This month's headlines
 

Oh, say can you CFO? Among hospital CFOs, the acquisition of medical technology isn't always at the top of the priority list. Some IMDA members are trying to change that. Needed: Disruptive Innovation. How do we bring healthcare to people better, faster, cheaper? Through innovation, says Joe Flower, recent IMDA speaker, in an article published in Physician Executive magazine. Flower draws on his experience at the recent 2009 IMDA Conference in Charleston to make his point. New allied member: Benlan. After establishing a strong position in Canada, IMDA's newest allied member hopes to do the same in the United States. And it's looking for IMDA members for help. Medical device makers object to $40 billion tax. Medical device manufacturers are mad about the Senate Finance Committee's suggestion that they be taxed $40 billion over 10 years as their contribution to lower healthcare costs. Balanced approach needed for comparative effectiveness research. In a recently published White Paper, the American College of Physicians strongly endorse comparative-effectiveness research, but not if it hinders the introduction of new medical technology.

Keystone, Colo., is the site of the 2010 Annual Conference, May 16-18.

Oh, say can you CFO? IMDA members make inroads into the C suite

Hospital CFOs have a lot on their plate. Charity care, accounts receivable days outstanding, payer negotiations, their facility's investment portfolio. And even though the acquisition of clinically effective and cost-effective medical technology should be high on their list of priorities, it's not always top of mind. Some IMDA members are trying to change that.

"For years, we've had a campaign to brand Martab Medical to the 'C level' and high materials level," says John Marmo, president of the Mahwah, N.J.-based company. The reason is simple: The decision to implement innovative, cost-effective technology throughout a hospital or hospital system -- not just a single department -- must come from the C level, not a department head. "Our goal for many years has been to get to the C level person to talk about the clinical and economic benefits [of technology] for the entire facility."

Gaining an audience with the C suite isn't an easy thing to do. That said, during the last year, Marmo has had more C-level meetings than ever before. While clinicians' support for a new product or piece of equipment is essential, it won't by itself lead to acquisition, he says. "The i's need to be dotted and the t's crossed. I've been in front of five different C level people to explain clinically and economically why [acquiring a new medical device] makes sense for them. It's my opportunity to create a rapport with them and to talk to them about Martab as a whole.

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"Five years ago, we put together a plan to brand Martab," he continues. "Our message is, 'Martab is here to introduce innovative technologies that are cost-effective, and we represent these manufacturers who can help us do that.' With the C level, I'll say, 'I'm not here to talk to you about saving a nickel on band-aids. I want to talk to you about saving a significant amount of money by introducing new technologies into your hospital, and here are the potential savings.'"

IMDA members contemplating such an approach need to keep a couple of things in mind, says Marmo.

First, be prepared to accept the fact that COOs and CFOs are often dragged to meetings with suppliers by key clinicians. It is incumbent on the IMDA member to demonstrate to them exactly how and why the new technology will benefit the hospital.

Second, and closely related to the first, do your homework. Be prepared to produce documentation to support your claim that the new technology will indeed result in financial and clinical benefits.

Third, be creative in helping the hospital or IDN acquire the technology you're selling, particularly if it is capital equipment. Even if the CFO recognizes the potential benefit of a new piece of equipment, he or she may lack the budget to acquire it, and decide to hold off until next year. That's the point at which the IMDA member has to be prepared with creative solutions. Perhaps it means holding the paper on the equipment for a while, or lowering the price on the equipment while increasing the price of disposables. Private, non-profit hospitals will have more options than publicly owned institutions in this regard.

Something to talk about

In order to penetrate the C suite, it's important for the IMDA member to be aware of the CFOs' chief concerns. You have to speak their language. But it helps to enlist the aid of your department champions, says Duke Johns, president, Medical Specialties, New Orleans.

In many cases, those clinicians or department heads aren't equipped to carry the flag, because they don't know "CFO speak," says Johns. So he is embarking on a project to 1) become more familiar with the concerns and priorities of the C suite, and 2) share those with his immediate customers, so they can make a more compelling case to their CFOs about the need for new technology.

"My goal is to get to two or three CFOs and ask them, 'If your greatest dream were to come true, what would your respiratory therapist, anesthesiologist, ER director say to you [about new technology]? What do they need to understand about your headaches? What's in it for you from the perspective of the overall profitability of the hospital? Which DRGs are you losing money on? What do you mean by reimbursement, patient mix, risk? What do hospital-acquired infections really cost you? What's the cost of a patient having to spend an extra day in the ICU?'" He wants to share what he learns with the department heads.

In essence, Johns wants to build a Rosetta Stone, with which he can teach clinicians about the pain that's being felt by the C suite executives. "I want to reverse the whole process," he says. "If we can't get to the CFO, we can get to our customers and show them how to explain [the benefits of a technology] to the CFO." By doing so, IMDA members -- and their allies in the departments -- may help CFOs focus less on saving a few dollars on purchase price, and more on realizing larger, more systemic savings that new technology can bring about.

Borrowing from Mercury Medical Vice President of Sales Dave Tyson, Johns says that that IMDA members and clinicians can most effectively sell a new technology by discussing four things: its clinical advantages, financial advantages, potential to reduce liability, and user ease and effectiveness.

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How do we bring healthcare to people better, faster, cheaper? Through innovation, says Joe Flower, recent IMDA speaker, in an article published in the September/October 2009 edition of Physician Executive, the journal of the American College of Physician Executives. Innovation in medical devices and technologies, as well as innovation in management and operations, can help providers improve care without adding cost to the system, he says in the article, "Knocking Down Your Organization's Barriers to Efficiency and Effectiveness."

"Since the U.S. pays more and in many ways gets less than anyone else, the hunger for true cost-effectiveness is stronger here than anywhere else, and may well lead to startling new methods," writes Flower, who draws on his experience at the 2009 IMDA Conference in Charleston in the article. "So that's why I am looking at a walker. No, not for my own rapidly approaching enfeeblement. I am looking at a walker because what we need, at every level in health care, in every form imaginable, is disruptive innovation, the kind that does not show up from the big, established companies, but from garage inventors, tiny labs, and clever geniuses.

"So I'm here at a tiny meeting of independent medical distributors, and one company is selling a special, hot, new walker. 'If I were a hospital, why would I buy this?' I ask the vice president who is showing it. 'It looks more expensive than the usual flimsy kind.'

"The answer: It is more expensive, but it incorporates racks and attachments for infusion pumps, drips, telemetry, and whatever else the patient needs to drag along," he continues. "A recovering patient taking those important but vulnerable steps down the hallway needs only one helper, not an entourage. Money spent on the walker is more than saved in labor costs.

"Brilliant. And one after another, the participants show me devices with similar characteristics: they're new, they cost the same or more than the competition, but could save a lot of money either by being more effective or safer, or by allowing a patient to go home sooner, lowering length of stay."

Missed this year's Manufacturers Forum in Charleston? Check out the manufacturers who attended this year's Forum, as well as those who helped sponsor the Annual Conference, by going to the "Members Only" portion of the IMDA Website, www.imda.org. Imda.org is your portal to the market.

In the article, Flower cites three other innovative products he saw at the IMDA Conference (though he doesn't reference the Conference by name):

• A non-invasive cerebral oximeter for use during cardiac surgery, which can save an average $2,200 per patient by avoiding "pump head" cognitive impairment.

• An oral swab that tests a patient's response to warfarin, which could, according to independent analysis, prevent some 18,000 strokes and $1.1 billion in costs per year.

• An intraosseous infusion system that eliminates infection associated with femoral central line placements.

"So why aren't we already using these breakthrough technologies?" he asks. "Because hospitals and clinics put up numerous barriers to their use -- often, ironically, in the name of cost savings."

Flower's message to providers is that in the absence of systematic thinking, "cost savings will not save you costs, quality improvements will not improve your quality, and more effective techniques will not improve your effectiveness."

And systematic thinking is what's lacking among providers today, he says. For example, materials managers pursue reductions in unit costs without considering a device's impact on "systemic savings," such as its ability to bring about shorter length of stay or improved respiratory outcomes. Respiratory therapists are rewarded financially for giving more treatments, but not for yielding better outcomes (through new medical technology, for example).

And CFOs? They "disdain to get into nuts-and-bolts operations questions," writes Flower. "They will not even take a call from a manufacturer or distributor. They often feel they have dealt with the cost problem by working with group purchasing organizations and vendor certification firms. Yet these very solutions can act as bulwarks against disruptive innovation."

The bottom line? By sticking to old, short-sighted ways of thinking, providers "will never see the thousand ways in which the organization itself actively blocks process innovation."

Click here to view a PDF of the article. IMDA thanks Physician Executive for sharing this PDF with us.

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After establishing a strong position in Canada, IMDA's newest allied member, Benlan Inc., hopes to do the same in the United States. And it is looking to IMDA members for help.

Based in Oakville, Ont., Benlan offers a wide range of services, from the supply of parts, to bulk/non-sterile or finished/sterile, packaged and labeled products, according to Don McClintock, executive director of sales and marketing, U.S. and International.

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Benlan manufactures products in the following categories:

• Anesthesia kits and trays.

• Contrast management.

• Custom kits (e.g., dressing and IV kits and trays, central line trays and suture removal kits).

• Dialysis trays.

• Enteral feeding devices and supplies for adult and neonatal applications.

• Huber needles (standard and safety versions for port access).

• Insufflation filters and sets.

• Respiratory-related products, including oxygen tubes, suction catheters and kits, suction collection sets and suction connecting tubes.

• Urology-related products (e.g., cysto and TUR sets, Foley catheterization trays, urethral catheters and catheterization trays, irrigation trays and rectal tubes).

• Yankauers.

In addition, the company makes molded components and tubing.

Products can be made under a private-label arrangement or under the company's MedRX brand.

ISO certified

Benlan was established in 1978 as a supplier of medical grade tubing and molded components. With new ownership in 1989, the company grew rapidly in terms of products offered and customers served. In 1992, Benlan moved to its current 50,000-square-foot facility near Buffalo, N.Y. The company has received the ISO 9001/13485 certification and is an FDA-registered facility, says McClintock.

On a limited basis, Benlan already sells certain products and components into the United States, including enteral, suction catheters, urethral catheters, various urology products and insufflation devices. But the company has been focused primarily in Canada, its products being carried on an exclusive basis by Canadian Hospital Specialties Ltd., also based in Oakville.

"Socialized medicine has been in place in Canada since the late '60s," says McClintock. "Benlan and…CHS have succeeded and thrived in the socialized environment with innovative products and value-added solutions to meet specific needs of the end user."

It was through CHS that McClintock learned of IMDA. "If you take what we have done on a volume basis with the various MedRX brands in Canada over the past 30 years and extrapolate that into the size of the overall U.S. market, we feel there is a tremendous opportunity with our current line as well as ones we are developing."

IMDA members can welcome Benlan to IMDA by contacting Don McClintock at (585) 381-3361 or by e-mail.

Medical device makers object to $40 billion tax Some question whether tax is payback for trying to pass the buck to GPOs

Medical device manufacturers are mad about the Senate Finance Committee's suggestion that they be taxed $40 billion over 10 years as their contribution to lower healthcare costs. The tax was part of the Finance Committee's health reform proposal, released by Committee Chairman Max Baucus (D-Mont.) on Sept. 16.

"We oppose the inclusion of an unfair and counterproductive $40 billion tax on medical devices," said Stephen J. Ubl, president and CEO of the Advanced Medical Technology Association (AdvaMed), in a statement released on the same day.

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"The device industry is already making substantial contributions to the cost of health reform through billions of dollars in cuts to our major customers such as hospitals, clinical labs, durable medical equipment providers and imaging services that will be passed on to manufacturers," said Ubl. "In addition, restructuring of the health care system to emphasize efficiency, better prevention and management of chronic disease, patient-centered comparative effectiveness research -- all of which we support -- will have a profound impact on our industry.

"In view of these changes, the proposed $40 billion tax on the medical device industry is particularly onerous. Such a tax will sharply cut the resources available for research and development of life-saving medical treatments. For context, consider that the majority of device companies combined spent a total of about $9.6 billion on research and development in 2007. This new tax is nearly half that amount. The tax also exceeds the total amount of venture capital dollars invested in device companies in 2007 ($3.7B) and on an annual basis, is four times what device companies raised in 2007 for IPOs ($1B)."

An article appearing in the Sept. 15 edition of The Wall Street Journal suggested that the proposed $40 billion tax could be payback by the government for a strategic blunder medical device manufacturers had committed earlier in the year.

"Device makers were among the health-related industries that went to the White House this spring to volunteer financial concessions as part of an overhaul," according to the article. "They were then asked to offer a dollar amount in savings, representatives of the device industry and congressional aides said. Instead, the companies suggested that the government levy a tax on their adversaries: hospital-purchasing groups that negotiate for lower prices on medical supplies and some devices. Some senators, including Finance Committee Chairman Sen. Max Baucus (D., Mont.), were troubled that the device makers were 'offering up other people's money,' said a person close to the negotiations."

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American College of Physicians White Paper Balanced approach needed for comparative effectiveness research

Despite the public outcry by some against comparative effectiveness research, (see "Hot Button: Comparative effectiveness raises the ire of some," February 2009 IMDA Update), a prominent medical organization has voiced its support for the concept. That said, the American College of Physicians believes that such research should not be allowed to hinder the introduction of new technology into the market.

In its recently published White Paper, "Controlling Health Care Costs While Promoting the Best Possible Health Outcomes," the ACP decries the lack of oversight of the implementation of new technology. The organization represents 129,000 physicians and medical students.

In the paper, the ACP references an analysis by the Kaiser Family Foundation attributing at least half of the growth in medical spending in recent years to technological change. It also cites a recent review by the Congressional Budget Office that found that health economists largely agree that the increase in healthcare spending over the past several decades has been primarily the result of "the emergence of new medical technologies and services and their adoption and widespread diffusion by the U.S. health care system."

Most vexing, says ACP, is the fact that technology is implemented in the absence of solid information on how well it works, and whether it is, in fact, an improvement upon existing technology. "This 'evidence gap' hinders medical care decision-making, typically leaving physicians and patients without sufficient information for making informed choices among diagnostic and therapeutic options," according to the organization.

Although the White Paper references a variety of technologies, such as imaging and cardiac-related technologies, it uses an example from the pharmaceutical industry to illustrate the dilemma: "[B]oth Lucentis and Avastin are promising new drugs for treatment of macular degeneration, but head-to-head information on the relative outcomes is not available -- and one costs about 20 times the amount of the other. Similarly, different approaches to radiation therapy -- intensity-modulated radiotherapy and conformal radiotherapy -- have very different costs but currently inadequate information on which to base clinical judgments. And the pace of introduction of new genetic prognostic tests is on an exponential course without the necessary evidence on the results for clinical decisions and outcomes."

To address the situation, the ACP supports the creation of an independent and evidence-based assessment process "to analyze the costs and clinical benefits of new medical technology before it enters the market, including comparisons with existing technologies." (Currently, the United States lacks a centralized authority for coordinating assessments of the clinical effectiveness or cost-effectiveness of new technology.)

That said, the process must be well-balanced, according to the organization. "The assessment process should balance the need to inform decisions on coverage and resource planning and allocation with the need to ensure that such research does not limit the development and diffusion of new technology of value to patients and clinicians or stifle innovation by making it too difficult for new technologies to gain approval."

To view the White Paper, go to http://www.acponline.org/advocacy/where_we_stand/policy/controlling_healthcare_costs.pdf  

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IMDA Update Published by IMDA 5204 Fairmount Ave., Downers Grove, IL 60515 Phone:  (630) 655-9280 (866) IMDA-YES (866-463-2937) Fax: (630) 493-0798 Website:  www.imda.org E-mail:  imda@imda.org   Staff Katie Swartz: Executive Director Judy Keel: Executive Vice President Patti Perillo:  Senior Administrator Mary Moran:  Chief Financial Officer Mark Thill, Editor & Communications Director (847) 255-0716 Mitchell Kramer, Legal Counsel (800) 451-7466 Barbara Kramer, Legal Counsel (734) 930-5452 George Ayd, Jr., Insurance Administrator (703) 652-1309         2009-2010 Directors President Kevin Trout, Grandview Medical Resources, Inc. (412) 914-0950 President-Elect Anthony Marmo, Martab Medical (201) 512-1100 Secretary/Treasurer Hal Freehling, Jr., O.E. Meyer Company (419) 609-1633 Chairman of the Board Dave Campbell, PhD, Vital/Med Systems Corporation (303) 660-0888 Directors-at-Large Tom Birmingham, Bay State Anesthesia, Inc. (978) 682-6321 George Howe, Mercury Medical (727) 573-0088 Philip M. Reilly, KOL Bio-Medical Instruments, Inc. (703) 378-8600 Don Reiter, Specialty Respiratory Care, Inc. (818) 717-8807 x19 Bill Schultz, IPV Medical, LLC (760) 212-2769 Past-President Shawn Walker, Bay State Anesthesia, Inc. (978) 682-6321 Manufacturer Representative to Board Tim Beevers, Beevers Manufacturing & Supply (503) 472-9055 The ideas presented in this newsletter may or may not be applicable to your particular situation.  Always consult your tax advisor, attorney or CPA before putting them into effect.