To get paid, device makers must show return on investment

Medical devices can extend and save lives — but only if someone will pay for them.

A three-day conference on medical devices at the University of Minnesota this week is spotlighting medical breakthroughs that would have been scarcely imaginable in the 20th century. But the lofty talk came down to earth in a small meeting room just before lunch Wednesday, when one speaker with deep experience in the industry displayed a slice of wisdom on the screen at the front of the room: "If a device isn't covered and paid, not much else matters."

Yet securing payment is becoming harder than ever for hospitals and medical device companies, because the ways that are used to reimburse for care have also undergone changes that were scarcely imaginable until recently.

"Times are changing," said Paula Davis, a longtime industry expert who was a director of health economics and reimbursement at Abbott Laboratories until Friday, when she left to take on a similar role at the Maple Grove startup Inspire Medical Systems.

Davis was one of three panelists addressing reimbursement Wednesday at the Design of Medical Devices Conference. The event, now in its 17th year, runs through Thursday.

Davis said medical-device entrepreneurs who wait to think about reimbursement options until just before product launch will find themselves woefully behind. Medical device companies need to think about which specific diagnostic and procedure codes their products could be reimbursed under early in the design process, and they need to accept that it may take years to secure a preferred payment pathway.

Long gone are the days when new medical codes and insurance coverage decisions could be influenced by personal relationships or poorly designed studies, the panelists said.

"Data is the new currency," said panelist Stephen Clark, a chief strategy officer with Optum, the fast-growing data analytics and services subsidiary of the insurance giant UnitedHealth Group based in Minnetonka.

Clark noted that the company has begun using artificial intelligence to analyze vast data sets on health care payments and outcomes to judge the overarching value of new treatments. These value-based payments require a new "value-based assessment framework," which is happening across the industry.

"If you are thinking through how payers are thinking about this, how people that are thinking about managing risk, you have to get a return on investment," Clark told the audience. "It's a two-to-one minimum."

He noted that some makers of medical products will benefit in this value-based analysis, and others will not. "If you are on the efficient frontier, you will be paid. If you are not on the efficient frontier, you better think about a different way of getting it paid for, or move on."

After the panel talk, Thomas Morizio, CEO of Edina-based wearable device maker RxFunction, said navigating the payment maze may require upfront investments by a device company for personnel and proprietary data. "It takes time, and you have to invest accordingly," he said.

For RxFunction, a value-based framework could mean comparing the total costs for a patient who has been hospitalized for falls because they can't feel their feet, against a patient whose RxFunction device costs are higher but their costs of care for falls are lower over a given period of time. The company is also collecting data on patient satisfaction with the device, because that's become a key metric for insurers.

"If we can begin to have data on patient satisfaction and falls, at some point, we could see that the population that is using this technology do fall less, and they are more satisfied with their overall quality of life," RxFunction President and co-founder Lars Oddsson said.