The Future Lies in Value-Based Healthcare: Why we need to encourage our customers to base procurement decisions on more than the purchasing price

Justin Carty, CEO of IMSTA spoke with Irish Times journalist Sylvia Thompson

The cheapest product rarely gives customers the best value, according to Justin Carty, the CEO of the Irish Medical and Surgical Trade Association.  Representing products ranging from bandages to CAT scans, Carty has to navigate a careful route when promoting the medical device industry to public and private hospital purchasers keen to get the best value for money with limited budgets.

But, as luck would have it, Carty’s agenda fits completely with the new EU public procurement directive.  This 2014 EU directive presents a holistic analysis of value based health care which evaluates the entire life cycle, safety and effectiveness of products and not just the purchasing price.  It also encourages the industry to define best price-quality ratio and to collaborate more closely with purchasers at the pre-tendering phase.

A recent report from the Boston Consulting Group, commissioned by Med Tech Europe (of which IMTSA is a member) presents a clear picture on how things need to change.  Currently, most health care providers purchase medical products on the basis of the up-front purchase price, which, the consultants argue cloud the true cost of care.

The report includes insightful examples of what happens when broader criteria are used to purchase equipment.  Take for instance, the Karolinska University Hospital in Sweden whose foutreen year tender for imaging services which included MRI, ultrasound and CT scanners; by tendering for imaging services rather than equipment, the contract included maintenance of technical standards, upgrades and replacement during the fourteen year period.  Similarly, when the Stockholm County Council (which runs most of the city’s hospitals) sought tenders for wound care products, it asked suppliers to include calculations for the number of dressing changes, staff and transportation costs for changing these dressings.  The winning bid was from the highest priced products which showed a lower cost of care over time.

The Boston Consulting Group report argues that smarter procurement such as these examples embraces a value-based framework that is aligned with the new EU directive.   To include all the hidden costs of the equipment in terms of its durability and suitability to patient’s needs, the group suggests a calculation based on patient outcomes divided by the costs of achieving these outcomes.

Carty hopes this more holistic approach to procurement will be embraced by healthcare providers in Ireland.  “This new procurement process focuses more on how to achieve better patient outcomes,” he says.  Carty also suggests it would encourage clinicians to work more closely with the medical technology industry rather than leaving procurement decisions to those with their eyes firmly placed on the purchase price alone.

A natural extension of this approach would, according to Carty, be for healthcare providers to seek solutions to ongoing problems through industry competitions.  This already happens in some countries such as the UK where the Small Business Innovation Research (SBIR) mechanism is used.   There, NHS England’s SBRI Healthcare has worked with companies to come up with new solutions to problems in diverse areas such as diabetic foot ulcers, child and adolescent mental health and brain injury.  The key element of effective SBIR programmes is that clinicians and front-line staff are the ones to identify the unmet need.

In his role as CEO of IMSTA, Carty proposed the SBIR model to a cross-departmental committee at Government level in 2015.

“We proposed that one to two per cent of the HSE non-pay procurement budget of €500 million could be ring-fenced to find solutions to identified healthcare problems,” he explains.    The proposal was repeated in the IMSTA submission to the Oireachtas Committee on the Future of Healthcare in August 2016.  As yet, the model hasn’t been embraced by the Health Services Executive.

Now, in 2017, Carty is keen to move the agenda forwards.  To that end, Value-Based Healthcare Strategies is the theme of the IMSTA Annual Conference in the Crown Plaza Hotel, Santry on March 22.  Confirmed speakers include Dr Tom Kelley from ICHOM, the International Consortium for Health Outcomes Measurement, Bill Maher, the CEO of the Bons Secours Hospital Group and Frank Sullivan, Adjunct Professor in Medicine and Director of Prostate Cancer Institute, NUIG.  Throughout the conference, delegates will hear about the role of healthcare innovation in improving patient and clinical outcomes. Proposals for a new economic evaluation framework for medtech will also be discussed. 

Ultimately, Carty is keen to spread the message about the role of medical technology companies in helping people live longer, healthier and more productive lives.   “These life changing innovations also bring savings across the health care system by replacing more expensive procedures, reducing hospital stays and allowing people to return to work and home more quickly,” says Carty.

However, he adds a note of caution. “In order to understand the value and benefits of medical technology and ensure continued leadership of this industry, we must have the right public policies to support investment, innovation and patient access.”

Article for IMSTA Newsletter, Spring 2017