Cardiology is typically a profitable service line for hospitals. As reimbursement declines and the population ages, hospitals may face increasing demand for cardiology services and increased pressure to reduce costs. These factors will make maintaining profitability more challenging for hospital cardiology departments, according to Mike Vintges, vice president of sourcing operations at Novation, a supply contracting company.
To remain solvent, hospital cardiology service lines will need to meet clinical and patient satisfaction standards, improve efficiency and manage supply chain costs and utilization. "If you do all those things well, cardiology will continue to be a service line that can be profitable. But if you do one or a few marginally [well], it can very quickly shift to a cost center rather than a profit center," Mr. Vintges says. He describes five trends in cardiology hospital leaders should be aware of to maintain a financially strong service line.
1. Technology remains necessary to be competitive. Cardiac technology is crucial for hospitals to be able to compete with other facilities because it plays a large role in clinical outcomes. Cardiac devices and other technology also attract patients for non-clinical reasons, as many consumers judge a hospital in part by its "latest and greatest" offerings. "The ability to offer the latest CT or MR gamma knife or newest cardiac procedure helps hospitals not just in their clinical capabilities but also in their perception in the community as a leader and innovator," Mr. Vintges says. "The perception of how advanced you are relative to technology and clinical offerings is a differentiator in [healthcare providers] that patients seek out." Some new technologies hospital cardiology departments are acquiring are robotic surgery equipment and devices for percutaneous valve replacement, according to Mr. Vintges.
Acquiring new technology, while expensive, can also have a large impact on patient safety. For example, cardiology service lines can offer imaging systems that minimize the effective radiation dose and take multiple images at one time.
Cardiology departments should thus choose technology based on a combination of clinical, patient safety and financial factors. Purchasing new technology only for marketing reasons may be a large expense that brings little clinical value.
2. Hospitals are considering medical devices' overall impact. As reimbursement declines, hospitals are beginning to take a more balanced approach to new medical devices by looking at the cost not only in dollars, but also in clinical and patient safety outcomes. "Five years ago when new technology came out, the first question hospitals might ask is, 'What is the price?' Today, they still ask that question, but their next question is 'What is the reimbursement and what is the clinical benefit, and what is the difference relative to sustainability, quality of life and the overall continuum of care?'" Mr. Vintges says. "[Hospitals] are looking more at the total cost of care as opposed to just an event-based type of care."
Cardiology service lines may have an advantage in taking a more broad view of devices because there are outcome-based registries that allow service line leaders to predict outcomes based on years of data. These registries in addition to financial pressures have made hospitals more aware of products' costs and how these costs reflect clinical value. "Is a $5,000 pacemaker twice as good as a $2,500 pacemaker? In the past, no one would have probably thought about that. Today, those questions are asked," Mr. Vintges says.
In addition, the financial implications of medical devices have caused a greater focus on these devices not only by service line leaders, but also by hospital C-suite executives. Rather than the decision to acquire a device being driven by physicians alone, the decision may now be made in collaboration with the hospital CFO and supply chain leader, according to Mr. Vintges.
3. Cardiac technologies are being commoditized. Most cardiac technologies today are more evolutionary than revolutionary because developers made slight changes to an existing technology rather than creating a completely new product, Mr. Vintges says. For example, he says the creation of the stent dramatically changed heart attack treatment, representing a revolutionary product. Now there are drug-eluting stents that release a drug to prevent blockage of the artery, which is an advancement of an existing product and therefore evolutionary. Mr. Vintges suggests the evolutionary nature of technologies in cardiology have begun to commoditize the products, making them more interchangeable and comparable.
4. Scrutiny of utilization is increasing. Another trend in cardiology is increased scrutiny by the federal government of utilization of certain procedures and devices, such as implantable cardiac defibrillators. Federal officials are determining whether procedures are being performed appropriately or if they are overutilized. Overutilization generates additional costs to payors who reimburse physicians for the procedure and poses a clinical danger to patients who may not have needed an implant. To maintain appropriate utilization, hospital cardiology departments need to consider the benefits of a device compared to the benefits of lifestyle changes. As cardiac technologies become increasingly sophisticated, providers may be tempted to acquire and use new devices that may not have more clinical benefit than other, less invasive treatments. "[The service line] is a victim of its own success as cardiology continues to grow and develop," Mr. Vintges says.
5. Cardiac supply chain costs are declining. Over the last 18 months, Novation has seen a 12 to 18 percent reduction in costs of cardiac rhythm management devices, such as defibrillators and pacemakers, according to Mr. Vintges. He predicts prices will continue to decline as cardiac products become more commoditized and have evolutionary rather than revolutionary changes. The decrease in prices can also be attributed to greater cost transparency, which spurs manufacturers to lower prices as they compete for customers, according to Mr. Vintges.
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To remain solvent, hospital cardiology service lines will need to meet clinical and patient satisfaction standards, improve efficiency and manage supply chain costs and utilization. "If you do all those things well, cardiology will continue to be a service line that can be profitable. But if you do one or a few marginally [well], it can very quickly shift to a cost center rather than a profit center," Mr. Vintges says. He describes five trends in cardiology hospital leaders should be aware of to maintain a financially strong service line. 1. Technology remains necessary to be competitive. Cardiac technology is crucial for hospitals to be able to compete with other facilities because it plays a large role in clinical outcomes. Cardiac devices and other technology also attract patients for non-clinical reasons, as many consumers judge a hospital in part by its "latest and greatest" offerings. "The ability to offer the latest CT or MR gamma knife or newest cardiac procedure helps hospitals not just in their clinical capabilities but also in their perception in the community as a leader and innovator," Mr. Vintges says. "The perception of how advanced you are relative to technology and clinical offerings is a differentiator in [healthcare providers] that patients seek out." Some new technologies hospital cardiology departments are acquiring are robotic surgery equipment and devices for percutaneous valve replacement, according to Mr. Vintges.
Acquiring new technology, while expensive, can also have a large impact on patient safety. For example, cardiology service lines can offer imaging systems that minimize the effective radiation dose and take multiple images at one time.
Cardiology departments should thus choose technology based on a combination of clinical, patient safety and financial factors. Purchasing new technology only for marketing reasons may be a large expense that brings little clinical value.
2. Hospitals are considering medical devices' overall impact. As reimbursement declines, hospitals are beginning to take a more balanced approach to new medical devices by looking at the cost not only in dollars, but also in clinical and patient safety outcomes. "Five years ago when new technology came out, the first question hospitals might ask is, 'What is the price?' Today, they still ask that question, but their next question is 'What is the reimbursement and what is the clinical benefit, and what is the difference relative to sustainability, quality of life and the overall continuum of care?'" Mr. Vintges says. "[Hospitals] are looking more at the total cost of care as opposed to just an event-based type of care."
Cardiology service lines may have an advantage in taking a more broad view of devices because there are outcome-based registries that allow service line leaders to predict outcomes based on years of data. These registries in addition to financial pressures have made hospitals more aware of products' costs and how these costs reflect clinical value. "Is a $5,000 pacemaker twice as good as a $2,500 pacemaker? In the past, no one would have probably thought about that. Today, those questions are asked," Mr. Vintges says.
In addition, the financial implications of medical devices have caused a greater focus on these devices not only by service line leaders, but also by hospital C-suite executives. Rather than the decision to acquire a device being driven by physicians alone, the decision may now be made in collaboration with the hospital CFO and supply chain leader, according to Mr. Vintges.
3. Cardiac technologies are being commoditized. Most cardiac technologies today are more evolutionary than revolutionary because developers made slight changes to an existing technology rather than creating a completely new product, Mr. Vintges says. For example, he says the creation of the stent dramatically changed heart attack treatment, representing a revolutionary product. Now there are drug-eluting stents that release a drug to prevent blockage of the artery, which is an advancement of an existing product and therefore evolutionary. Mr. Vintges suggests the evolutionary nature of technologies in cardiology have begun to commoditize the products, making them more interchangeable and comparable.
4. Scrutiny of utilization is increasing. Another trend in cardiology is increased scrutiny by the federal government of utilization of certain procedures and devices, such as implantable cardiac defibrillators. Federal officials are determining whether procedures are being performed appropriately or if they are overutilized. Overutilization generates additional costs to payors who reimburse physicians for the procedure and poses a clinical danger to patients who may not have needed an implant. To maintain appropriate utilization, hospital cardiology departments need to consider the benefits of a device compared to the benefits of lifestyle changes. As cardiac technologies become increasingly sophisticated, providers may be tempted to acquire and use new devices that may not have more clinical benefit than other, less invasive treatments. "[The service line] is a victim of its own success as cardiology continues to grow and develop," Mr. Vintges says.
5. Cardiac supply chain costs are declining. Over the last 18 months, Novation has seen a 12 to 18 percent reduction in costs of cardiac rhythm management devices, such as defibrillators and pacemakers, according to Mr. Vintges. He predicts prices will continue to decline as cardiac products become more commoditized and have evolutionary rather than revolutionary changes. The decrease in prices can also be attributed to greater cost transparency, which spurs manufacturers to lower prices as they compete for customers, according to Mr. Vintges.
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