The healthcare industry is constantly evolving. Moreover, given the recent debates in Congress, it doesn’t seem like it’s going to stabilize anytime soon. It is possible, however, to thrive despite this instability. In fact, we can use these challenges as an opportunity to build a new model of collaboration—one that can be mutually beneficial for all parties involved.
When I worked for Cardinal Health, I saw thousands of medical device sales presentations by hundreds of supplier sales reps. Each supplier organization, and the reps they employed, had different sales strategies—ranging from combative or adversarial, to cooperative and consultative. As I observed these various approaches, I recognized the opportunity for “outside-the-box” collaboration between my provider customers and their suppliers.
During my tenure, I saw increasing levels of success when providers and suppliers established greater trust, communication, and transparency. My own personal sales strategy evolved, and the response was overwhelmingly positive when we crafted agreements that benefited both sides at the negotiating table. That was the key to ensuring we hit our sales goals in the short-term AND the long-term. In addition to hitting our goals, we helped foster long-lasting, mutually beneficial relationships between providers and suppliers.
Much has changed since my time at Cardinal, but I believe that the core fundamentals of this collaborative model can hold true in any healthcare organization and at any scale.
The Emergence of RSAs
In a previous post, we talked about incentives that will get both parties to play ball. With $47 billion in supply spend wasted each year, both suppliers and providers alike are being impacted. Commercialization times for suppliers are increasing. Supply expenses for providers continue to rise and face greater scrutiny.
While I’m not going to write at length about how outcomes-based or value-based contract models are intended to help mitigate some of this waste (you can read our earlier post about that), I do want to reiterate that the appropriate way to assess the value of medical supplies is to move analyses beyond price. Value = Performance / Price. Performance remains a very important, but elusive, metric to this new formula.
So, in the world of outcomes-based care, what does collaboration look like? Right now, risk-sharing agreements (RSAs) are on track to becoming the new standard in medical device contracting. This is certainly a huge step toward collaboration: Suppliers are taking on some of the risk of implementing new devices and providers will feel assured that those devices will performed as promised.
While this is a great start, I’m not sure it goes far enough.
Sharing More Than Risk
There are many more benefits that can be shared through RSAs than just risk. But, without effective monitoring of device performance, those benefits will never be realized.
Early in our market research, I had coffee with an executive from a healthcare provider network. Our conversation turned to RSAs. When I asked how his organization handled monitoring performance at the product level, he told me “to be honest, we’re not monitoring anything at the product level.”
I almost choked on my coffee.
Although nearly all executives will monitor performance and outcomes at a service-line, departmental, or facility level, effective monitoring at the product level has remained unattainable. In these instances, the RSA is unable to serve its initial purpose—sharing risk. How is a provider expected to make informed purchasing decisions if they do not know how their devices are performing?
Now, let’s look at it from the supplier side. The supplier has just entered into an agreement to get their devices into the hands of providers. They have just put additional skin in the game, but because their customers lack continuous, effective performance measurement, there is still a lot of uncertainty regarding the future of that business relationship. They are unable to go to the provider and say, “this device has resulted in a 20% decline in 30-day readmissions” because their customers do not have the metrics to back that up.
Without the proper tools to monitor the performance of these devices and compare them with what has been defined in the agreement, then an RSA is anything but collaborative. It can become meaningless or even detrimental.
There’s a great opportunity for providers and suppliers to get the most out of their risk sharing agreements, and at the center is a collaborative approach to performance monitoring.
By adopting a technology platform that measures performance at the product level and in real time, providers and suppliers will be able to realize the full benefits of their risk-sharing agreements. The company supplying the technology becomes an independent, third party that can be an honest broker between providers and suppliers.
Providers can see if their purchases are performing as expected, and they can use the correlated data to inform their purchasing decisions in the future. Suppliers, on the other hand, can show the true value of their devices to both existing and future customers. Both parties reap the benefits. Plain and simple. That is what true collaboration looks like.