Evaluating the future

Frost & Sullivan’s Charlie Whelan looks at why medical technologies should be judged on their actual value to patients.

“When more information becomes available to people, they make decisions differently, and behavior changes”
-Charlie Whelan

In April/May of 2009, Frost & Sullivan surveyed 70 hospital professionals in six functional areas, asking them about the strategic challenges facing their institutions and the process by which they evaluated and adopted new technologies. In addition, Frost & Sullivan conducted extensive interviews with a physicians and hospital professionals in a variety of roles.

Charlie Whelan, Frost & Sullivan's Director of Consulting, Healthcare and Life Sciences, explains that the impetus for the survey came from the company's ongoing interest in marketplace trends within healthcare, as well as his day-to-day work with clients who are developing new medical technologies.

"We saw a trend wherein clients were coming to us and wanting to assess not just the technical or clinical aspects of their technology but also the economic benefit that it could bring to healthcare providers," Whelan says. "We saw that as becoming increasingly important in the marketplace, largely because of economic variables.

"It wasn't that clinical needs are changing, it was more about certain economic decision-makers having more of an impact on the decisions around whether a product was adopted or not; so we wanted to look at that a little more closely.

The survey results showed that the variable of patient satisfaction has become increasingly important to hospitals for economic and competitive reasons. "Obviously, hospitals have always wanted to keep their patients happy for altruistic reasons," Whelan underlines. "But here in the US, what's happening is that hospitals now have very clear economic drivers to have higher patient satisfaction levels, because they get bonus payments from Medicare."

Whelan says patient satisfaction has now become a lot more transparent. For many hospitals, patients can go online and see how hospitals score in different areas, then make a decision about which hospital to go to for their often elective surgical procedures. Moving into the future, Whelan believes that those technologies that offer higher patient satisfaction will be considered to be more valuable than they were previously.

"In the past, hospitals and doctors may have looked at a device that claimed to provide better patient satisfaction and said, 'That's nice, but it cost too much and it's not really worth that expense,' Whelan says. "In the future, they're going to look at that and say, 'Wow, that could help improve our patient satisfaction scores and that, in turn, can help generate greater reimbursement and greater profits for us and make us more competitive versus our other healthcare providers locally.'"

Net benefit

Whelan gives the example of a technology that costs $400 that is not reimbursed. The manufacturer it claims it can get patients out of a hospital one to two days earlier, depending on the type of surgery. Keeping a patient in hospital after surgery can cost $1200 a day, and hospitals are increasingly being paid under bundle codes or DRG codes that incentivize them to get patients out of the hospital as fast as possible, because it makes them more profitable.

For these reasons, Whelan says it can make financial sense for hospitals to consdier such products, even when they are not reimbursed. "You need to look at the technology and consider it because of the operational benefits it provides," he says. "It may cost $400 but you're able to save $1200, which nets you $800 in savings."

"You also add patient satisfaction and better outcomes. That type of calculation, at least based on the research that we did, is not fully appreciated by hospitals everywhere. Some leading-edge hospitals see that and they make the connection, but a lot of hospitals are still not fully appreciative of it. I think that's going to change."

Whelan points out that technology companies have historically focused on clinicians and the fact that something has clinical value: it can help your patients get better faster. While that is important, he says that technology companies need to keep in mind the economic, operational and workflow impact that their technologies have.

"Many companies have appreciated this, but it's still relatively new. Part of what precipitated the survey was the fact that a lot of medical device companies were coming to us and talking about strategies they had that were focused on presenting the economic and operational benefits that their technology brings and not the traditional sole focus on the clinical benefit."

Expert advice

Whelan advises technology companies to be sure they understand all of the relevant impact that their technology would have on the healthcare provider. This includes playing out the scenario of what would happen when the technology is adopted, and whom it would impact. "For example," he says, "It's not going to impact just the doctors and nurses. It's going to impact the biomaterials managers and the OR managers and the purchasing managers and the CFOs and the case managers, all on down the line. It has a ripple effect.

"Healthcare is so complex. It's such a matrix-type organization that one new technology option can cause a complete paradigm shift, so you need to understand how your technology fits into the much larger context of where it's being used and how it's being used.

"The other thing I would say is you need to develop some quantitative data showing how it can demonstrate economic benefits and patient satisfaction. You also need to think about how your technology can measurably improve patient satisfaction scores."

Whelan cites one OR manager he spoke to, who said she had adopted a particular technology specifically because of its ability to improve patient satisfaction scores. She had done a study internally comparing two populations of patients who had had the same surgery; one group got this particular type of pump and the other group didn't. And she found that the pain scores for the population with the pump were better.

The survey also predicts an increased reliance on healthcare information technology, which Whelan believes will flatten healthcare delivery in many ways. Once data is captured and standardized in a patient record and is available to individuals other than just the doctor, he says, this will change how delivery is carried out.

"Much discussion on the growing importance has glossed over this," he asserts. "A lot of things happen when information is made available to people: look at what's happened with the internet. When people have more information, they make decisions differently and their behavior changes.

"What we'll see is more healthcare information being at the fingertips of case managers or nurses or hospital administrators, and they will start to make more decisions and gain more power relative to physicians. We'll also to start to see more standardization of care.

"There will be continued emphasis on workflow optimization and more technologies will develop that put that same information back into the hands of patients so they can manage their own care. It's going to facilitate greater collaboration, too, not just between clinicians and clinicians but between clinicians and patients."

Charlie Whelan is Director of Consulting, Healthcare and Life Sciences for Frost & Sullivan.

The objectives of Frost & Sullivan's web survey into new technology adoption by US healthcare providers included the following:

• To show how forces in the healthcare industry should change the way hospitals valuate new technologies based on the actual value they deliver
• To describe the process hospitals currently use in the evaluation and adoption of new technologies.
• To describe how hospitals currently think about operating cost management and value, particularly when evaluating the adoption of new technologies that might have an impact on patient outcomes.
• To show how forward-thinking providers are changing the way they act on this value equation to position themselves for survival in their markets.

 

Conclusions drawn from the Frost & Sullivan web survey, as outlined in the white paper, 'The New Economics of Healthcare'.

"Whether a hospital adopts new technologies or not is not an option. Hospitals must constantly evaluate new technologies to improve patient outcomes, as well as to maintain competitiveness and financial viability. Hospitals should institute multi-disciplinary technology evaluation committees aligned with the larger strategic objectives of the whole facility and system.

"These committees must have executive sponsorship and broad influence over the entire facility to address conflicting agendas and make decisions in the best interest of patients and the facility. Hospitals must ensure that the adoption of new technologies is aligned with the larger priorities of the facility and its mission.

"Most hospitals have these committees to some degree already, but administrators need to take a more proactive role in bringing new technologies up for evaluation. Whether the technology passes clinical muster is crucial, but every new idea deserves evaluation, regardless of where that idea may have originated.

"A holistic approach to technology assessment is crucial for hospitals to fully appreciate the value of the technology. This approach includes a thorough review of the true economics of a technology and the long-term outcomes it can deliver. This process must be guided by more than simply a narrow focus on reimbursement or the partisan interests of particular departments."