Quantifying & Capturing Value In the Age of Healthcare Reform

Copyright © 2013 by LeveragePoint Innovations Inc. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means —

electronic, mechanical, photocopying, recording, or otherwise — without the permission of LeveragePoint Innovations Inc. This document provides an outline of a presentation and is incomplete without the accompanying oral commentary and discussion.

COMPANY CONFIDENTIAL

Quantifying and Capturing Value in the Age of Healthcare Reform

Monthly Webinar Series – April 18, 2013

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Sponsored by LeveragePoint the Software Solution for Value-based Pricing

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Today’s Presenter Quantifying and Capturing Value in the Age of Healthcare Reform

Chris Provines is a healthcare and medical technology

industry veteran. He has 23-years of experience in various

functions, including executive roles at Johnson & Johnson

and Siemens Healthcare. He is a world-leading expert in

medical technology pricing and market access. He is the

CEO of Value Vantage Partners, a global consulting and

training company focused on strategic pricing, value selling,

and sales negotiations.

Chris is the author of the Strategic Pricing for Medical

Technologies, and is an award-winning Adjunct Professor at

Rutgers University Business School where he teaches in the

MBA program. He can be reached at

[email protected].

Copyright © 2013 Value Vantage Partners LLC All Rights Reserved

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• Learn about key changes to the US healthcare market

• Discuss strategies for quantifying the value of your offering and

connecting it to customers' evolving business model

• Share what best practices companies are doing to grow in the new

normal

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Learning Objectives


5 Shift Happens

New

Buyer

Old

Buyer

Relationship driven / less

sophisticated buyers

Value & data-driven /

professional buyers


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Physician

employment

trends

Purchasing

consultants

Value based

purchasing

Reimbursement

cuts

Data

transparency /

Comparative

effectiveness

Increasing

evidence

requirements

Patient

satisfaction

ACO’s

Bundled

Payments, Gain-

sharing Readmission

penalties

Costs

Qualit

y

Pressure on

Prices, Value,

Utilization &

Margins

=

Key Drivers Will Accelerate the Shift


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Source: Beckers Hospital Review; April, 2012

1. Cost containment

2. Improve patient

quality

3. Maintaining

reimbursement

4. Data connectivity

“There is one strategy that

was almost a near-

consensus among the

surveyed hospital executives:

Negotiate more aggressively

with vendors and suppliers”

“If suppliers can prove they

have an immediate impact on

patient outcomes, that'll

resonate with the C-suite of

the hospital.”

Top Areas of Focus for Hospital Executives


Physician

gain sharing

programs

Value based

purchasing New business

models

Accountable

care

organizations

Rise of the

economic

buyer

Healthcare

Reform

Implications – sales and corporate

account teams will need to:

Interact in a credible way with

administrators on healthcare

reform issues

Understand the business impact of

products, solutions & services

Be able to sell the value of

technology and services to ACOs

Be able to sell both clinical and

economic benefits

Deal with more powerful economic

buyers

Use value in trades during

negotiations

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Sales Teams Face a Wave of Challenges


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normal

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Learning Objectives


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10

Understand Your Value Proposition

Patient Provider Physician ACO/Insur

er

Psychol-

ogical

Clinical

Economic

Where do you have

advantages?

Adapted from: Strategic Pricing for Medical Technologies, Provines (2012)


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Understanding Economic Value

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The big questions

to ask related to

your solution?

Who ultimately pays?

• Medicare

• Medicaid

• Commercial

• Employer / Other

How is the provider/physician paid?

• Prospective case rate (DRG, APC)

• Per diem

• Fee for service

• Risk based / bundled payment

How does the buyer evaluate the

economics of your solution?

• Total cost of ownership

• Quality incentives / reimbursement

• Population vs. clinical event

• Risk mitigation



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“Classic” Examples of Value Management

12

Cypher Drug-

eluting stent

Oncotype DX,

21-gene

reverse

transcription

assay

Quantify

Communicate

Capture

• First drug-eluting cardiac stent launched

• Substantial investment in clinical & economic

data and reimbursement activities

• Priced to “share” value at ~$2,900 per stent;

cost-neutral for payer versus bare metal stents

• Innovative breast cancer recurrence assay

• Test helps to better predict recurrence risk and

direct chemotherapy

• Company sponsored comprehensive economic

analysis to quantify value and show savings

• Priced at $3,450 at launch



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You Don’t Need a Blockbuster to Start

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Common

challenge

What best practices companies do….

• Products

came to

market

through

510K or Lab

Developed

Test (LDT)

regulatory

path

• Little

evidence

exists

Prioritize

critical

products;

select 1 or 2

key solutions

to start with

Quantify value

using single

center study;

decision

analytic tool; or

approved

protocol to

study customer

economics

Develop

selling tool;

train and

deploy

through the

sales team

1. 2. 3.


Different Elements of Offering

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You Need to Think Broadly About Value

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• Payment terms

• Contract length

• Performance requirements

• Risk sharing

• Service hours

• Response time

• Shipping terms

• Customer support

• Training

• Etc.

• Quality level

• Speed

• Capacity

• Etc.

Core

Solution

Services

Business

Terms

Enablers

• Procedure kits

• Automation

• Mapping

• Etc.



15





normal

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Learning Objectives


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Better

integrate

value into

R&D

Unbundle &

understand

value of

offerings

Quantify

Communi

cate

Capture

• Implement value into formal stage gate process

• Use quantitative techniques to dollarize

• Look at value from “buying center” and each

stakeholders’ perspective

• Make evidence decisions early in R&D process

• Unbundle offering (core solution, enablers, service)

• Quantify value of separate components

• Use components of offering to “trade” with different

buyer types

Best Practices for New Normal

Quantify Value


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Arm sales

team with

value

messages &

tools

Educate sales

team on value

& customers’

business

Quantify

Communi

cate

Capture

• Provide sales team with quantifiable value

messages and tools

• Align messaging and tools to different buyers

and buyers’ payment mechanisms

• Many sales teams are responsible for

communicating clinical and economic value

• Educate sales team on the customers’ financials

and business model

• Teach sales teams to communicate economic

value to value analysis committees


Communicate Value


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Teach sales

team to

negotiate with

new buyers

Develop

population and

risk based

contracting

models

Quantify

Communi

cate

Capture

• Prepare sales team to deal with more

sophisticated professional buyers

• Identify standard list of offering trades

• Provide guidance on how to trade value with the

new buyers (buying committees, VAC’s, etc.)

• Align pricing and contracting strategy with

customers’ new payment models (ACOs, bundled

payments, etc.)

• Be prepared to take on risk when it’s to your

advantage


Capture Value


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• Healthcare reform and other trends are ushering in major changes

for providers, employers, insurers, and patients

• Healthcare suppliers who are prepared for the new normal will be at

a significant advantage

• The future clearly points to value-based healthcare buying

decisions – you need to be prepared to win

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Conclusion

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Professional Pricing Society Spring Conference

• Ed Arnold will be presenting, “Anyone Can Build a Value Model: Let Me Show You How”

• Friday, May 3rd at 1pm PDT

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LeveragePoint framework for Customer Value

Reference

Value

Positive

Differentiation

Costs unique to

doing business

with you

The Unique Value

You Provide the

Customer

Confidential

Quantify Value

Visualize Value

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Communicate value with confidence & consistency

Planning Costs $5.40

Reduce Testing $7.36

Lost business

$3.06

Reporting $3.08

Integrate $2.88

Value Message Value

Higher levels of reliability reduce operating failures

$108,000

Streamlined parts inventory reduces parts carrying costs

$320,000

Higher output and revenue due to reduced excavator downtime

$720,000

Fuel efficient engines reduce energy costs

$640,000

Engage customers by showing them how you

impact their bottom-line

Confidential

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Thanks for Watching!

[email protected]

www.leveragepoint.com

(617) 945-7075

Chris Provines

[email protected]

(908) 421-0112

http://www.leveragepoint.com/

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