Volume to Value: The Medtech Search for the Future

Digital transformation is at the forefront of every corporate leaders' mind as they look to find success in the future their organizations. For the medtech world, along with every aspect of the healthcare enterprise, this is exponentially true. The successful Medtech company will be the one who best redesigns their previously fragmented healthcare construct to one marked by increased speed and agility, flawless and complete integration and clear transparency throughout their process.

The path to digital transformation will be found in the long-term value of questioning decades of medical structure and business thinking to revise and optimize existing processes. Healthcare has never been required to accelerate change toward enterprise solutions through digital transformation.

The Internet of Things has become the buzz-phrase of the decade. While it is frequently in the news and studied by institutes and organizations world-wide, it often draws a yawn when the discussion is broached around the coffee maker. This all changed for me recently as I sat with the CEO of a Fortune 100 Medtech company. As he contemplated the future of not only his company, but our society and its structure, he revealed the customer, with the evolution of the Internet of Things (IoT), is now in the driver’s seat. Any organization which does not embrace this will have a limited future.

To build a common understanding of the importance, we only need to look to three important revelations. The Brookings Institute released a 2009 report in which they revealed, “Reforms are needed to transition provider reimbursement away from volume and intensity of services and toward quality and value.” This timely report marked the beginning of the end for volume-based health care profit margins and revealed the early beginning of the transition to value and Evidence based medicine.

This movement was exponentially increased in importance when MarketResearch.com published 129-page Mind Commerce report revealing and detailing the evolution of a “$117 Billion market for Healthcare Internet of Things by 2020.” It is estimated that 50 billion individual devices will be connected by 2020. McKinsey Global Institute went on to map the value of the Internet of Things to “a potential economic impact—including consumer surplus—of as much as $11.1 trillion per year in 2025.”

Throughout our lives, we have lived in an experienced-based medical world. Physicians operated with great discretion and autonomy in the diagnosis of their patients. The IoT has begun to change that paradigm. Data is now of utmost importance. The focus now must be on “value-based care, shifting financial incentives to a model in which providers are compensated on how their patients fare, rather than by the number of tests, visits or procedures performed.” This revolutionary way forward shifts power from the physician to medical managers. Along these lines, the Journal of Health Politics, Policy and Law stated, “Evidence-based medicine helps promote this shift in power and facilitates the work of medical managers. To begin with, evidence-based medicine reduces the discretion and autonomy of physicians.” This movement further allows the evaluation of safety, effectiveness, efficiency and cost of medical practices through both science and social science perspective.

This is not a completely new concept. Managed Care Organizations over the past decade began the shift of the power paradigm from the individual physicians to the new class of manager whose task was to evaluate, oversee and control medical practice.

As we look to the future of Medtech, it is important to realize “the very definition of “medtech” continues to evolve to embrace volume to value.” The growing pursuit of innovation outside traditional boundaries can be seen through mergers and acquisitions (M&As). While the number of major deals has remained fairly constant over the last decade, the size of the average M&A deal has grown 7-fold from approximately $200M to nearly $1.4 billion and began a rejuvenated surge in 2017.

As the market shifts to recover from revenue erosion, the long-term winner will be the company who best embraces IoT to grow service margins, streamline interaction of individual connected devices and develop intelligently modified utilization and maintenance schedules to, improve customer interaction, responsiveness and satisfaction in the inevitable future Experience Economy. A somewhat foreign concept to the healthcare arena which has previously been reluctant to adopt a consumer-centric model. PWC recently released, “Beyond the device: From Producer to problem solver” in which they detail “Customer needs are driving medtech companies into new areas of innovation… [Device and Diagnostic providers are] reaching across the ecosystem to offer services that engage patients in real-time, improve physician performance and demonstrate value beyond any one device, diagnostic or technology.”

 MD+CI further cemented this evolution to an Experience Economy by highlighting the fact “half of the 10 largest medical device companies sell tailored solutions outside of their devices, 7 have moved toward ‘services-based offerings,’ and all offer customers training and education.”

With all of these indicators pointing to the new Medtech future, it is no surprise “Medtech executives expect a higher level of innovation over the next three years.” What should concern them most is the fact, “they lack formal processes to achieve their goals for new services and business models.”

This is the impetus to my passion for the Medtech industry, the reason for hours of research, reading and interviewing. As the Medtech CEOs realize their need for formal processes to innovate and survive, the Afterburner Flawless Execution model can fill that void. Complexity, meet simplicity! From the Thunderbirds to the Blue Angels, from Navy Seals to Army Rangers, the same methods and procedures that enabled their success will facilitate the evolution of the Medtech industry’s supersonic quest for a place in the Experience Economy of the future. Is your organization pursuing Flawless Execution? At Afterburner, Inc., we enable leaders to realize the potential of their teams and not merely achieve their goals.