FRONT LINE OF HEALTHCARE

Transformations are disruptive, and our 2017 survey reflects an industry in flux, but it also reveals signs of progress. Healthcare organizations on the forefront of change are moving to reempower physicians, recognizing their importance in managing costs and supporting the move toward value-based care.

Medtech procurement is the best example of this alignment. More than 80% of surgeons and procurement officers say they work in collaborative partnerships to purchase medical equipment, weighing clinical and economic value together. Surgeons also express a more collaborative attitude about procurement than five years ago: 43% of surgeons now believe their procurement department improves costs and quality of care. “They keep costs reasonable while still allowing the majority of surgeons to use the instruments and implants they want,” one physician noted.

The move to reempower physicians reverses a 10-year trend that had shifted decision making away from doctors and toward procurement professionals who chose products mainly on the basis of price, often putting the two groups at odds. Our data shows that decision authority has started swinging back to surgeons, but with a new twist. Surgeons have become more sophisticated buyers, weighing clinical and financial data and considering multiparty interests when they select devices.

By contrast, nonsurgical physicians continue to feel their behavior constrained by payer restrictions, and they feel this most acutely in prescribing drugs, where most do not rely on pharmacy benefit managers (PBMs) to control costs or improve quality. Most physicians feel a responsibility to minimize costs, but they focus primarily on patients’ out-of-pocket expenses instead of overall costs to the healthcare system.

During the next two years, practitioners on the front line will continue to scrutinize the effectiveness of new systems and tools, both in terms of quality of care and cost. It will take time to develop clinical and economic evidence, which means the pace of change will remain slow. But it will also help the industry move toward better solutions.

As healthcare professionals grapple with new systems and approaches, all sectors of the industry are rethinking their strategies to meet evolving clinical and economic needs. In this report, we highlight how the changing environment for physicians will affect providers, medtech and pharma, and we examine some of the no-regrets moves each can take in a changing landscape.

Healthcare providers that want to move toward value-based care can increase support for that shift by engaging their physicians and providing evidence that new initiatives deliver quality care at lower cost. Physicians in management-led organizations are less satisfied and less aligned with their organizations’ missions than those in physician-led organizations, the survey data shows. Management-led organizations received a Net Promoter Score of 11% as a place to work, compared with 36% for physician-led practices. Overall, physicians give lower Net Promoter Scores to their organizations than finance and procurement officers do.

Our findings indicate management-led groups can increase physicians’ engagement by granting them greater autonomy and by adopting some of the best attributes of physician-led groups. Practices that offer a combination of efficiency and physician autonomy are likely to perform best.

Indeed, many have overlooked the role of the physician as system innovator. Physicians tell us that they are open to new cost-saving models, but need to be on the front line of change helping health systems identify which approaches create value for patients, and which don’t. For example, clinicians’ and administrators’ views differ on the importance of cost-saving initiatives. Physicians and finance officers rank care-management teams the top priority, while procurement officers say vendor consolidation and purchasing automation are most important.

Despite the slowing shift toward value-based care, healthcare organizations are aggregating at a rapid clip and continue to experiment with new governance models. Hospital systems within cities are growing by acquiring and partnering with other institutions and medical groups in the same area. The volume of hospital mergers and acquisitions increased 42% from 2010 to 2015, according to the American Hospital Association, which also says that the number of community hospitals affiliated with a healthcare system rose to 66% in 2015 from 51% in 1999. Finally, physicians continue to move away from solo practices: Only 14% were self-employed in 2017, down 6 points in two years, the Front Line survey found. This aggregation of systems and physicians could enable future change as fewer, larger organizations become the norm.

Building category leadership positions and offering value-added services can help medical device manufacturers stand out in a crowded field. More than 60% of surgeons rank “strongest existing relationship” with a manufacturer as a key purchasing criterion, up from 46% in 2015. Category leaders benefit from much stronger customer advocacy: Across general surgery, orthopedic surgery and cardiac surgery, market-share leaders, including all category leaders, receive much higher Net Promoter Scores than other manufacturers.

Healthcare providers continue to reward clinical innovation despite increasing pressure to control costs. Surgeons’ top criteria for medical equipment are product quality and patient outcomes. However, it’s important for medtech companies to demonstrate both the clinical and economic value of products. As surgeons regain purchasing authority, they have become more attuned to economic value and weigh financial data as part of the overall purchasing decision.

One way leaders have started to emphasize economic value is through alternative pricing models, such as risk-sharing contracts. The penetration of alternative pricing models today varies by specialty, with the greatest traction in orthopedic surgery in the Comprehensive Care for Joint Replacement (CJR) program, aided by a push toward bundled payments from the Centers for Medicare & Medicaid Services (CMS).

Healthcare professionals expect major increases in the use of innovative pricing models for medical devices over the next two years, including patient-based pay for performance and population-based risk sharing, to more than 50% of practices, from fewer than 15% today. Even though surgeons have overestimated the pace of adoption in the past, these models are likely to prevail in the long term. Medtech companies that get a head start now testing and refining alternative pricing models will be well positioned for an eventual uptick in their use.

Sales representatives remain an important source of information for surgeons. Overall, the two most important roles a sales rep can play are covering cases in the operating room and providing on-call support, the survey found. But the relative importance of roles played by sales reps varies across specialties. Operating room coverage and on-call support were more important for orthopedic surgeons. General surgeons, on the other hand, value receiving educational materials more than cardiac surgeons and orthopedic surgeons do. Medtech companies can improve the effectiveness of sales reps by tailoring their role to surgeons’ needs.

Nonsurgical physicians rank patient outcomes, real-world evidence and safety profiles as the most important factors influencing their prescribing decisions. The implications are clear: To demonstrate the clinical merits of their products, pharma companies must go far beyond the traditional clinical trial data for regulatory approval. Pharma companies that upgrade their medical affairs capabilities to generate real-world evidence underscoring the efficacy of new products will be best positioned to provide physicians the data they are seeking.

At the same time, however, physicians are increasingly concerned about the cost of drugs, at least to the extent that it affects their patients’ ability to afford therapy. Bringing drug prices down is a top priority for the healthcare industry and policy makers, but physicians say they are ill-equipped to manage total drug costs because they have limited visibility into, and limited control over, drug prices. As a result, the best they can do is to limit out-of-pocket drug costs for patients. When asked about the most effective approaches to reducing drug costs, physicians point to three key changes: price transparency between payers and pharmaceutical manufacturers, giving Medicare authority to negotiate drug prices and greater competition among manufacturers.

While physicians are concerned about drug pricing, they are critical of actions taken by PBMs and payers to control drug costs, particularly when these actions constrain their decision making. Only 19% of nonsurgical physicians believe PBMs improve costs and quality of care. That view contrasts sharply with surgeons’ more positive view of medtech procurement decisions, which they say help improve healthcare organizations’ bottom line without sacrificing the quality of patient care.

Seventy percent of nonsurgical physicians believe payer restrictions (prior authorization requirements, appeals process) limit their prescribing decisions, and 59% believe these restrictions decrease their ability to deliver high-quality care, both percentages up slightly from our survey in 2015. However, just how constrained physicians feel varies by specialty. Our survey showed medical oncologists feel notably less constrained by formularies and other payer restrictions, and are more likely than most other specialists to believe physicians have control or influence in pharmacy and therapeutics committees. Oncologists also weigh price less when making prescribing decisions.

However, the cost of treating cancer has been at the heart of the healthcare costs debate, and we expect oncologists to face growing payer restrictions in the coming years. Utilization management rates for oncology drugs rose to 50% in 2016, from 34% a year earlier. Competition will grow more intense: A flush of me-too products with minimal clinical differentiation are hitting the market, and payers are increasingly demanding real-world evidence of their relative efficacy.

That said, there is a contingent of physicians who indicate that they are actively seeking to manage total cost of care. Pharma companies can support physicians in that effort by providing evidence that their therapies are clinically differentiated and more cost-effective than other treatment options.

Pharma companies can prepare for an uptick in the use of alternative pricing models, where price is based on indications or outcomes, by testing and refining them with providers and payers. The physicians we surveyed expect the use of innovative pricing models for pharmaceuticals to more than triple over the next two years. In the past, however, the pace of adoption has been much slower than healthcare professionals anticipated.

In a shifting landscape, an omnichannel approach to marketing is the most effective way to get drug information to nonsurgical physicians. Physicians rank continuing medical education (including conferences) as their most important source of information, relatively more important than published medical journals for the first time in this survey. Reliance on sales representatives declined over the last six years, moving from one of the top three information sources in 2011 to fifth place in 2017. Meanwhile, online sources, including drug websites and search engines, have greatly increased in importance. These trends are likely to continue since younger physicians are less interested in relying on sales reps as an information source and are more accustomed to going online for drug information.

After a decade of trying out new models, the US healthcare industry has yet to rally around an innovative approach that provides quality care at lower cost. In fact, a disruptive, technology-based solution like those that have transformed the telecom or retail industries may take much longer to develop for healthcare, although a comparable outcome seems inevitable. In the meantime, the industry will continue to innovate, with progress in fits and starts as different models gain traction in different places. Although the pace of change has been slower than predicted in recent years, as Microsoft cofounder Bill Gates once noted: “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten.”

The key message of our 2017 survey is that future progress depends on physicians shaping and leading change. Healthcare organizations that engage and empower physicians are likely to lead the next wave of innovation. Proving the clinical and financial benefits of new systems and tools while reducing their complexity is essential to overcoming physician skepticism. Those efforts will take time, but they will help provide new momentum for change.

Providers

Pharma