Throughout much of modern-day medical history, technology has favored big-ticket items that favor physician preferences. The more lucrative the proposed medical device, the more likely it was to be courted by venture capitalists and private investors. After all, people who have money have traditionally been most interested in endeavors that spawn more money.
In recent years, there has been a significant shift in the way the healthcare industry operates, moving the majority of the responsibility for payment into patients' hands. Several years ago, proponents of this movement may not have realized how this change would ultimately impact healthcare providers and hospitals.
The Former Face of Medical Technology Investments
Prior to patients being forced to have a lot of skin in the game, so to speak, major investors sought profit-enhancing innovations that ultimately boosted the bottom lines of major medical device and diagnostics companies.
As HealthAffairs.org explains, the focus for investors was three-fold. They backed business plans that:
- Served meaningful unmet needs (scope of the market)
- Deployed potentially effective technologies (solution for the market)
- Commanded a price that exceeded cost (profitability of the market)
In this structure, the third bullet is the most prominent; in order for inventors to receive adequate attention -- and thus sell their products -- they needed to convince investors that their innovations would make a lot of money.
Previously, medical technologies were largely marketed to private physicians. Individual doctors, not hospitals, were the keys to success when inventors were trying to make sales, as these were the people responsible for comparing alternative devices and determining the ultimate best outcome for their patients.
How the Shift in Payment Responsibility Altered Investors' Views
Medical bills are expensive, and even the smallest of invoices can cause incredible financial burdens for those individuals responsible for payment. When the government and major insurance companies were footing the majority of medical bills, the medical technology company could get away with costly inventions that largely benefited their investors.
As patients have begun to realize the impact associated with high-deductible health plans and patient-focused payment responsibilities, healthcare providers -- both private and hospital establishments -- have begun to experience revenue cycle management deficits, as individuals find it difficult, if not impossible, to pay exorbitant medical bills.
According to HFMA.org, "The average patient bill languishes in the accounts receivable department for more than 60 days before it is paid. Even worse, providers can expect to receive only 17 cents on the dollar for its aged patient invoices."
Today's Face of Medical Technology Investments
With physicians and hospitals struggling to get paid in a timely fashion -- and with patients facing increasing medical costs -- today's inventors are more likely to see potential investment suitors if their submissions fit two criteria:
1. They reduce costs
2. They enhance safety
The overwhelming result of this payment ebb and flow has turned toward cost-decreasing medical technologies that ultimately benefit hospitals, as opposed to physicians.
"Value assessment" committees now hold a major stake in the final decision for devices proposed for approval. These boards demand substantive data that reinforces both the quality and the cost of the potential medical technologies.
Medicine is ever-changing. So, too, are the ways in which technology is adapted such that it fits with the needs of patients and care providers. In this new world of start-ups and smart work forces, inventors are wise to heed the warnings of those before them, creating cost-effective solutions that benefit hospitals while enabling ease-of-care and long-term patient health.