The state of the medical device industry: 10 key thoughts

Written by Shayna Korol | June 20, 2018 | Print  |

As surgical care shifts toward lower cost, lower acuity settings, medical device companies have evolved to meet the needs of the healthcare landscape.

Ryan Bond, director of healthcare solutions at NuVasive, and Bill Wilder, director of outpatient solutions at DePuy Synthes, a Johnson & Johnson company, spoke about the state of the medical device industry in a panel discussion at Becker's 16th Annual Future of Spine + The Spine, Orthopedic and Pain Management-Driven ASC Conference on June 14 in Chicago.

Here are key highlights from the discussion:

Trend towards alignment

Ryan Bond: "It's not uncommon for 20 to 25 spine companies to be selling to a hospital. Larger surgery center chains are a little more moderate than that, but they're struggling to find the right blend of how many suppliers are needed in order to support their surgeon customers. One difference that we see in surgery centers that are physician-owned with a focus on spine is a trend towards greater surgeon alignment, so maybe they're working with two or three companies instead of six or seven. In 2017, we worked with 112 surgery centers across the country, which is surprising to a lot of people that we have that much spine business in the ambulatory setting, and it's growing fairly organically and fairly rapidly."

Bill Wilder: "By nature, surgery centers want to provide choice, especially in an equity ownership with the physician. There's a trend towards alignment: around processes, protocols and product choices, and we're seeing that trend start to accelerate."

Price pressures

RB: "Over the last eight years, there has been a net increase in the national average Medicare DRG for spine. The ASP average selling price is declining for all of us. There's some expansion for spine, but price pressure is ever-present. In surgery centers, we do see some price pressure softening, because payers are looking at the arbitrage between the right patients, what's safe and effective, and if they can save money by having the procedures done in a lower cost site of service."          

BW: "We all know that the typical reimbursement in those lower acuity settings is less, and the pressure on margin and price is consistent. As it relates to the growth of joints in the ASC space, we see market growth in the double digits. When you look at the Johnson & Johnson medical device company family, we play in orthopedics, surgery, vision care, so if one of those businesses have a softer year, it's picked up by one of the other companies."

The fastest growing segment

RB: "Surgery centers are NuVasive's fastest-growing customer segment. As we look at the surgery center space specifically, just from a purely economic standpoint, the value to us as customers lies in the lower cost site-of-service. There are less fixed costs than in a hospital."

BW: "The surgery center space is growing fastest. The ASC setting is the sweet spot for achieving Triple Aim performance, which is the requirement to participate in today's healthcare environment."

Migration of spine to ASCs

RB: "There's no doubt for us the surgeon is always the cornerstone. We're seeing more and more spine surgery done in a surgery center setting. Not only is the surgeon a clinical customer now, they're an operational and economic customer. We're also realizing that there are other customers in this dynamic and we need to, as a pure play company, lean into them more. The five customers are the surgeon, the patient, the hospitals, surgery centers and the payer, which is insurance companies and employers."

BW: "The one thing that I would add to that is with the migration of higher acuity cases to lower acuity settings, the customer that we didn't pay as much attention to a decade ago that we do now is surgery center management companies. So that's probably been the one change — but it's always been the surgeon as the focus."

What NuVasive and DePuy Synthes are doing

RB: "For the first time this year, we have an option for employees that need elective surgery; they can choose to have that surgery done in an ambulatory setting, and the company will pick up the tab for that. We're trying to put our money where our mouth is. There is a cost arbitrage between a traditional hospital and a forward-thinking surgery center, which leads to major savings for us as a self-funded company."

BW: "Customers are asking how we are going to minimize complexity and make it simpler for them. One of the things that we have done in the Johnson & Johnson family of medical device companies is having one person represent the entire portfolio to try to simplify things."

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