Medical Devices

Value-based Purchasing of Medical Devices

Implantable medical devices, ranging from artificial knees to cardiac pacemakers to deep brain stimulators, offer substantial benefit to patients and value to society.  This clinical and social value depends, however, on the high quality but affordably priced devices being used on the appropriately selected patient, by an experienced surgeon, and in the least costly site of care.  Over the past ten years BCHT has conducted a series of quantitative and qualitative studies of device assessment, pricing, and utilization, with the results disseminated through peer-reviewed journal articles, Issue Briefs and journalistic reports, and presentations at professional, governmental, and scholarly conferences.  Some of the key findings of the research were brought together in a book, Purchasing Medical Innovation, published by the University of California Press in 2015.


Purchasing Medical Innovation

Purchasing Medical Innovation - book cover

The life sciences industry creates a remarkable pipeline of new medical devices, but these too-often are used on the wrong patient, at the wrong time, or at the wrong price.  The way to sustain innovation while ensuring affordability is to improve the process of product assessment and purchasing.  Purchasing Medical Innovation analyzes the roles of the Food and Drug Administration (FDA), Medicare and private insurers, physicians and hospitals, and consumers themselves in the larger process of assessing performance, price, and appropriate use.  The book is short (150 pages) and written in a non-technical style targeted at managers and professionals in hospital systems, health plans, and life sciences firms, regulatory agencies, and consumer advocacy organizations.  

Robinson JC.  Purchasing Medical Innovation: The Right Technology, for the Right Patient, at the Right Price.  Oakland, CA: University of California Press, 2015.

Reference Pricing for Joint Replacement
Reference Pricing for Arthroscopy

Hospital strategy for device-intensive service lines

The surgical service lines that rely most prominently on implantable devices are among the most common and profitable for hospitals and hence the source of extensive internal organizational focus and external market competition.  BCHT has studied key dimensions of these internal and external challenges, including:


Competition among hospitals and between hospitals and ambulatory sites of care

More sophistical assessment and purchasing of devices

Alignment of hospitals with physicians through employment and joint ventures

Unjustified variability in price and performance

Medical device firms maintain extensive and sophisticated sales, marketing, and pricing capabilities, often far exceeding the analytic and negotiating capabilities of hospitals and other purchasers.  This asymmetry has resulted in a confusing and dysfunctional pattern of high and variable prices for similar devices across similar hospitals in similar market contexts.  BCHT has conducted case studies of leading medical device types as well as statistical analyses of the landscape of device pricing.

Bundled payment for device-intensive procedures

Hospitals and ambulatory clinics are the direct purchasers of most medical devices, but they in turn are paid by health plans for the services provided to enrollees and patients.  The manner in which hospitals are paid, including DRG case rates and forms of fee-for-service, strongly influence their incentives carefully to assess and energetically to negotiate for medical devices.  Special ‘carve outs’ and supplemental payments attenuate the incentive created by case rates and other forms of prospective payment for hospitals to delay in adopting cost-increasing novel devices.  BCHT has worked with the Integrated Healthcare Association on bundled payment methods for device-intensive procedures as well as studied the impact of payment methods on adoption and spending.