Lessons from @IntuitiveSurg – Don’t sell your device, sell your program

1024x1024 As hospital systems consolidate, and as more physicians become hospital employees, the business side of the hospital has taken control over the acquisition of new procedures and technologies. For medical device companies, the days of driving sales via physician champions is over.

Each time I seen an announcement like the new Bridge Clinic at MGH or the new bladder-cancer detection system at Intermountain Medical Center, I am reminded that providers are fundamentally regional service businesses.

For providers, acquiring an innovative new medical device means offering a new service to patients. For a provider, the decision to acquire a new medical device is a business decision to grow the hospital’s service share. The more novel the service, the more business risk faced by the hospital, and the more complicated the purchasing decision. Philip Kotler’s book “Strategic Marketing For Health Care Organizations” gives an example of the new reality:

A hospital is considering adding a sports medicine program to its portfolio of services. Before deciding whether to launch such a program, it plans to do market research to gauge the size of the community need, discover which competitors already offer such a program, consider how it will organize and deliver the program, understand how to price its various services, and determine how profitable the program is likely to be.

Medical device sales and marketing needs to adapt. Intuitive Surgical shows us how.

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Lessons from @IntuitiveSurg – Three Ways to Break Through the Referring Physician Bottleneck

In a 2006 presentation, Intuitive touted data that by implementing the da Vinci marketing programs, large hospitals could triple their prostatectomy volume from pre-robotic surgery levels, and small hospitals could grow their volumes by a factor of 10.

Pretty impressive.

I recently wrote how Intuitive Surgical has done a great job building a consumer brand, by teaching their hospital-based customers to market the robotic surgery service locally to consumers.

A great procedure and a consumer brand are necessary but not sufficient to drive adoption. Referring physicians can still be a bottleneck, preventing patients from even getting to your proceduralist. Many patients are like my mom, who routinely asks her doctor about new medications and procedures for her various medical conditions. If her physician doesn’t know about the procedure, or doesn’t feel comfortable with it, she won’t recommend it.

Intuitive tackles this issue head on.

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US Justice Department Takes Action on Physician Owned Distributorships

US Department of Justice Scales Of Justice (Photo credit: Wikipedia)

I’ve been writing about physician owned distributorships (PODs) for a while. See my previous posts here and here. Whether or not there is improper behavior, physician owned distributorships create the appearance of impropriety and give the medical device industry a bad name.

Earlier in September, the Justice Department finally took action against a physician owned distributorship. It took time for the Office of the Inspector General (OIG) to build its case against PODs generally (see the OIG activities here), and against this distributorship in particular. My guess is that the Justice Department will try to use this case to set a precedent, so the Continue reading “US Justice Department Takes Action on Physician Owned Distributorships” →

There’s a Medical Device For That

Like virtually all cataract surgery patients, my parents were thrilled with their cataract procedures. Why not? After a quick office procedure, their new intraocular lenses (IOLs) gave them better vision than they had experienced for more than a decade.

Now imagine a world with no devices for cataracts, only drugs. Imagine taking one or more medications every day for the rest of your life – drugs which could not cure cataracts, but which slow the inevitable progression towards blindness. Imagine the typical chronic-medication side effects: somewhere between minor discomfort and an increased risk of cardiovascular mortality. How does that sound?

When given a choice, I’ll take medical devices over drugs every time. Here’s why.

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US OIG Warns on Physician Owned Distributors

In 2011 I urged extreme caution for medical device companies considering selling products through physician-owned distributorships (Caution: Physician-Owned Distributorships Ahead). This week, the US Office of the Inspector General (US OIG) issued a fraud alert for physician-owned distributorships, stating that “OIG views PODs as inherently suspect.” Don’t say I didn’t warn you.

Doctor-Owned Device Suppliers Deemed Inherently Suspect – Bloomberg (bloomberg.com)
Buyer Beware: Fraud Alert For Doctor-Owned Device Businesses (commonhealth.wbur.org)

The US Medical Device Sales Model is Changing

US healthcare system consolidation, and the increasing percentage of US employment of physicians directly by healthcare systems, are dramatically changing the US medical device market, as I’ve previously discussed here, here, and here.

This week, Evan Anderson presents a first-hand view of these changes in a great article on the Stanford Biodesign Alumni blog. Highly recommended.

A Tale of Two Specialties

If you haven’t already heard the big news from last week, Johnson and Johnson’s Cordis subsidiary announced its withdrawal from the drug-eluting (DES) stent market, a momentous event for the firm that launched the first DES and created a new multi-billion-dollar medical device sector. Cordis is also shutting down its Conor MedSystems DES business, which it acquired for $1.4 billion in 2007. My reaction: Wow!

Meanwhile, the same week, the NY Times reported that metal-on-metal hip implants may become “the largest product liability cases of this decade.” The FDA website states that “on May 6, 2011 the FDA issued orders for postmarket surveillance studies to manufacturers of metal-on-metal hip systems. The FDA sent 145 orders to 21 manufacturers.”

Two long-term implants. Two medical device sectors. One critical difference.

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The Looming Impact of Healthcare Service Consolidation

St. James' and Murray Hospitals, Butte (1915) — Image by Butte-Silver Bow Public Library via Flickr

Last week, the Boston Globe reported that Lahey Clinic and Beth Israel Deaconess Medical Center held early discussions on a possible merger.

Last November, Cereberus Capital, a private equity firm, bought Caritas Christi, a group of six hospitals in the Boston area. In December the newly named Steward Health Care System bought two more hospitals in the region. This April, Steward added its ninth local hospital. In June, Steward offered to purchase Landmark Medical Center in Rhode Island. More acquisitions are planned.

In January, Northeast Hospital Corp (owner of Beverly Hospital, Addison Gilbert Hospital in Gloucester, BayRidge psychiatric hospital in Lynn, and a Danvers outpatient clinic) began exploring a merger or sale to a larger regional player. By June, Lahey Clinic, Beth Israel Deaconess, Steward Health Care System, and Vanguard Health Systems had all made offers to buy.

In April, Beth Israel Deaconess Medical Center and Milton Hospital announced plans to merge in six months.

Provider consolidation isn’t just a Boston phenomenon. Healthcare services M&A is heating up all across the US. What’s going on, and what does consolidation mean for medical device companies?

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Caution: Physician-Owned Distributorships Ahead

Payments to physicians always raise conflict-of-interest issues for medical device companies (see my post on When Is It Okay to Pay Physicians?). These issues never go away. Today, the Wall Street Journal reported that five US Senators have requested an investigation into the legality of Physician-Owned Distributorships (PODs).

Not being in the spinal implant business, this is the first I’ve ever heard of PODs. What are PODs and what are the implications for medical device companies?

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Hospital-Employed Physicians and Medical Device Opportunities – Update

A few weeks ago I wrote about the growing trend of physicians being employed directly by hospitals rather than in private practices, and how this trend impacts medical device opportunities. Last week the Wall Street Journal published an article “Medical-Device Firms Lose Clout As Hospitals Buy Practices” which is well worth reading. This week, PWC released a report “Health Reform is Driving Hospitals and Physicians Together.” Have you analyzed the impact of this trend on your medical device market over the next few years?

Health Reform is Driving Hospitals and Physicians Together, But They Must Overcome Trust and IT Issues, Find PwC Surveys (prnewswire.com)

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