If you are making a medical device startup or are developing products within MedTech. You have been given the codex right here of what your products need to focus on. In Blue the insights from Molly and McKinsey. In purple my thoughts:
from: Molly Gamble (Twitter) - Friday, April 12th, 2024
What are academic medical centers focusing on most amid increasing pressure to improve performance?
Understand that your products must "Improve performance" - that is not automatically "Cut cost": The is a big misunderstanding. You can even raise costs as long as the entire patient episode reduces costs. But the key is that in the value proposition hospitals are clearly saying "bring me products and services that improve performance."
McKinsey set out to learn the answers by surveying 100 AMC leaders in the summer of 2023. In a report issued in April, the global consulting firm notes that reimbursements falling short of costs, more alternative care options for patients, inflation-induced cost increases and chronic workforce shortages have hampered AMC financial performance. For 45 AMCs it analyzed, median operating margin fell from 3.7% in 2017 to 1.5% in 2022.
To better understand what AMCs are doing in response, McKinsey asked 100 academic medical centers what operational levers they are currently pursuing, with respondents having options to indicate they have pursued the effort in recent years and are continuing it, are newly pursuing it or increasing their focus on it this year, or not actively pursuing it at this time.Â
Below are the top 10 operational levers indicated by respondents, along with context to contrast their pursuit of these operational projects and the potential they see for high margin opportunity.Â
These are the top ten things that operational managers - the people that will sign off to buy your product or services actually care about in 2024. Ignore these at your Peril.
1. Length of stay. Eighty-five percent of respondents said this is a continued area of focus and 12% said it is a newer area of focus for their organizations, and the majority of AMCs — 41% — identified length of stay as the performance area with the greatest untapped margin improvement opportunity.Â
Read that number 1 carefully. You need to be delivering solutions that reduce LOS. And that can be through a ton of modalities: Reduced infection, less invasive procedures, earlier detection (see n treat), less complications, tech that can take the patient home faster (patient monitoring at home), software that predicts which patients are ready to go home now...... etc Ensure that your product somehow links to the reduced LOS and then prove it.
2. Revenue cycle management. Eighty-three percent of respondents said this is a continued area of focus and 13% said it is a newer area of focus for their organizations, while only 9% identified RCM as the performance area with the greatest untapped margin improvement opportunity.Â
How does your product or solution (software etc) help with Revenue Cycle Management. How do your GTM solutions - risk shares - sales models - help the RCM of a provider?
Invent some way that helps with the AMCs revenue cycle and profit and loss.
3. Payer contracting. Seventy-seven percent of respondents said payer contracting is a continued area of focus and 16% said it is a newer area of focus for their organizations. A thin 7% identified insurer contracting as the area with the greatest untapped margin improvement opportunity.Â
Are there better solutions out there to help with Payer Contracting? Is it optimised? Can a software solution targeting this be the answer?
How does your company support AMCs with information and marketing materials to help them with better Payer Contracting? How are you working with payers on education to help them understand the AMC side of the equation?
4. Operating room utilization. While 75% of respondents are continuing focus on OR optimization, it is a newer or intensified area of focus for 19% of AMCs. Fifteen percent identified it as the area with the greatest untapped margin improvement opportunity.Â
This is a massive opportunity for devices through device design, software through improving OR efficiency, company support to help teams get better throughput. Look at this one and incorporate things in product design - service delivery - product support. How do you help with this? 1 minute saved is 1 minute saved at $100 per minute !
5. Patient engagement and experience. Seventy-five percent of AMCs are keeping focus on this performance area, 15% are newly or increasingly focused on it, and a noteworthy 10% of AMCs said they are not actively pursuing it. Only 4% of AMCs see patient engagement and experience as the top untapped margin improvement area.Â
What do you do as a company either through product design, information support, better outcomes, DTC sites etc to help your customers to get better patient engagement and create a better overall experience for the patient. This could be in countless forms - but how are you making your link to F&Bs to the patient outcome and experience?
6. Physician productivity. Sixty-eight percent of AMCs are holding their focus on physician productivity improvements, while 23% are newly or increasingly focused on it and 9% indicated they are not actively pursuing it. Interestingly, while it falls out of the top five priorities, 22% of AMCs see this focus area as the top untapped margin improvement area — second only to length of stay improvements.Â
Product design, connected smart tools, pre- peri - post op support. How are you ensuring your products and solutions improve productivity - not slow things down? Think about this especially through service changes or product introductions! Do you make that process easier and faster? How do you get them to proficiency faster with your product or solution? How do you save them time and effort to get better results? Dive in - understand the pain points and then build solutions for productivity.
7. Organic growth. Sixty-seven percent of respondents said this is a continued area of focus, 23% said it is a newer area of focus for their AMCs, and 10% said it is not an active focus right now. A modest 8% identified organic growth as having the greatest untapped margin improvement opportunity.Â
You can help with organic growth through DTC patient outreach campaigns with the provider. How do you partner on this? But you can also bring organic growth by offering exclusivity on next gen tech. There are hundreds of ways through improving patient outcomes - word of mouth - outreach - supporting materials etc etc. How do you help them with cutting edge press worthy stories?
How do you help your AMC become super desirable for patients?
8. Supply chain spend. Sixty-five percent of respondents said this is a continued area of focus, 23% said it is a newer area of focus for their AMCs, and 12% said it is not an active focus right now. A thin 4% said supply chain spend is the top untapped margin improvement area.Â
The obvious hit here is to develop better purchasing software solutions to make supply chain spend improvements. But even as a company - how do you make your product "easier to purchase?" How do you remove time from supply chain so they can make decisions on your product faster? What back end software are you using to help them with this pain point for your product? How are you helping educate supply chain and create opportunities for improvement? How much focus do you put on them as a partner rather than a barrier?
9. Purchased services spend. Sixty-four percent of AMCs are keeping focus on this performance area, 20% are newly or increasingly focused on it, and a noteworthy 16% of AMCs said they are not actively pursuing it. The modest potential may be why, as only 2% of AMCs see purchased services spend as the top untapped margin improvement area.Â
What services do they purchase today that you can bring in as part of your offering? Don't just think plastic and metal - think about service provision around the product.
What about someone building a suite of products that automate RFQs for service providers - and help standardise the service provision process? Analysis tools that give AI driven insights into service spend and areas of improvement?
10. Pharmacy spend. Sixty-three percent of AMCs are keeping focus on this performance area, 17% are newly or increasingly focused on it, and a significant 20% of AMCs said they are not actively pursuing it. Five percent of AMCs see pharmacy spend as having the greatest untapped margin improvement opportunity.Â
Alternative revenue streams are the performance area that most AMCs — 42% — said they are not actively pursuing at this time.
For medtech an obvious point here is how does your product reduce pharmacy spend? Reduced pain = reduce pain meds. Reduced infection = reduced antibiotics. Look at all the areas where your product through design or delivery has an impact on the patient that could reduce additional pharmacy spend. Better wound management - apps that help tailor Pharma delivery needs post therapy (reduce Pharma products for those that probably don't need it) etc etc
In short - you need to reset your frame of reference to the frame of pain of the AMCs - and start to rethink the product - or product development. Re think the marketing and what you focus on proving. Ensure that you hit as many of these top 10 pain points - wrap your information in this context - and help the AMCs tackle the issues they care about not the product you care about.
This is for educational purposes only