By Joseph Haduch and Patrick Flaherty
Over the course of the past several months this column has touched on several topics that influence and affect, in our opinion negatively, provider’s individual and collective ability to transform the expense and value from manufacturers of clinical equipment for both service and equipment acquisition.
While we fully acknowledge that providers share in the responsibility of bringing new and innovative solutions to address many of health care’s problems and inefficiencies our collective attention has been on the inequities of the process currently in place that drives the relationships between the manufacturer and the provider. We believe it is a relationship that is disproportionately designed to meet one party’s objective business requirements while leaving the provider’s value delivered more nebulously defined. This is clearly defined by the drastically different margins each party enjoys. While it may not seem obvious given the tone of some of these columns, we stridently believe that a new and more objectively collaborative relationship between manufacturers and providers is a practical and moral imperative if we are to have any hope of lowering the cost and increasing the accessibility of care while at the same time elevating the quality and value delivered to patients. Some of the practices used by manufacturers to maintain the current counterproductive imbalance of benefits are obvious and some are subtle, all of them get in the way of creating meaningful and sustainable collaboration. What follows are some areas that we believe are in desperate need of transformation.
Divide and Conquer
Divide and conquer is one of the first places we will visit among the places we wish would go away. Equipment manufacturers focus a great deal of effort in being “the vendor of choice.” Translating this means simply that the manufacturer has chosen to isolate the physician or administrator they believe is the most politically powerful in the supplier selection and isolating them from the provider’s wholistic decision support process; this typically involves direct marketing, phones calls from supplier senior executives, and can even include site visits conveniently couched as something not overtly connected to the specific decision. The end-result of this type of engagement is to get the physician and administrator to add internal pressure against its own internal departments’ process for selection, frequently causing a great deal of redundant activity to re-channel the work into an objective and fair process. This antiquated sales strategy has absolutely no place in any value-based care or patient affordability discussion. While it has no place in 21st century health care negotiations, it is currently not going away. It remains a major part of the tool set of one of the most onerous departments of all manufacturers … the marketing department.
The clinical equipment manufacturer marketing department occupies an inner ring of Dante’s inferno as it frequently distorts and manipulates critical information which is used to make objective decisions for patients. Marketing rarely, if ever, highlights the qualitative differences in research studies and never points out conflicting information. Marketing will use whatever “study” supports their efforts to persuade a sale, including statistically insignificant data and data where the clinical end-points are “no-worse” than the existing control groups. When there is an ostensible claim of improvement identified in the marketing material, it conveniently is unable to be included in a contract as a measurable and guaranteed deliverable, it is almost always a “hope it works” moment for the provider, fully at its own risk. Marketing perpetuates the notion that sales and performance are not aligned. This misalignment prevents the translation of promise by manufacturer into guaranteed practice improvement. A similar issue to marketing is created by the research and development (R&D) teams of manufacturers.
Research and Development
R&D is supposed to be completely separate from commercial sales and decision making but, as many of us know, this is a practical fallacy. The reality in this space is one that involves direct access to physicians, most often with no one from the business side of the provider, describing the next level of equipment. In many situations, the physician would like to have first or early access to the equipment when it is eventually released or, for academic medical centers, be a principal or co-principal investigator for industry sponsored trials. This off-grid set of discussions clearly influences physician’s thought processes, just like the manufacturer intended. If anyone struggles to believe this is a reality, simply ask or recall how many times a sales representative not currently successfully positioned to win a sale says something like, “Can we arrange a site visit for you and your physician to our design center (frequently in a foreign country) so you can see what is coming?” This all too frequent pitch is clearly evidence that the use of R&D vapor ware as a sales tactic is alive and well.
GPOs and Government
Another barrier is the convenient use of a third party as a shield to prevent good faith negotiation. There are two classic shields used constantly by manufacturers … the U.S. government and group purchasing organizations (GPOs). In both scenarios the manufacturer negotiates an agreement with the third party and then subsequently claims that the price(s) included in the agreement are the indexed “floor” pricing from which all other agreements must be negotiated and evaluated for compliance. This convenient tactic permits the supplier to set a basement price they can hide-behind when confronted with a provider negotiating from its own objective margin position. When using the government, the manufacturer will frequently claim they are bound to provide the lowest price to the government and cannot move from the position for the provider; this is not true, government contracts only involve like to like transactional comparisons, if the provider’s contract has any strategic elements where commercial feedback or other value is provided, then the control comparison with the government is vacated. The GPO as the control is even more problematic; the GPO is an aggregator of purchasing volume, not an agent to drive strategic compliance or practice. The GPO also makes more money when the equipment is higher-priced; the GPO also inconsistently incorporates service and support into the full contractual set of benefits. Manufacturers who hide behind GPO negotiations are choosing to avoid good-faith negotiations from providers whose bottom line is driven differently than the GPOs.
Many of you have first-hand experience with some, if not all, of the examples discussed. As long as these, and other barriers, are commonly utilized, our hope and need to transform will be blocked by an edifice of brick. Walls, whether of brick or of words, have no place in 21st century health care … the ones cited above need to be relegated to the same graveyard as the barrier that divided Berlin and whose collapse was a harbinger of a new era. In next month’s article “Breaking Down Barriers” we’ll discuss how HTM can be at the forefront of a and what can be done to counter these current “Barriers to Change.”
Patrick Flaherty is the vice president of operations for UPMC BioTronics. Joseph Haduch, MBA, MS, is the senior director of clinical engineering for UPMC BioTronics. The views expressed here are those of the authors and do not necessarily represent or reflect the views of TechNation or MD Publishing.
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