When The Trough Gets Leaner

Submitted by francois.debrantes@hci3.org on Friday, October 10, 2014 - 01:43

Those who have been benefiting from a free lunch are now complaining that they'll have to pay for it – The squealing from Chicago's gathering of the free lunch beneficiaries was so loud it even caused a putative candidate for the Presidency to hem and haw. The absurdity of this scene would be laughable if it wasn't such an offense to the millions who have paid dearly for the trough that has filled the bellies of AdvaMed's members. Like pigs swallowing an endless supply of apples, medical device manufacturers have, by and large, swallowed an endless supply of dollars from average Americans by way of ever rising health care premium payments and out-of-pocket costs. What these manufacturers are complaining about today is the looming tax on medical devices, which is one of the key funding mechanisms for the ACA and hence the ability to provide health care coverage to millions who have had it denied to-date. But they're also squealing because the business models they have relied on to fill their coffers is getting squeezed at both ends. Of course, like other industry stakeholders – what I lovingly refer to as the agents of the status quo – they are on track, this year, to spend half a billion dollars just on lobbying…that's fees to lobby firms who host "educational" sessions and other junkets for Congressional members and staff. It doesn't count the amount of money poured into political action committees and direct political contributions. Their hope is that they can reverse the macro trends that are tightening their trough.

What this means to you – In 2012 the Government Accounting Office (which is pretty widely recognized as being unbiased) issued a report that highlighted one of the ways in which medical device manufacturers have benefited from the health care industry's price opacity. These tactics are now backfiring as health plans and employers are moving away from fee-for-service payments and making it clear to physicians and hospitals that it is their duty to source these medical devices as rigorously as any company outside of health care sources its supplies. Bundling services into a single price for an episode of medical care is changing the economic dynamics for AdvaMed's members and they're feeling the pain. Now comes the infamous tax and with it, claims that innovation in the industry is about to end, at the expense of patient quality. Really? Well first off, the innovations that they have brought us, while many have been highly beneficial, have also been highly overpriced. The result has been a decline – yes, a decline – in median US household income. This decline must be reversed and one sure way of doing that is to stop the hyperinflation of medical costs. Second, innovation is actually flourishing from a bevvy of entrepreneurs who are focusing on creating powerful insights with tiny devices and data, helping physicians make better informed decisions, and closing real quality gaps with feedback loops, not just another platinum-coated big box. Companies like Propeller Health have had a significant impact in improving medication adherence and reducing asthma exacerbations for kids. Others like Syapse and Medivo are delivering crucial info at the point of care. The net result is lower costs and greater quality, but clearly at the expense of the old guard AdvaMed members. When the trough gets leaner, the pigs always squeal, and this week we heard them squeal in Chicago, but that should be music to the ears of those who have paid dearly for it.