Crossroad for Cath Labs: Outsourcing Is Moving In

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The role of some cardiac device makers is evolving in the cath lab as they expand from selling products to providing services and solutions. It’s a trend that is likely to continue globally.

Nudged by necessity

About four years ago, Kevin F. Fox, MD, faced a predicament. His hospital system needed new equipment for catheterization labs but lacked the capital to buy it. As chief of cardiology at Imperial College Healthcare NHS Trust in London (U.K.), he and administrators weighed their options. They could lease equipment from a vendor, but over time that likely would be even more costly than buying. Going to the other extreme, they could negotiate with a third party to provide a cath lab and then send their patients there.

The U.K. health system was also warming up to the idea of public–private partnerships, a shift that allowed Imperial College to take a novel approach that didn’t require capital and wouldn’t add costs long term or force them to shuttle patients elsewhere. They could bring in a company that would carry the upfront cost of the equipment and provide both advisory services and nonclinical staff to help make the cath labs more efficient. In return, Imperial College would repay the company on a per-case basis over a seven-year contract.

The company? Medtronic, a nearly 70-year-old manufacturer of cardiac devices and other technologies.

With some trepidation, Imperial College signed on the dotted line in 2013 to work with a fledgling arm of Medtronic called Integrated Health Solutions. As of the third quarter of the 2017 fiscal year, the Medtronic group had 124 contracts valued at $2.6 billion over six years with health systems in Europe, Canada, Latin America, the Mideast, Africa and—a first—the U.S., with an agreement unveiled in late 2016 with University Hospitals in Cleveland.

“For me, the concerns about what might go wrong, losing control, etc., just didn’t happen,” Fox says. “On Wednesday morning I was working with a fully staffed, fully stocked cath lab getting through work and not having to worry about things like, have I got the right kit.”

 

Jonas Funk, L.E.K. Consulting
 - Jonas Funk, L.E.K. Consulting

From products to problem solving

The transition from a traditional medical device maker into a diversified business that markets services, solutions and added value to health systems isn’t unique to Medtronic. Boston Scientific rolled out Advantics in 2015, a group that sometimes partners with other companies to help hospitals address strategic needs. Imaging, information technology and other industries also have made arrangements with hospitals that go beyond simply supplying a product.

It is a growing trend, according to industry analysts. In a survey of more than 150 hospital administrators in the U.S., respondents placed increasing value on a range of services from medical technology companies between 2014 and 2016 (see figure on page 9). Providing financial and capital services and outsourced nonclinical functions showed the biggest spikes. The study was conducted by L.E.K. Consulting, an international firm with offices in Boston and Chicago.

The increased emphasis on value and accountability in the U.S., Europe and elsewhere is forcing health systems to look outside their own institutions for solutions, says Jonas Funk, managing director and partner at L.E.K.’s Chicago office and co-author of the “2016 Strategic Hospital Priorities Study.” 

 “Given the tightening of the screws and the challenges the hospitals are facing, they are becoming more receptive to how to benefit from the expertise and standardization potential that external partners can help give to them,” says Funk, who has been studying the medical tech sector for about 20 years. “We are seeing not only an increase to receptivity to deeper partnership, which I think is consistent with what Medtronic is doing with University Hospitals, but we are also seeing increases in outsourcing.” 

The global cardiac device companies say that they are well positioned to identify and share best practices in the cath lab because their staff have observed practices around the world. Industry proctors, for instance, give physicians guidance on techniques and devices during product rollouts. Their role is essential until physicians have gained sufficient expertise, observes Srihari S. Naidu, MD, the lead author of the Society for Cardiovascular Angiography and Interventions’ 2016 expert consensus statement on best practices in the cath lab (Catheter Cardiovac Interv 2016;88[3]:407-23).

Physicians whose experiences are limited to one or a few institutions may be myopic, notes David G. Hurrell, MD, of the Minneapolis Heart Institute at Abbott Northwestern Hospital. “Sometimes what is staring you in the face is not so obvious, but it is glaring perhaps to an industry team that comes in and will help you through it,” he says.

Hospitals also might benefit from a bigger picture perspective, Funk says, especially if that insight is accompanied by data-driven guidance and support. “It’s one thing to know what you need to do, which often isn’t the case, and it’s another thing to have the resources to do that standardization,” he says. “A lot of the problem is that there is a lot of variation in how care is delivered, even within the same hospital system.”

How Hospital Administrators Perceive Value of Potential Medtech Services

Hospital administrators have been increasingly interested in an expanded range of services that medtech firms provide, reports L.E.K. Consulting. For its 2016 Strategic Hospital Priorities Study, L.E.K. asked administrators to rate various services that medtech services could provide on a scale of 1 to 7, where 1 meant “not at all valuable” and 7 meant “very valuable.” Respondents who selected “Don’t know” were excluded.

Source: L.E.K. Consulting. 2016 Strategic Hospital Priorities Study; reprinted with permission.
 - 2016 Hospital Study-graph

David G. Hurrell, MD, Minneapolis Heart Institute at Abbott Northwestern Hospital
 - David G. Hurrell, MD, Minneapolis Heart Institute at Abbott Northwestern Hospital

Past precedence

Both Boston Scientific’s Advantics and Medtronic’s Integrated Health Solutions say they customize cardiovascular services to meet an individual health system’s needs, whether it is increasing throughput in the cath labs, reducing costs, managing inventory, improving patient outcomes or other efforts designed to add value. Boston Scientific has signed agreements with Together MD, a data analytics software supplier; MedAxiom, a cardiovascular consulting company; and Accenture, a services business. Medtronic provides not just services but also staff to handle some nonclinical cath lab duties.

These newer business units didn’t form in a vacuum. Earlier industry–hospital experiences paved their way. Minneapolis Heart Institute has worked with both companies, but not their formal solutions arms, to integrate Six Sigma and lean processes into its practice, Hurrell says. “They have expertise in industry around efficiency and running a business that we have not had in healthcare,” he says. “It has not been in our culture.”

 - tips-successful-partnershipBoston Scientific, for instance, analyzed the institute’s system for monitoring patients implanted with devices and developed a lean alternative that “dramatically changed our efficiency,” Hurrell says. “The people who are doing the day-to-day device management are swamped with patient phone calls and patient appointments. They don’t have the time to work on it. By bringing in this outside team for a short time over maybe three months, we were able to totally turn around how we do that work.” 

Imperial College, with five hospitals that serve nearly 2 million people in northwest London, was an early adopter and a test bed for Integrated Health Solutions. The health system includes five cath labs that perform between 2,000 and 3,000 interventional, coronary, electrophysiology and structural procedures annually, Fox estimates.

“Undoubtedly we were part of their learning curve,” Fox says. “If we can demonstrate success in the partnership, then that is good all around.” 

In a case study, Medtronic claimed that within its first year Integrated Health Solutions had refurbished two of Imperial College’s cath labs, increased start times from 58 percent to 93 percent, cut the time looking for items by 75 minutes a day, reduced supply costs by hundreds of thousands of dollars and trimmed staffing costs.

“There was a risk-share element in that if we did not improve the amount of work and the efficiency of the labs, the financial hit was shared in some way between us,” Fox says.

Now four years into their agreement, it is more challenging to measure savings and efficiencies, Fox says. Since 2013, the cath labs have faced an increase in acute cases and a patient population that is more complex. These take precedence over scheduled elective cases and reduce the number of procedures that can be performed in a day. The health system also has made it a priority to improve its response time in acute cases. In addition, Imperial College has been struggling with understaffing and retention because of a limited talent pool, a problem that plagues all of the U.K., according to Fox.

“Medtronic Integrated [Health] Solutions has landed in this very complicated and difficult environment for healthcare where there are huge pressures,” Fox says. “It may well have been without the partnership we would have simply drowned. The fact that we are still able to offer what I believe is an excellent service, and in some ways a better service, is partly due to the partnership we have.”

Srihari S. Naidu, MD, lead author of “SCAI Expert Consensus Statement: 2016 Best Practices in the Cardiac Catheterization Laboratory”
 - Naidu

Quelling conflicts of interest

Funk sees the trend for industry–hospital alignments increasing along with payer demands for value. Device companies may have the edge over competitors such as information technology, staffing or consulting services, given their existing relationships as suppliers and their clinical expertise. “Then there also is the fact that a lot of the data and analytics that would be useful to leverage in identifying best practices and ways to standardize to a best practice is resident, or at least potentially resident, in the hands of companies that have products being used vs. a pure service company,” he says.

But their identity as device makers also is a potential handicap. Naidu, who is the director of the Hypertrophic Cardiomyopathy Program at Westchester Medical Center’s heart and vascular institute in New York, questions if a service- or solutions-focused branch of a device manufacturer can remain truly neutral about products, and says firewalls need to be in place to negate that possibility.

“We need to be cognizant, and they also have to be cognizant, that there can be a perception of and potential reality that there is a mixing of interest here,” he cautions.

Embedding nonclinical staff in the cath lab relieves hospital clinicians of tasks such as supply management and scheduling and allows them to concentrate on patients and their care. Fox likens the initial experience to that of bringing any new employee into a workplace with a period of adjustments as staff build new relationships.  

As part of its agreement with University Hospitals, Medtronic employees provide nonclinical support with the goal of improving efficiency while maintaining costs, according to John McCarthy, vice president of Medtronic’s Americas Integrated Health Solutions. University Hospitals declined to comment for this article, saying it was too early in the process to discuss the agreement.

The practice raises additional concerns, though. Naidu cites the risk of bias in favor of a company as company staff and hospital employees and administrators work closely together. That potential bias might influence decisions about products that aren’t comparable in cost or quality.

“I would be hesitant to do that, personally,” he says. “You would have to track it and make sure this kind of creep does not happen.” One way to avoid that real or perceived conflict would be for the solution business to spin off from its parent company, he suggests.

Fox has not seen any such compromising. “I think my colleagues felt they may be in a situation where they would lose clinical control, but that really hasn’t happened. They still stand in the cath lab using the equipment they choose with the staff the hospital employs doing what they feel is right for the patient.”

Funk, saying skeptics cite the analogy of a fox in a henhouse, says the onus is on device companies to prove that the value they offer supersedes other company interests. “That is a potential, perceived conflict that medical device companies will need to help mitigate against,” he says.

The 2016 consensus statement marked SCAI’s first time addressing industry in the cath lab. The document touched on circumstances where the presence of an industry representative or clinical specialist was appropriate or questionable and emphasized the need to follow policies set by the medical director and hospital.

It did not include the expanding role of device manufacturers as service and solutions businesses. If this trend continues, as Funk and Hurrell expect will be the case, then the authors likely will revisit the topic and offer directives in the next iteration, Naidu says.

“I don’t know what the answer is right now because in reality we haven’t seen many hospitals do this [for] a metric on whether it is acceptable or harmful,” Naidu says. “We would need to look at those and learn from those experiences.”