Pulse of the industry: medical technology report 2013

Industry insights: Omar Ishrak

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Transforming and leading

EY - Omar Ishrak

Omar Ishrak
Chairman and CEO
Medtronic, Inc.

The clamor around the sustainability of health care systems worldwide continues to build — and for good reason. As I travel to various countries and meet with health care leaders and government officials, I hear a certain consistency in the challenges and opportunities they are facing. Virtually all of their economies are strained, and health care costs are consuming an ever increasing portion of their overall budgets. At the same time, huge populations around the world, at all income levels, lack access to basic standards of health care.

All of these countries are working to balance the fundamental challenge of increasing access and managing cost, all while maintaining quality. On one hand, governments, and often the private sector, are working to remove the barriers that limit access. On the other hand, as they seek to expand access, they do so with full knowledge that they cannot allow escalating costs to consume their economies or compromise the quality of care.

The situation is particularly acute in the United States, where, in large part, we have access to quality care, but face steeply rising costs. A significant cause of the cost escalation in the US is the way we have historically financed and incentivized health care delivery. For decades, and even today, the US health care system has largely operated on a fee-for-service model that rewards volume over value. It can incentivize more treatment over better health, and it often rewards inputs over outcomes.

This system isn’t without benefits — it has fostered years of innovation, and we have seen significant clinical advancements in patient care.

But the path this system has traveled for many years is based on a flawed assumption: that unlimited funding — from the government, employers or the private sector — will always be available. Wisely, the US health care system is moving to a fee-for-value approach, which incentivizes value over volume and outcomes over inputs. We are seeing increased momentum and energy from a variety of stakeholders — all aimed at improving the sustainability of health care systems.

Within the medical technology industry, it is easy to bemoan the apparent pressure this “new” health care environment places on innovation. However, this very reaction suggests that innovation within our industry is limited to technology alone. Instead of defining innovation as inventions and iterations, we must focus on the opportunity to redefine innovation across our industry to include bold new business models that deliver clear clinical and economic value to health care systems.

Developing innovative, new therapies to improve clinical outcomes will always be a central value proposition in the marketplace. The basic human desire for better care is limitless, because people will always strive for better health and improved quality of life.

But today’s world requires more from us. Demonstrating economic value can be difficult, because it requires a more comprehensive understanding of health systems, developing relationships with a broader set of stakeholders, a new approach to R&D and new commercial models.

The shift from fee-for-service to fee-for value is upon us. We must channel the growing frustration into a rallying cry for our industry to deliver new forms of innovation and value propositions that meet these clinical and economic demands.

These are challenging but exciting times, filled with tremendous opportunity for medical technology companies and innovators to be part of the solution for efficiently increasing access and improving the quality of health care systems around the globe. Every company is faced with a choice: stick to the status quo, or transform and lead.

This is an excerpt from a guest article featured in our Pulse of the industry: Medical technology report 2013. For the full article, download a PDF version of the report and see page 18.