. Finally, and most important, to help with affordability, we set up a financing program for underprivileged patients to relieve some of the burden in the patient-pay system.
Within 18 months of starting this program, we had screened 20,000 individuals, resulting in 2,000 pacemakers implanted in patients in need.
While heart disease continues to remain a stubborn problem in India, it is programs like this that are starting to chip away at the issue.
This is one example of how a company, working to meet the needs of a specific community, can lower barriers to entry and improve overall health of a population.
As a company, we know that only providing devices to patients in need does not fully utilize our knowledge and resources to really move the needle on improving global healthcare. That’s why the path forward for us, and the industry as a whole, is innovative approaches that strive to partner with each country’s hospitals, health systems, payers and the local healthcare ecosystem.
In addition, it will be important to take the key learnings from these collaborations to benefit other patient populations around the world. By moving forward together we can make a greater difference.
Rob ten Hoedt
Executive Vice President & President,
In the U.S., our medicines, hospitals, devices, and other therapies have never been better at helping people with acute problems. The ways in which we can target specific genetic mutations in cancer cells, create 3D maps of a beating heart, and revive or replace failed organs were unimaginable half a century ago. Our current system has improved patient outcomes and is the source of tremendous innovation, and we must strive to find long-term sustainable solutions.
The way healthcare systems approach patient needs and pay for services have led us to this point, and are ripe for change. Healthcare companies, including Medtronic, have focused on creating and selling products that are clinically and technologically better than previous generations. But those improved products also cost more due to the increasing expenses associated with R&D.
Hospitals and doctors have newer and better ways to treat patients. They also have been incentivized to do as much as possible for reimbursements in the pay-for-service model. Patients are coming into the doctor’s office to treat acute symptoms instead of addressing chronic problems that could limit their frequent, episodic-based utilization of system resources. Insurers collect higher premiums from patients and push back on paying for the services, tests devices, and drugs that doctors, hospitals, and patients use.
Total healthcare costs in the United States are expected to climb to $4.8 trillion by 2021, a startling increase from the $75 billion spent in 1970. If we keep going down this path, we will risk a system-wide failure. The definition of value defines how the system approaches healthcare.
The good news is that the construct of value in healthcare is widely recognized. The U.S. government has already approved reforms that focus on paying for better patient outcomes, not just for the number of services, products, and tests provided. But improving patient outcomes after diagnosis isn’t enough. We need to increase value in the healthcare system throughout the continuum of care.
At Medtronic, we recognized this fact several years ago when we introduced a concept we call economic value and incorporated it as a cornerstone of our business strategy. In short, we saw a shift in what our customers expect from us. They don’t just need clinical value from our therapy innovations, they need economic value as well. The product or service we deliver must also provide an economic benefit such as making care delivery more efficient, minimizing system waste or expanding patient access to therapies.
As a leading medical technology company, we accepted this broader perspective of value. We shifted our business to address this challenge, and we haven’t looked back. Since embracing economic value, we identified an opportunity to increase value not only with our devices, but also through our clinical expertise and therapeutic knowledge. That’s one of the reasons we created the Medtronic Integrated Health Solutions℠ business – a new offering that moves beyond devices to focus on system-level services and solutions. Today, Medtronic Integrated Health Solutions is helping hospitals, public and private payers, and health systems align value within the care continuum by delivering more efficient and improved care to patients.
By working across the care continuum with a variety of partners, Medtronic is playing a role in moving the healthcare system forward. We’re redefining value while continuing to embrace the importance of meaningful innovations. That’s why we’re excited to sponsor the Harvard Business Review and New England Journal of Medicine’s Insight Center on “Innovating for Value in Healthcare.” It’s a particularly relevant topic in healthcare and one that cuts across stakeholders to ultimately bring a better and healthier system.
Follow along as thought leaders discuss this critical topic in healthcare.