Integrated health system Spectrum Health has struck its first risk-based deal with medical device manufacturer Medtronic.
Heart failure patients who receive a type of Medtronic pacemaker will have their progress tracked, including 30-hospital readmissions and other measures. Medtronic will reimburse Spectrum is the patient doesn’t fare well.
“A patient who has suboptimal outcomes also comes generally with a much higher cost,” said Bill Selles, the senior director of procurement at the 14-hospital system based in Grand Rapids, Michigan. “If we do have outcomes that are suboptimal, Medtronic has been helping to pick up some of the burden associated with things like unexpected readmissions where health systems aren’t compensated and to make sure that they’re involved with us in ensuring the best outcome.”
Medtronic also uses an algorithm that adjusts the pacemaker based on real-time patient heart rhythm data, which the company says prevents death and reduces the risk of other adverse outcomes.
Selles said Spectrum has no obligation to use Medtronic products or to grow its business with the device manufacturer.
“However, I would expect that that would happen, assuming we see the outcomes and we see a supplier who’s working differently, I would expect us to want to grow that relationship,” Selles said.
This could serve as an incentive to a drug or device manufacturer who wants to grow its market share. Selles said he thinks the future of health care purchasing is with risk-based contracts, and there’s growing evidence that providers are moving that way. A 2019 report from Deloitte found that hospitals were using their purchasing power to get better deals on new technologies. Meanwhile, bundled payment programs that cover episodes like a heart failure hospital episode do not cover the cost of technology, which creates a need to make sure the device is worth paying for and outcomes come as promised.
“If I think about my role leading procurement for Spectrum Health, historically I’m at the table negotiating piece price on a particular supply or drug; and in most organizations, that’s exactly what happens,” Selles said. “But that’s only a small fraction of the total cost to serve a patient. And so the big incentive for Spectrum Health is that this is a supplier who is willingly and eagerly taking on more accountability for the outcomes of their products.”
And indeed, Medtronic told The Wall Street Journal that it’d signed about 1,000 risk-based contracts between 2017 and 2018. The Deloitte report found that Bard Medical sells its antimicrobial catheter at a discount if a health provider agrees to split savings if a patient doesn’t end up getting a urinary tract infection.
Selles said Spectrum also is looking at potential opportunities with Medtronic for new devices for nervous system conditions and other cardiovascular conditions. He also added that the collaboration took a lot of work to set up, including data sharing infrastructure, and working with a wide array of departments, from finance and quality to medical operations.