Thinking Differently About Healthcare Materials Management CAHPMM Annual Meeting

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Thinking Differently About Healthcare Materials
ManagementCAHPMM Annual Meeting

• October 25, 2007
• Teri Louden, PresidentThe Louden Network
• www.louden.net

Thinking Differently About Healthcare
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Todays Lineup

• What Hasnt Changed?
• 2. What Is Changing?
• 3. WIIFY?

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What Hasnt Changedor Back to the Future!

• Healthcare Cost Pressures
• Quality of Care and Best Practice Focus
  (remember TQM?!)
• Physicians Wanting The Latest and Greatest!
• 47 million Americans lack health insurance
• Ever-Laborious Legal and Regulatory Pressures

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Healthcare costs continue to skyrocket

• Premiums for employer-sponsored health insurance
  plans rose an average of 7.7 in 2006, a rise
  that was more than double the inflation rate of
  3.5 and the 3.8 gain in wages.
• HMO premium rates will increase by approximately
  14.1 in 2008-the highest increase in four years.
  
• _U.S. Comptroller
  Generals Office

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And The Train Keeps on Coming!

• _ In the next decade U.S. Healthcare spending
  will double from todays level to 4.1 trillion,
  one fifth of our nations economy.
• _ By 2030 one fifth of Americans will be 65 or
  over. Instead of three workers paying into Social
  Security and Medicare for every one beneficiary,
  there will be just two.

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The Revenge of the Acronyms

• The CMS, the CBO, the GAO, the OMB are all
  looking at healthcare costs. So are the
  presidential candidates from both parties. So are
  employers.
• A recent report by the Leapfrog Group says there
  are now 155 pay for performance programs in place
  this year, compared with only 39 in 2003.

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• Researchers looked at 10 different
  pay-for-performance programs and found they used
  almost 60 different physician performance
  indicators, that no one indicator was used by all
  10 programs and no two programs rewarded
  providers the same way.
• 
  _Pricewaterhouse Coopers

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The Voters Weigh In

• What are the most important issues facing the
  U.S.?
• War in Iraq 43
• Healthcare 21
• Immigration 18
• Economy 13
• Gas Prices/energy 12
• Terrorism/security _Kaiser Health Tracking Poll
  June 2007

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Americans Biggest Healthcare Concerns

• How much do I have to pay out of pocket? 38
• Cost of Medicare/Medicaid 18
• Cost of Healthcare overall 18
• Increases in employer costs 13
• _Kaiser
  Health Tracking Poll, June 2007

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Do you think the government should provide a
national health insurance program for all
Americans, even if this would require higher
taxes?

• Yes 64
• No 35
• Not sure 2
• _CNN/Opinion
  Research Poll, May 2007

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Physician-Hospital-Vendor Relations ScrutinyA
Given!

• HHS OIGs office Stark II Phase 3
• Department of Justice
• Federal Trade Commission
• IRS
• CMS/Congress crackdown on specialty hospitals
• FDA
• JCAHO random surveys

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Health Care A Trillion Industry!

• Financial Services
• Healthcare Trade Payors
  Alternative
• Associations Medicine
• Disease/Condition Vendors/
• Focused Associations Suppliers
  Foundations
• Healthcare Retailers
  The DotComs
• Providers
• Consumers

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No Matter the Challenges or Opportunities

• . Never Forget Why We Are Here
• There is the Word Care in Healthcare!

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Todays Lineup

• What Hasnt Changed?
• 2. What Is Changing?
• 3. WIIFY?

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Healthcare Provider Industry Consolidation

• Fewer and fewer independent hospitals
• Multi-Billion Health Care System Providers with
  Multi-Billion Budgets and Buying Power!

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Boston Scientific/Guidant Deal of the Century!

• 27 billion dollar acquisition
• Largest medical device MA transaction ever
• Medical device MA long characterized by many
  small deals vs. large transactions
• Industry consolidation fewer large companies as
  acquirers

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Medical Device Companies by Size

• Less than 20 employees 3,377
• 20-99 1,022
• 100-499 373
• 500 324
• Source US. Dept of Commerce

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Understanding Vendors
The Consolidators
The Innovators
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Medical Product Industry Sectorsby FDA
Regulations

• Pharmaceutical/Drug
• Manufactured by a chemical process
• Regulated by Center for Drug Evaluation and
  Research (CDER)
• Bio-pharmaceutical/Biologic
• Manufactured by a biological process
  (biotechnology)
• Regulated by Center for Biologics Evaluation and
  Research (CBER)
• Medical Device
• Neither chemical nor biological
• Mechanical, Electrical, Information Technology,
  etc.
• Regulated by Center for Devices and Radiological
  Health (CDRH)

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What is a Medical Device?

• Diagnostics and therapeutics
• Surgical and medical and dental and equipment and
  supplies
• Ophthalmic products
• Laboratory apparatus
• Veterinary instruments
• ButThe World is Converging!!!
• NAICS codes

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Combination Products

• A product comprised of two or more regulated
  components
• Drug, Device, Biologic
• Physically/chemically combined
• Drug-eluting stent (drug/device)
• Orthopedic implant with growth factors
  (device/biologic)
• Co-packaged or kit
• Pre-filled syringe
• Metered dose inhalers
• Separate cross labeled products
• PET imaging (diagnostic with a radiopharmaceutical
  )
• Hyperthermia device with chemotherapeutic drug

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AndThe Emerging Convergence of
Device/IT/Wireless Technologies
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The Future Medical Technology Converging Across
Many Disciplines

• New Learnings for product developers coming
  together
• Physicians other clinicians engineers
  biologists material scientists nanotechnology
  experts IT optical scientists data mining
  experts statisticians biotechnicians
• Along with new IP, regulatory and
• Reimbursement issues to be addressed
• Plus, new learnings for manufacturing

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Major MedTech Market Trends

• Convergence of technologies
• Global research and market launches
• Off-shore manufacturing (esp. for less technical
  products)
• Industry consolidation
• Disease management focus
• IT as a key success factor

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Advanced Medical Technology A Robust Market
Today and Positive Future Prospects

• Environment
• Explosive growth in elderly population
• Continued need for cost-effective health care
  solutions
• Trends
• Early diagnostic emphasis
• Alternative-to-drug therapeutics gaining
  popularity

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Advanced Medical Technology A Robust Market
Today and Positive Future Prospects

• Capital Markets
• 1st Quarter 2007, record vc investments of 1.1
  billion in medical devices, surpassing IT
  investments
• 2006 investments up 20 to 2.63 billion record
  year in number of deals and amounts invested
• 2004-2006
• 44 device IPOs, most with high after-market
  performance
• 92 acquisitions of venture-backed device
  companies

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Medical Technology Follow The

• 1965

• Disposables
• Diagnostics
• Less Invasive Surgery
• Miniaturization
• Imaging
• Digital Age/IT
• Biotech and Drug Delivery
• The Big Diseases
• Support for Labor Realities
• Combination Products
• Genomics

Future?
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Synecor A Unique MedTech Incubator Concept, and
an Amazing Launch!

• Raised 24.3 million since 2000
• Second financing was by JJ valuation was
  200mill
• In 2007, Synergy Life Science Partners 150 mill
  fund being launched to further support Synecor
  device launches (source In Vivo)
• In 6 yrs, has launched 4 companies, 2 in NC, with
  one already sold to Guidant
• Source In-Vivo magazine article

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Major MedTech Growth Sectors

• Ortho
• Cardiology
• Obesity
• Diabetes
• Ophthalmic
• Cosmetic
• Non and least-invasive
• Wireless monitoring

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Its a Global World Now!

• Medical Technology Launches Research Outside
  the US
• World Population age 20-34
• By 2010,
• 4 US
• 60 Asia
• World GDP
• 50 will be in Asia in the next 20 years

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We Can Hardly Imagine the Future IMPACT OF THE
WWW!!!

• Virtual Dr. Visits
• Patient Compliance Measurement and Reminderswith
  Incentives
• Gaming Technologies for Health Care Worker and
  Patient Edutainment
• Patients Seeking Out Technology Access vs.
  Just a Dr. or Hospital
• Global Learnings

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Continued Explosion of

• Healthcare Facilities Building
• Medical Technology Advances
• Wireless Technology Applications in Healthcare
• Aging Population

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Baby Boomers and the Health System Its the
Workforce, Stupid!

• Hospitals have read the demand side of the baby
  boomers wrong!
• Technology will continue to reshape the demand
  for hospital care
• While they wait for years for baby boom health
  services demand to crest, hospitals will
  experience a human resource crisis of
  unprecedented magnitude!
• Source Jeff Goldsmith

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Todays Lineup

• What Hasnt Changed?
• 2. What Is Changing?
• 3. WIIFY?

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W I I F Y
?

• 1. Think Differently About the Role of
  Materials Management
• 2.
• 3.
• 4.
• 5.

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Thinking Differently

• Take Time Out To Think Strategically!!
• Radical innovation is needed to change the
  healthcare business model-today it is
  incremental at best
• The Radical Solutions are not always in all our
  newfound data and information.

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The Radical Solutions Will Come From Creativity

• Value time to think strategically and
  creatively and stretch your thinking!
• Where Is The Wisdom Weve Lost In Knowledge?
• Where Is The Knowledge Weve Lost In
  Information?
• T.S. Elliot

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Imagination Is More Important Than Knowledge

• Albert Einstein

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Who Moved Our Cheese?

• ITS TIME TO THINK
• TOTALLY DIFFERENTLY!!

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How Do You Want to Be Perceived? What is Your
Value?

• Purchasing
• Logistics and Materials Management
• Expert Contract Negotiator
• Product and Technology Cost, Reimbursement, and
  Finance Expert
• Medical Technology Management
• Advanced Medical Technology Expert
• All of the Above??? Plus More?

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How Are You Perceived By

• Senior Management?
• Physicians?
• Nursing?
• Other Clinicians?
• Your Staff?
• Your Peers?
• How Do You Want to Be Perceived??

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Be a Part of the Senior Executive Mgmt. Team

• More and More MM Reporting to CFOsits a sign
  of the times!
• Billions of Under Your Control
• Represent Solutions Not Just Expenses!
• Talk The Languageanalysis, numbers,
  reimbursement, ROI
• Add Professional Development to your time
  management list of priorities

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W I I F Y
?

• 1. Think Differently About the Role of
  Materials Management
• 2. Focus Your Time With The 80/20 Rule
• 3.
• 4.
• 5.

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Where is Your Biggest Return for Your Time Going
to Be?

• What Product Lines to focus on and why eg.
  Pharma, Capital Equipment, Physician Preference
  Items.other?
• Priority of Focus by Functional area eg.
  purchasing, inventory mgmt, costing analysis, new
  medical technology assessment

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W I I F Y
?

• 1. Think Differently About the Role of
  Materials Management
• 2. Focus Your Time With The 80/20 Rule
• 3. Make Vendor Relations a Key Strategy
• 4.
• 5.

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Finding The Perfect Partners!
What A Vendor Wants and What They Can Deliver
What You Want and What You Can Deliver
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Vendor Relations

• 80/20 RuleIts a Balancing Act
• Watch and take control of contracts and price
  information sharing
• Its not just about the Big PlayersDont forget
  emerging advanced medical technology companies
  and university tech transfer as well
• More and more need for vendor partners with IT
  solutions and data/cost analysis capabilities

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W I I F Y
?

• 1. Think Differently About the Role of
  Materials Management
• 2. Focus Your Time With The 80/20 Rule
• 3. Make Vendor Relations a Key Strategy
• 4. Free Up Your Time for Thinking Differently
  and Being The Expert
• 5.

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Make Continuous Learning Outside Your Box a
Priority

• Staying up on Materials Mgmt. is a given
• But now need to add
• Financial Management HFMA meetings, Health
  Leaders magazine, Healthcare Finance News
• Medical Technology/Vendor perspectivesAdvaMed,
  In-Vivo, MX

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W I I F Y
?

• 1. Think Differently About the Role of
  Materials Management
• 2. Focus Your Time With The 80/20 Rule
• 3. Make Vendor Relations a Key Strategy
• 4. Free Up Your Time for Thinking Differently
  and Being The Expert
• 5. Back to the Basics of Mgmt 101!

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Create the Right Culture

• Dust off The One Minute Manager!
• Delegatefor your team and for you!
• Develop a culture of Learning. Everyone become an
  expert and then the whole team is viewed as
  the experts
• Rethink work design given the new worker realities

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Develop Creative Communications Strategies

• Everybody, Anywhere
• Is Connected!
• Entertainment Multi-Media
• How The
• New Economy
• Communicates
• Content Anywhere/
• Anytime
• Fast

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W I I F Y
?

• 1. Think Differently About the Role of
  Materials Management
• 2. Focus Your Time With The 80/20 Rule
• 3. Make Vendor Relations a Key Strategy
• 4. Free Up Your Time for Thinking Differently
  and Being The Expert
• 5. Back to the Basics of Mgmt 101!

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Food For Thought

• The Best Way To Predict The Future
• Is To Create It.
• --Peter Drucker