07.31.12
We all know that there has been a shift in U.S. procedures from inpatient to outpatient. But the bottom-line questions are where are the biggest shifts, and which medical specialty benefits? Such trends are important to everyone in medtech because it represents the environment in which our products are used, and the macroeconomic conditions that drive our businesses. A recent McKinsey report titled “Accounting for the Cost of U.S. Healthcare” revealed insight into these questions.1 The objective of the report was to identify the drivers behind a counter-intuitive trend seen beginning in 2002: In 2010 the United States actually saw consistent declines in the rate of spending. We still spent more than any other country on healthcare (and the amount continues to increase), but we did so at a declining rate—from 9.5 percent in 2001 to 3.9 percent in 2010, the lowest level of spending growth in the past 50 years.2
Why It’s Important
In the process of identifying the factors that are driving this spending deceleration, the McKinsey report also generates some rarely seen data for orthopedic device marketers to use in forecasting exercises over the next five years. The report starts with an overall review of U.S. healthcare spending in 2009. (See Chart 1.3)
Chart 1 |
Identifying Trends
In general, the economics of outside-of-hospital procedures drive a higher level of cost-conscious purchasing in outpatient facilities. The takeaway for orthopedic manufacturers from Chart 2 (see Arthroscopy, Knee and Shoulder) is that if your medical specialty is shifting to the outpatient patient procedures listed in this chart, be sure that there is an economic benefit in the new products you are developing for this space.
Chart 2. Change in the Market Share of Procedures Performed in Non-Hospital Settings (2006-2009)4 |
While outpatient facilities have seen growth, Chart 3 shows the relative and large size of office-based procedures. The most surprising data is summarized in Chart 4. The U.S. length of stay patterns are among the lowest when compared to the European Union.6 However, we still have the highest annual per capita spend on hospitalization and average cost per bed day.
Chart 3. Frequency of Surgical Procedures Per 1,000 Patients5 |
Chart 4. International Hospital Cost Data |
The Opportunity
The factors contributing to the high average cost per bed day seen in the United States are complex and need examination. In addition to considering how to make orthopedic devices less expensive, what opportunities may be uncovered through whitespace research that targets new technology development to help reduce U.S. hospital spend per bed day?
References:
- McKinsey Center for U.S. Health System Reform; Accounting for the cost of U.S. Healthcare, December, 2011.
- Sean P. Keehan et al. “National Health Spending Projections Through 2020: Economic Recovery and Reform Drive Faster Spending Growth,” Health Affairs 30, No. 8 (August 2011): 1594-1605.
- Center for Medicare & Medicaid Services, McKinsey analysis.
- Lewin Group analysis of data from OptumInsight (formerly Ingenix), McKinsey analysis.
- Ibid.
- Organization for Economic Cooperation and Development, McKinsey data.
Editor’s note: Readers are invited to submit market data and trend questions to Maria Shepherd. Periodically, selected questions will be presented in this column, with answers from Maria. Send your questions to the email in her bio (below).
Maria Shepherd, founder of Data Decision Group, has 20 years of leadership experience in medical device and life-sciences marketing. Following a career including serving as vice president of marketing for Oridion Medical; director of marketing for Philips Medical; and senior management roles at Boston Scientific Inc., she founded Data Decision Group. Her firm quantitatively and qualitatively sizes opportunities, evaluates new technologies, and assesses prospective acquisitions for medtech companies. Shepherd teaches marketing and product development courses and recently was appointed to the board of the MSBiV Medtech Investment Committee. She can be reached at (617) 548-9892 and mshepherd@ddecisiongroup.com.