New Healthcare Model Reframes Relationships, Risk-Sharing, Between Providers And Companies

Critics have long faulted U.S. medical education for being hidebound, imperious and out of touch with modern health-care needs. The core structure of medical school—two years of basic science followed by two years of clinical work—has been in place since 1910.

Now a wave of innovation is sweeping through medical schools, much of it aimed at producing young doctors who are better prepared to meet the demands of the nation’s changing health-care system.

The U.S. shift to value-based care is transforming relationships. One evolving phenomenon is risk-sharing agreements between providers and healthcare companies, including pharmaceutical, medical device and equipment makers. These agreements allow both parties to share defined risks and opportunities of a shifting reimbursement landscape

Several major med tech and medical device companies, for example, have moved to negotiate deals[1] that share the risks of technology obsolescence and enable them to work closely with the healthcare providers to improve outcomes through better workflows and appropriate technology. As evidence of this growth, in February the public-private partnership of DiA Holding FZCO and the Turkish Ministry of Health signed a five-year contract with Siemens Healthineers to build and outsource their medical laboratory service operations for two new hospitals. This new business model offers a customized solution to increase efficiency and contain costs as part of the Turkish government’s program to restructure the country’s healthcare system.

There are also high-profile alliances, known as Managed Equipment Services (MES) contracts[2], whereby a private sector service provides hospitals with access to innovative medical technology and equipment for an annual fee. Other aspects include:

  • A flexible program typically covers a 10- to 25-year period.
  • Companies that provide MES contracts offer to manage all equipment concerns such as clinical selection, procurement, installation, user training, on-site expertise, maintenance, and ongoing technology refreshes. Some companies also offer so-called “multi-vendor” MES, meaning a product not manufactured by that vendor can be provided within the service agreement, which enables wider clinical choice to hospitals across many technology suppliers.
  • One distinctive feature of such contracts is that they typically include performance improvement programs like workflow redesign, utilization management, and fleet optimization. The long-term nature of these contracts allow MES providers to bring in experts to work with hospital staff to improve clinical, financial, and operational aspects and implement programs using effective tools like data enabled benchmarking and performance dashboards.
  • The risk-sharing portion of an agreement may include clinical and/or economic outcomes that are measured and agreed upon prior to contract signing, and payment is contingent upon meeting those measures.

For imaging in particular, this shift to MES will eventually impact every segment of the imaging provider spectrum, according to an analysis[3] by consulting firm Frost & Sullivan, and may become the standard in five years.

Significant MES partnerships from Siemens Healthineers that have seen improvements in patient care, time efficiencies, and financial savings include:

  • SpainThe Ministry of Health of Murcia[4] signed a 15-year MES contract in 2010 with a goal to improve the technological innovation as well as the financial and planning security of two regional hospitals in Spain. This contract included procurement, installation, and management services for 20,000 medical devices, including mammography, ultrasound, laboratory, IT and third-party equipment for both hospitals. After five years, results have exceeded expectations. They include a 25 percent reduction in administrative costs, a projected €3.2 million in savings, and a 15 percent decline (from 15 to zero percent) in patient rescheduling related to equipment technical failure. Other results include an 83 percent improvement in resolution times and a 90 percent reduction in equipment damage costs for Santa Lucia Cartagena University Hospital. Los Arcos del Mar Menor Hospital saw their mammography waiting lists shrink from two years pre-partnership to no waiting time.
  • The Netherlands – Zaans Medical Centre (ZMC)[5], a 280-bed hospital that entered into a 13-year MES contract in 2013, has seen several improvements. The annual pricing fee of both the equipment and service components is significantly lower through the MES model. System downtime has been nearly eradicated (with uptime improving to 6 percent) due to on-site technical and management capabilities, and 10 extended educational programs have been implemented, increasing user confidence.
  • Canada – In 2015, the William Osler Health System in Canada[6] signed a 15-year contract for a comprehensive suite of services to manage most of its medical imaging equipment at three hospital sites. The contract redesigned processes in the emergency room, making imaging available 24 hours/7 days a week, which is essential to quality diagnostic care and treatment. To support timely response, the hospital chain also added remote reporting to allow radiologists to review exams and issue patient reports regardless of their location – in the hospital, at home or on the go.

This MES approach appeals to both med tech companies and healthcare providers. Med tech companies find MES agreements provide more stable revenues and enhance customer relationships to be more strategic than transactional. They can also activate additional business benefits by deploying technologies that showcase their product and service portfolios to mutual gain.

MES programs help healthcare providers to:

  • Drive capital cost savings through better equipment selection, improved utilization and performance with reduced operational costs. These cost benefits are due to optimized maintenance models, insurance, training and inventory management
  • Remain up-to-date (i.e. operationally effective and clinically relevant) as the med tech fleet ages and technology develops over time
  • Manage med tech service to reduce complexity (and cost) and improve quality to reach desired economic and clinical outcomes
  • Drive value-for-money decision-making around equipment renewal and upgrade
  • Increase staff satisfaction by focusing their attention on patient care
  • Transfer future med tech obsolescence and pricing risks
  • Flexibly introduce cost-effective financing, where and when needed, as a part of an ongoing commercial program
  • Improve patient satisfaction and safety with new technologies, and reduce patient wait times due to optimum fleet sizing and better utilization.

In short, new partnership approaches with med tech companies give providers more opportunity to focus on their core of providing patient care and help the healthcare system restructure incentives to move towards value based care.