Here’s another indication that the old models of healthcare are crumbling.
In a conference call to discuss fourth quarter results, Medtronic CEO Omar Ishrak announced that the company is pursuing partnerships with payers worldwide to try and leverage outcomes data that can help develop cost effective therapies and manage chronic diseases.
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The strategy is being driven by a recognition that customers are not going to pay any amount of money for a therapy that works. They need products to be make sense from a cost perspective too. Or as Ishrak put it, “delivering economic value is increasingly becoming a critical factor in today’s changing healthcare environment.”
In the U.S., Ishrak said that Medtronic (NYSE:MDT) is in “initial discussions with Aetna regarding chronic disease management partnerships in diabetes and heart failure.”
In another sign of shifting strategy, the company recently finalized a partnership with the government of Lombardy, the largest region in Italy, to produce outcomes research and study the effectiveness of medical technology.
“This unique program will evaluate the quality and overall treatment cost for chronic diseases of chronic diseases for several Medtronic technologies,” Ishrak said. “Both of these partners (Aetna and the government of Lombardy) have rich sources of patient outcome data, which is essential for the quick and effective evaluation of economic value.”
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Ishrak’s comments imply that he believes that companies need to focus on both economic value and clinical value. Leveraging data from in insurance companies and public payers is an obvious choice to know what therapies work and are also cost effective. That can determine where the company needs to put its resources.
A Medtronic spokeswoman wasn’t immediately able to say whether Medtronic has had any such partnerships with insurance companies and public payers any time in its history.
It is a novel approach nonetheless and one that is a break from the past where product development at medical device firms largely meant making incremental improvements and charging a premium for it.
But in choosing a partner in payers, both public and private, Medtronic is underscoring the fact that their data can be effectively mined to come up with cost effective solutions that work.
It is not surprising that in the U.S. Aetna is the insurance company with whom Medtronic is planning a partnership. In a blog post, healthcare expert Joe Flower commends Aetna CEO Mark Bertolini for recognizing that business as usual will doom insurance companies.
Bertolini in fact doesn’t consider Aetna an insurance company but an information company, Flower writes. He notes that Bertolini believes that:
Health insurers are unlikely to disappear. But their primary role in the future will be using new technologies to help accountable health systems serve their customers and drive out costs — and the health systems, not the health insurers, will increasingly be the face, the brand, of that improvement.
As a vendor serving those health systems, Medtronic wants to be part of that paradigm where cost reduction and positive clinical outcomes go hand in hand.
“We believe strongly that the ability to translate clinical value into economic value will be the key area of for success in healthcare over the longer term,” Ishrak said.
