par Brendon Nafziger
, DOTmed News Associate Editor | May 31, 2013
From the May 2013 issue of HealthCare Business News magazine
“We think this next wave of consolidation underway right now probably makes the one that happened in the 90s seem small,” Reilly tells DOTmed News. “You’re probably going [from] 650 down to 150 in the next five or six years. We think we’re going to see a huge step function change in consolidation activity.”
The reason? There are a few. One is that the “sweet spot” for patient revenue is $8 billion to $10 billion, which requires a big integrated system, or what Reilly calls a “super- regional” model — not necessarily national, but possibly spanning several states. The University of Pittsburgh Medical Center, one of the country’s leading medical institutions, for instance, is built on a large regional model, and pulls about $10 billion in yearly revenue, Reilly says.
Numed, a well established company in business since 1975 provides a wide range of service options including time & material service, PM only contracts, full service contracts, labor only contracts & system relocation. Call 800 96 Numed for more info.
Another driver is access to capital, something smaller institutions have a harder time getting, especially as they struggle with reimbursement challenges and pressure from health care reform. “Even though there’s a lot of bliquidity out there, it’s hard to get,” Reilly says. “You need a good size chassis to get the financing you’re looking for.” Reform has another effect, too. As fee-for-service payment models transition to value-based payment ones, health care facilities will often need to work at population health, receiving payments or incentives for meeting targets with the patients in their area of care. But to play the “population health” game, you need a big patient pool, Reilly says.
“A million patients is the sweet spot to do population health, and you need a good size network to capture a million patients.”
Hub and spoke
The result is what Reilly calls a “hub and spoke model,” where you have a high-end tertiary institution, or the hub, surrounded by community hospitals, clinics and ambulatory health care centers — in other words, the spokes. This will have myriad effects on biomedical engineers, one of which is that larger, more consolidated institutions could use their biomeds to service not just one hospital, but all the outlying “spokes” that surround it. “If you think about investments they make in systems and tooling or training, you can really leverage them if you’ve got a bigger footprint or system to go after,” Reilly says.
Pronk Technologies' FlowTrax
And hospitals could even offer their “surplus capacity” — in other words, extra biomeds or their time — to other hospitals or clinics that aren’t even part of their network. “We’ve seen some biomed/CE departments get creative,” observes Greg Alkire, who works with Pronk Technologies, a nine-year-old manufacturer of test equipment. “Even though that outlying clinic might not be affiliated with the hospital, they’ll pick it up as a moneymaker. They’ll send a guy out in a van virtually every day to do testing outside the hospital.”
This is in turn, is putting pressure on manufacturers of equipment used by biomeds to ensure the devices are both easier to carry around and cheaper to buy. And in an effort to achieve the necessary ‘ities — affordability, simplicity, durability and portability — testing equipment makers are learning lessons from unlikely places. For instance, for two engineers at TriMedx, an asset management company, and one of the big nationwide providers of biomedical technical services to hospitals, inspiration for a new smaller, cheaper tool came all the way from India.