Medical Device Companies Join Physicians in Bearing Risk

December 20, 2014

New risk-contracting discussions are now occurring between providers/hospitals and the pharmaceutical and medical device industries.

While I never had the opportunity to personally participate in the Woodstock music celebration of the summer of '69, I would still consider myself a member of the Woodstock generation, which by the way, never occurred in Woodstock. The music festival, billed as three days of peace and music, actually took place in the town of Bethel, N.Y., on the farm of a gentleman by the name of Max Yasgur. Even though the town of Woodstock, N.Y., never held the festival, it still retains the peace, love, and happiness atmosphere of the festival, which, in the minds of many, represented the generation of the '60s.

One of the performers at the Woodstock festival was Crosby, Stills, Nash & Young, whose song Déjà Vue, has the following lyrics:

If I had ever been here before
I would probably know just what to do
Don’t you?

For healthcare, déjà vue may mean a return to risk contracting, similar to capitation arrangements that were prominently present quite a few years ago. Today, risk contracting may occur with accountable care organizations, whose main goal is to coordinate care and improve care quality for the Medicare lives for which the providers are responsible.

However, there are new risk-contracting discussions that are now occurring, not between payers and providers, but between providers/hospitals and the pharmaceutical and medical device industries. This is a true paradigm shift, as everyone realizes that the healthcare dollar has a finite limit, and quality and outcomes need to be part of any contractual arrangement.

As recently reported in Modern Healthcare, as hospitals and systems do a better job in aggregating data and measuring outcomes and quality, they are exploring risk contracting with many of the top vendors, including Boston Scientific, Johnson & Johnson, and Medtronics.

Current discussions include implantable cardiac devices that may require a lead revision to a unit, or readmission for patients within a certain timeframe, if the device does not perform properly. In those cases, hospitals may be asking for a rebate or a discount on a future unit.

With the ever-increasing cost of drugs, notably cancer drugs, hospitals are also entering risk pay-for-performance contracts with pharmaceuticals companies that measure the success of drugs, such as meeting certain serum or lipid levels, within a mutually agreed upon timeframe.

While risk contracting may not be appropriate for an individual and a third-party payer or employer, individuals need to assume more responsibility for a healthy lifestyle that prevents diseases, such as heart disease and diabetes. That responsibility may include higher premiums for those with unhealthy lifestyles.

When the Woodstock festival ended, performer/songwriter Joni Mitchell wrote Woodstock, which Crosby, Stills, Nash, & Young also recorded. Parts of the lyrics are:

Well I came across a child of God, he was walking along the road
And I asked him tell where are you going, this he told me:
Well, I'm going down to Yasgur's farm, going to join in a rock and roll band.

A later line declares:

By the time I got to Woodstock, we were half a million strong

While I did not experience a déjà vue, or Max Yasgur’s farm, I was happy I finally had the chance to visit the town this past summer. When I visited, there were probably 2,000 people or 3,000 people in the town that day. In 1969, a half a million strong would have been fun. In 2014, I was very content with 2,000 to 3,000.