Healthcare reform law expected to spur device niche

By Patty Enrado
09:57 AM

While the reform legislation did not focus on wellness, expect this area to grow, said E. David Hetz, cofounder and managing director of Cutlass Capital. Hetz spoke on a panel last week at the Health Technology Investment Forum.

Such devices as the PDA and the iPhone and their applications have the potential to transform the industry by enabling consumers to access healthcare information and becoming personal wellness managers, he said. The bottom line, according to Hertz: "If you have a solution that really works, gets hard dollars costs out and customers are your partners, it's a huge win-win."

Healthcare reform legislation will change how the total population will have to be managed, according to the panelists. In turn, the market will seek intermediary business models that deploy analytics to look at populations and manage services  better and smarter, said  Christopher McCord, principal at Healthcare Growth Partners.

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The care and utilization management space will be big, with niche benefit companies – for example, in radiology - providing the most effective best practices, McCord said.

New business models will emerge as a result of regulatory changes in the healthcare reform law, panelists agreed.

"We should all hold out hope that this is not a one-time event, that this is the first step in genuine healthcare reform," Hetz said. "It's just that the first step is really insurance reform and provided a very, very important societal benefit in the form of access, but did virtually nothing to deal with - ultimately what we all have to wrestle with - the cost side of the equation."

Some money was allotted to support state tort reform, and fraud and abuse investigation, audit and prosecution, as well as demonstration projects from the Centers for Medicare and Medicaid. "But they're not going to make much of a dent in the bill," Hetz said.

"The cost side of healthcare continues to be the most significant opportunity for market-based solutions," he said. "Priority has to be about taking real hard dollar cost out of the system."

Daniel Farrell, director of PricewaterhouseCoopers' Transaction Services Practice, agreed. "Any business model that takes cost and waste, such as over-utilization, out of the system is going to be a success," he said. Anything that shifts the paradigm away from the current system, which incentivizes utilization, will be successful, he added.

Look to Massachusetts as a leading indicator of what to expect theoretically on the national level, said McCord. Since its statewide healthcare reform, the commonwealth has experienced strained emergency departments and the highest wait times for appointments in the country. New business models that address scheduling throughput and efficiency in patient flow, as well as over-utilization, are potentially in a good position. "Access is expanding, costs aren't contracting," McCord said. "The best companies are those that don't take advantage of that situation but try to fix it."

With approximately 32 million uninsured people required to purchase health insurance under the new law, the shrinking numbers of primary care physicians in the country will be further strained, panelists said. Hertz noted that models that provide more direct care than a physician does will emerge. More progressive hospitals are looking at traditionally competitive surgical centers as intermediaries, part of the solution for continuum of care, he said.

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