Medsider: Learn from Medtech and Healthtech Founders and CEOs - How Will These 2 Major Healthcare Changes Affect Medical Device Companies?

Episode Date: June 14, 2013

How will healthcare reform affect care delivery and reimbursement? And what will the impact be for medical device companies? These are probably the 2 biggest questions that medtech companies need to answer in order to succeed in the future. Unfortunately, there aren’t solid answers at this point. But there are some people that can help...[read more]Related StoriesSubstantial and Sustainable – 2 Words That Medtech Companies Should Get Used ToSocial Media Best Practices for Marketing Medical DevicesWhy Intersect ENT is an Example of Hope for the Medtech Industry 

Welcome to MedSider, where you can learn from a mix of experienced medical device and medtech experts. These proven mentors will show you how to master the med tech space on your own terms without going to school. Now, here's your host, Scott Nelson. How will health care reform affect care delivery and reimbursement? And what will the impact be for medical device companies? These are probably the two biggest questions that med tech companies need to answer. in order to succeed in the future. Unfortunately, there aren't solid answers at this point,

but there are some people that can help. In this interview with Brian Conte's executive director for the advisory board company, we learn how medical device companies can respond to the changing healthcare dynamics. Here are a few of the points we're going to cover. How will the increased scrutiny regarding the appropriateness of certain procedures impact health care providers and medical device companies? The number of hospitals offering catheter-based re-bascularization has increased by 30% over the last 10 years. What are the results of these trends?

How will reduced reimbursement affect the recent influx of POLs or physician-owned labs? Value-based purchasing programs, readmissions reduction incentives, value-based payment modifiers for physicians, bundled payments for care improvement initiatives, and commercial ACOs. What do all of these healthcare delivery changes mean for med tech companies? Percutaneous transcatheter heart valves and renal deuneration? Is there too much hype around these two spaces? Brian provides us with his expert opinion. And what is the one major initiative that medical device companies need to really grasp

as we head into the new era of health care? I hate to have these interviews interrupted. So before we dig in, listen to these quick messages. First, to get free email updates when another Medsider episode goes live, simply go to Medsider.com forward slash free. We don't send emails often, but when we do, they're full of valuable content. No spam ever. Just go to Medsider.com forward slash free to sign up.

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Hello, hello, everyone. It's Scott Nelson, and welcome to another edition of MedSider. This is the program where you can learn from proven and experienced med tech and medical device thought leaders and experts. And on today's program, we have Brian Contos, who's the, executive director for the advisory board company, a global technology research and consulting firm partnering with 150,000 leaders in 3,700 organizations across healthcare and higher education. So without further ado, welcome, Brian. I appreciate your coming on the program.

Great. Well, thank you. And thank you for inviting me to the discussion today. Absolutely. So let's first start out with a little bit more about you as well as the role you play within the advisory board company? Yes, certainly. Well, let me just give you the, I guess, the quick history here. So I've been with the advisory board about 14 years or so now and oversee all of the work that we do and what we consider our clinical research programs as well as our industry partnerships.

So basically that means that I work with the teams here in our Washington offices to produce all of the content and resources that we provide to our hospitals, health system, and and health industry partners on any number of matters related to key clinical areas, cardiovascular oncology, radiology, and so on, as well as the organizations that partner with us in biotechnology, pharma, med device, and so forth. So that's really where I spend most of my time. I've had a pretty decent history in our cardiovascular space in particular. really since day one, working at the advisory board, focused in on key strategic and operational

concerns facing cardiovascular providers. And then prior to the advisory board was doing work at the Yale School of Medicine and their infectious disease department researching in a, basically an immunology lab looking at T-cell responses. Got it. Cool. Thanks for the introduction. And I hope everyone has a little bit of better sense for who you are as well as the advisory board company. And I thought we'd cover, we'd first start out with some of the trends specific to the cardiovascular space that you're seeing across the country. And we'll use the recent piece that you wrote for endovascular today as sort of a reference point. And then we'll dig into the competitive landscape as well as as well as transition later into kind of the healthcare

economic umbrella topics like the physician fee schedules, value-based purchasing programs, and how med tech companies and medical device companies can respond in light of these major changes. So let's first start out with some trends. And I'll mention a couple data points that you that you wrote about in that recent piece for endovascular today. Let me just list, let me just read some of these here. So from 2005 to 2011, lower extremity angioplasty procedures increased by 67%, venous ablation by 400%, which is phenomenal, it's a phenomenal increase, venous angioplasty by 62%, but yet coronary procedures decreased by 20%. So those are, you know, we've got two sides of the coin there.

So can you speak to those trends and specifically, you know, the coronary piece with the decrease and the 20% decrease over the, you know, the span of 2005 to 2011? Sure, absolutely. Well, you know, I think we have to consider kind of the historical perspective here that for many providers, hospitals and physicians alike, over the last 10, 15 years, really the dialogue has been dominated by what's happening in the coronary arena. And so if we go back in time a bit, we found. many folks investing sort of disproportionately in capabilities around coronary

revascularization and you know across the sort of the early 2000s we saw essentially an explosion in coronary procedures and part of that was a move away from open bypass toward trans catheter approaches which really accelerated with the drug-eluding stent. So we very quickly saw open surgery drop significantly. We've probably lost about 40% of the open bypass procedures for coronary arteries since they peaked probably around 2002 or so. But what happened in the latter part of that decade, so getting closer to about 2007-2008 period, we really saw sort of a pullback in that market, largely driven by the questions about the safety of drug-loating stents.

So you'll probably recall the concerns that were raised with late stent thrombosis with drug-loating stents. And that led to sort of an abrupt pullback in that market. And shortly after that sort of controversy, we saw the publication of the Courage trial. And the courage trial looked at basically stable patients who had, coronary disease and raised the question of whether or not we needed to always intervene on these patients of whether or not optimal medical therapy could produce perfectly sufficient results in those cases so this really started to create a bit more scrutiny over the use of PCI or percutaneous coronary interventions

and and we really haven't seen much of recovery as that much of started to pull back, we saw that despite the fact that more programs opened, there were more hospitals offering interventional cardiac services, the absolute number of cases was decreasing. The last bit there, I would say, is, you know, in the last couple of years, we've seen even greater scrutiny, even leading to lawsuits against certain programs and certain cardiologists questioning the overall, basically the need for some of these procedures. And these have attracted a lot of press attention and I think it really created resistance in terms of the referral stream. So we're just not seeing as many cases being referred on for interventions.

And of course, behind the scenes, we've seen an increase in prevention, so better use of pharmacologic regimens. And of course, as we've seen better and better technologies like drug leading stents really take hold fewer revascularizations needed. So you have this sort of confluence of issues. Some of them are market scrutiny. Some of them are related to really effective technology that has decreased the demand for these services. Right. That's a lot of interesting data there that, and I want to pull out a couple different things, and that you mentioned the number of centers offering PCI procedures has increased, yet the overall case volume has decreased, which is that's an interesting

interesting point. But in regards to that sort of that multi-focated, maybe that's not the best description, but the confluence of issues around the decrease, the coronary procedural decrease by, you know, over the most recent decade here, does any one particular issue stand out to you? Is it the fact that technology has gotten better or the referral patterns just have diminished because of, you know, the courage trial, for example? Do you think anyone is more substantial? in relation to that decrease versus another? Yeah, certainly I think that the stagnation and volume, the sort of flattening of demand from the last like three or four years,

I would have attributed that largely to the courage trial and its sort of ripple effect, really just questioning the need for intervention and fairly stable elective patients. I think the reason for the decline that we've seen, so going from flattening to actually declining, really ties to the much greater scrutiny and real concern that folks have around procedure appropriateness. Today, the NCDR, which maintains the registry for PCI cases, will report on a case-by-case basis and overall for participating providers, basically where do you stand in terms of procedure appropriateness? So there's a, you know, there's a laser focus on this right now.

And I think as a result of that, much more conservative management of patients relative to five to eight years ago. Got it. And how much do you think one area that we didn't focus on is reimbursement? And how much do you think the fact that reimbursement for coronary procedures has decreased? And that maybe has led to a little bit of the procedural volume decrease. as well. Do you think that plays a part in this? Yeah, I think we talk about that a lot in general that, you know, declining reimbursement or softening reimbursement rates will lead to a reduction in procedure volume.

But the reality is PCI continues to be a fairly well reimbursed procedure, especially for inpatient cases. It generates a pretty considerable contribution margin for hospitals. So it's not surprising that even as we've seen this volume decline in the last 10 years or so, we've probably added 400 plus hospitals to those that are offering this procedure. Where the reimbursement starts to get a bit more challenging is for the cases that have shifted outpatient. And today, about 30 to 35 percent of PCI cases are actually being billed as outpatient. So they're falling under an APC and not a DRG payment structure. And there's a pretty considerable difference and reimbursement there. Now, that I think is simply putting pressure on hospitals to

find new ways to achieve cost savings and greater efficiency. I do not think that a loan that has produced sort of a reduction in the number of cases. It's simply a reflection of whether it's being done inpatient or outpatient in the economics that come with that. Got it. Okay. Interesting. Let's shift a little bit more to the competitive landscape within the the hospital setting. We discussed a little bit in regards to the number of hospitals offering PCI procedures, but there's a couple more data sets that I'll point out here that you wrote about. The increase 30% over the last 10 years, the number of hospitals offering catheter-based rebascularization. The number of centers offering AAA stent graft repairs increased by 115%. That's enormous.

So as more and more hospitals begin to offer these sort of endovascular-based therapies, what are the results, or what do these trends mean? And really, what's the impact for medical device or med tech companies, in your opinion? Sure, absolutely. Well, you know, one thing just for context is when we're talking about basically procedures outside of the heart, so largely the peripheral vasculature, this has been the sort of greenfield opportunity for many hospitals in the last five to ten years, really looking at peripheral vascular disease as a, there's a lot of latent demand there, is the way I would phrase that.

So we have seen a huge increase in the number of providers offering these therapies, especially on the high end. So when we do look at procedures for treating aortic aneurysms, even carotid scenting, the number of scents, has actually increased pretty considerably. Now, a couple things have come with that. One is it somewhat commoditizes the marketplace. So you just have a lot more centers that have put their stake in the ground saying that they can offer comprehensive heart and vascular services to their community. Now, for those centers that have been able to really achieve a kind of a multidisciplinary approach there, they're marketing that and positioning themselves as being,

you know, a destination center or a center of excellence. And I think to a large extent, effective programs have been able to garner greater market share as a result of that, and they're getting more referrals. Historically, it's been very difficult for hospitals to provide holistic heart and vascular care in sort of a comprehensive environment because there have been turf battles between clinicians. Once you have moved from open to end vascular therapy, you've got interventional radiologists, cardiologists, neurointerventionals, vascular surgeons, et cetera, all with the skill sets to kind of chase after this. So more competition in the market, some concern over whether or not we have the right sort of multidisciplinary

approach to provide these services, because that's certainly in the best interest of the patients. And of course, the more programs that are offering these procedures, you know, from a From the industry side, that means obviously more purchasers out there, buying the technology, but a more diffuse marketplace. You have centers that are sub-scale that aren't doing a whole lot of these procedures, so a little bit more work needed to really get the products out into the marketplace. I think what's really intriguing, though, is as some of these procedures start to shift from the hospital to physician practices because now you're talking about potentially opening the market

up by many fold in terms of the number of providers involved. And we are seeing select procedures being done increasingly in the physician office setting. Right. Let's speak to that because that's been a very recent trend, the idea of physician-owned labs. Do you see, I guess with the recent influx in terms of the number of physicians offering these procedures sort of in their own clinics or in their own labs, totally outside of the hospital. Do you see that trend continue? Is that largely driven by reimbursement? And if reimbursement drops, we may see, Medicare reimbursement drops, we may see sort of the end of physician-owned labs or physician-owned clinics. Yeah, I mean, this is definitely a case where reimbursement matters. So before when I was talking

about PCI and there's a lot of buffer there in terms of lowering the reimbursement is still having a profitable procedure. The rates are just, they're much more slim than that office environment. There's just not as much to play with. So I think reimbursement is a huge factor here. It's not the only factor. If you think about venous angioplasty moving more toward a physician office setting, some of that is convenient. There's a massive number of patients out there, who have dialysis shunt venous denoses that need to be treated. And sometimes the most convenient way to do that is to manage them in the office setting. It also may mean a little bit of extra income for the proceduralists that are offering that service.

But reimbursement definitively plays a role here. And we are seeing slimmer and slimmer rates, in part because, because CMS has begun to increasingly package services related to end of vascular treatment. So think back to 2011 when CMS basically created or implemented a policy around peripheral vascular for arterial interventions where now there's no more really composite coding that's used there.

It's all sort of packaged into one relevant CPT code. And that effectively has led to slightly lower reimbursement rates for those procedures. So there's definitely that risk that if CMS comes in and continues to cut payment, that we could see these services swing back to the hospital setting because they just won't be economically viable for physicians in their practice. I would say where are we in the spectrum of that? we've probably seen the most sort of accelerated portion of that adoption curve in the office. I think it's going to slow down going forward and potentially reverse course if rates come down.

Got it. Yeah. You wonder if we looked at like a bell curve where we're at exactly on that curve, if we've peaked and already starting to see declines or maybe just tapering off as you just mentioned. But you wonder if two to three years from now we'll look back at this time period from 2011 to 2013 or 2014 and say that was kind of a land grab, if you will, for physician in labs, especially as more physicians are acquired by hospital practices, if that will factor into the equation as well. but let's use that, the talk of reimbursement, I guess, as sort of a segue into health care economics. And there's a number of different topics here, but for lack of time, maybe we'll focus in on a few. But from 2008 to 2013, you wrote that inpatient reimbursement of peripheral arterial re-bascularization increased by 15%, which is a decent little chunk. However, physician fee schedules for intubascular specialists have decreased substantial.

over the last five years. Do you think this will continue? Well, you know, it's interesting because every year we talk about the sort of imminent reduction inpatient rates for these services, and yet every year, CMS produces a inpatient prospective payment update that provides a, you know, marginal to decent increase and payment for these services. And, in fact, if we look at the 20,000. 2014 proposed rate, it looks like another positive year for endovascular procedures, at least on the inpatient side.

So I would say that things are holding steady there, and we will probably continue to see slightly positive updates on the hospital side of things. That said, for as much decline as we've seen on the physician side of the house, again, I think that may have peaked. the phenomenon of bundling payment, there's not a heck of a lot more to bundle. If we look at the different types of endovascular services, there aren't many left over for CMS to come in and sort of achieve those cost savings that they've realized with things like lower extremity arterial revascularization cases. So I think the physician fee schedule should stabilize. And we are seeing encouraging signs that the whole debate about the sustainable growth rate or the SGR,

that this may be the year, finally, for the SGR to be replaced. So I would imagine that over the course of the next three years or so, we should see a bit more stabilization in the physician fee schedule. And then on the hospital side, you know, slight positive increases there. So overall, I think the economics and relative, terms look decent. Whether or not we're keeping pace with cost, that's a whole other question, and I think in general, we're not. So I think on a margin basis, these procedures are becoming slightly less profitable. But again, they've been in sort of a privileged position of being

fairly lucrative services to offer. So I think there's still some room there that even with some margin compression, it's still an attractive business to be involved in. Got it. And I'm going to ask you this now. It's a little bit off topic. I'm going to forget in this interview will be over with if I don't ask now. But going back to the Venus ablation trend, from 2005 to 2011, Venus emulation has increased by 400%.

Surely we won't see those increases continue, but do you think that's something that's that, for example, as cardiologists, you know, in particular, begin to do more of these types of procedures and their patient base is largely, uh, uh, is large, their patient base is largely, um, I guess, funded by, by, by CMS or Medicare. Is that sort of a, a number that will be a red flag to, to CMS, um, as they look at, as they adjust maybe a reimbursement for, uh, for that CPT code or those, that kind of that grouping of CPD codes for that procedure? I mean, it could be. You know, we got to that 400% figure in part because of the relative attractiveness of

offering venous ablation procedures in an office setting. Particularly, this is a low-acuity procedure, some debate about how much of these cases are being done more for cosmetic reasons versus, you know, sort of clinical need. But regardless, we've seen. huge adoption rates of RF and laser technology and any number of office settings, cardiologists, vass for surgeons, primary care, you name it. That has been seen as sort of an attractive service to offer and a fairly lucrative one, whether it's a self-pay basis or instances where Medicare is paying for the service, but it's hard to believe that we'll continue

to see that growth rate. The market has, you know, matured significantly in the last five to ten years. Now, when CMS sees such rapid growth, it can trigger sort of an investigation to understand what's going on here. Are we reimbursing appropriately? Are we over-reimbursing for these services? Now, where CMS typically comes down is in instances where there's a real question about the appropriateness of the case, whether or not the services being offered consistent with either national coverage decisions or sort of local coverage decisions. So I would argue that unless there is a real question mark on the appropriateness of the cases that are being performed, CMS probably won't really act on this in any particular fashion.

Again, they may investigate to see if the reimbursement rates are consistent with the costs that are being reported, but there's no indication of that right now. Got it. Okay. That makes sense. So going back to some of these different health care economic topics, we talked about physician fee schedules, and that's an interesting sort of dynamic in that for the procedures themselves, reimbursement continues to sort of steadily climb. But for the people, the physicians that are actually performing the procedures, their payment or reimbursement has dropped. It's such an interesting dynamic. But moving on to some of these other topics, maybe let's pick out one or two that are maybe interesting to you, whether we talk about value-based purchasing bundled payments. We talked about that a little bit, maybe even ACOs. What do you find interesting right now and maybe what's the most important for medical device or med tech companies moving forward when looking at some of these different changes in healthcare delivery models?

Sure, absolutely. Well, you know, I would say of all the different activities that are sort of evolving and taking hold right now, anything that really changes fundamentally how hospitals and physicians are paid for the work they do, that's really what we've got to focus on. So within that realm, a couple of things come to mind for me. First is probably a point of clarification on bundling. So everything that I've talked about thus far really speaks more to how CMS is evaluating services that are provided in the same setting and how that sets the rate for the physician fee schedule,

different and kind from bundling a la health care rate. reform, which is looking more at how do we take the way that we would normally pay physician and or hospital and basically pay for a set period of time of services around some type of incident procedure or medical diagnosis. So that type of bundling is intriguing because it's largely structured around how can we provide as a provider, how do we provide the most efficient cost-effective care in a bundle so that we basically have more dollars that we can share among the participants? So classic example might be cardiac surgery bundling where hospital and physicians may be paid one lump fee to cover, let's say,

a 30, 60, 90-day window from that procedure. And any of those savings that they're able to achieve, they can basically have a, they can split those. So there's a gain sharing element to that. So that in and of itself is likely not a direct threat to most of the MedTech firms that we would be thinking about because it's sort of all rooted in you're doing the procedure, now do it very efficiently and cost effectively. Now, so the procedure is being done as a foregone conclusion. Now, what technologies are used within that could have implications for MedTech, whether you're using, you know, catheter or stent type A or B, if one is more economical and produces similar results, you're likely to go with that one. But I don't think it's a mechanism to decrease utilization of the services.

It's just a question of which technologies will we use to get there. Got it. Accountable care organizations or shared savings model. are different and could have even broader implications because in this instance really the objective here is to reduce the actual cost to the payer so basically to bill Medicare less for services if you take that to that extreme it means reducing the reliance on acute care services do fewer surgeries admit patients less frequently and in that type of environment there will be pressure

to do fewer of these very expensive, very lucrative today, but very expensive procedures. And as a result of that, we could see at least for some end of vascular procedures, we could see some pressure on the volumes. As sort of a non-example, take renal rebutlerization. We've already seen a huge decline in renal cases because of questions of efficacy. Had that decline not already occurred, I would have put renal. re-bacterization at the top of the list in terms of target areas in endovascular for reducing sort of the overall cost of care because there just was no real clear sense in

many of those cases that we were improving the outcomes for the patient and and creating sort of endure kind of durable efficacy for them so accountable care organizations are kind of interesting in that that they could lead to and likely will really to reduce overall utilization and particularly in the hands of physicians. So a physician-led accountable care organization, they have every incentive to avoid hospitalization. It's not their revenue to lose,

but it will help them achieve their cost-saving goals to receive a bonus, basically, from the payer. So physician-led ACOs, I think, are the ones that we need to watch most closely in terms of potentially having a dramatic impact on referral patterns to specialists, as well as to hospitals. Got it.

So those are really two great topics that you sort of picked out to focus on is kind of the idea of value-based purchasing or value-based programs versus ACOs. And correct me if I'm wrong, but in essence, ACOs may impact utilization or procedural volumes versus value-based programs are going to more, in terms of the impact on med-tech companies, value-based programs are going to be more related to what sort of. of technology is used to treat this patient to get the best results within a certain period of time. So going back to the ACO model, though, is that a situation where if it's a physician-led

ACO model, they may look at specific numbers and say, okay, this specialist is doing an inordinate amount of procedures in comparison to his or her colleagues. Let's investigate this further and figure out like why, why is this, why is this endabascular specialist intervening so often and, and, you know, they may get, you know, he or she may eventually get a, you know, a slap on the wrist, so to speak. Is that kind of what maybe that would look like? Yeah, I think so. You know, at the end of the day, it's completely in the interest of the physicians that are partaking in that ACO to control utilization of those high-end services. So, you know, a classic example I oftentimes use is actually related to back pain. You know, lots of controversy around

the number of surgeries we do for in back versus, let's say, a very conservative management approach like physical therapy. Now, if I am a physician who has an ownership stake in an ACO, I'll very likely look at the practice patterns of the folks that I refer to and understand what is their utilization rate of different procedures, and then what's the relative outcome of those patients? And I will begin to steer volume toward those specialists that can produce sufficiently high outcomes, but doing it at a much lower cost. And I think in the end of atmosphere world, where we oftentimes deploy a number of adjunct technologies to treat patients, you know, there could be greater scrutiny over whether or not that makes sense.

You know, should we be using all of the different devices on top of, you know, simple angioplasty? You know, when should we or shouldn't we stent? With now having a drug-winning stent in the market, you know, which cases really need to have that technology versus traditional bare metal stent? So these are questions that savvy physicians. may start to ask. Now, I think that's a, that's sort of a second order priority, frankly, because there are, there's much more low-hanging fruit probably in the near term. But I do think as we get out three and five years into the evolution of accountable care organizations and

shared savings programs, then specialty care really starts to be an area focused, particularly with what we would consider preference-sensitive procedures, instances where there are legitimate alternatives that produce similar results. So this is something we need to be thinking about. Do I think this is going to be the first place that these ACOs look? No, but inevitably these very high-cost areas, cardiovascular oncology orthopedics, will be kind of brought into the fold to look for those opportunities.

Got it. And so the answer now, I mean, especially if there's other sort of low-hanging fruit to use your words that may be impacted more by some of these changes in the near term. But in the long term, is the answer for med tech companies, in the longer term, I should say, is the answer for med tech companies, medical device companies, when they fund clinical trials to really make it a point of emphasis to look at not only the cost of the device in comparison to other devices, but the cost of the device in comparison to medically managing a patient, Is that going to be like of extreme importance moving forward?

Yeah, I mean, I think what happens here is we extend the amount of time that we care about in terms of efficacy and cost effectiveness. It's no longer simply a question of what happens in the acute event. But as we look across three, six, nine, twelve months, how do alternating, you know, different procedural options or treatment options stack up relative to each other? That will become more and more important. So thinking about, you know, what are our endpoints? how far out are we looking? That becomes really important. And I think related to that is, you know,

and that speaks to how do we demonstrate value particularly to a clinician, but I think it also gets into a discussion about what are we selling in sort of the med tech world. Are we selling a product? Are we selling a solution? And increasingly we're finding that the organizations we work with,

they're really working on refining their solution sales approach. And moving a bit away from sort of that transactional product sales that's largely focused on identifying a physician partner and sort of gaining a foothold in the organization, but thinking more broadly about how do our services and our products fit into a broader sort of solution for treating these patients that provides value that perhaps is different from what we've, demonstrated historically.

Yeah. And to your point, I think, you know, Omar Ischrak, the CEO of Medtronic's been actually very, very vocal, I guess, in the public forum about about some of these major changes that you've, that you've just referenced. And it's interesting that you just brought those up. So kind of moving on as we conclude this interview, can you speak to, I'm curious to get your thoughts on a couple, you know, therapeutic areas, I guess, that are receiving a lot attention, percutaneous heart valves as well as renal de-nervation. Can you quickly speak to those

two different markets? Maybe the heart valves, the percutaneous heart valve market being maybe a little bit too overhyped. I'm just curious to get your thoughts and then what you think of the the renal de-irvation market here in the U.S. Sure, absolutely. Well, there's no question that on the transcath valve side, there's just been huge, huge excitement. And arguably, you know, transcathor of perhaps the biggest news of the last, oh, I don't know, some would argue 10 years for cardiology at least. I don't know if that's quite right when I think about what kind of impact I think these will have, but regardless, it's a big development, and we're talking about having an option for patients, in some cases that had no real option, and then providing an alternate option

for surgical candidates. You know, the market has really has really been receptive. to Taver. And we see now that there are probably, oh, I don't know, maybe 220, 250 sites that are actively implanting transcatheter valves and many, many more sites that are interested in coming online. We've probably seen about 6,500 commercial implants since Edwards received its approval for the Sapien valve. And that number seems to be growing at a pretty steady clip.

Now, the work that we're doing at the advisory board, I would say almost daily, we're getting questions about this market opportunity. And some of these questions deal with, does it make sense for us to open a program, some more strategic questions, to very operational questions. How do we deal with billing? How do we handle instances where you have a cardiologist and a cardiac surgeon involved in the case gets into the minutia there? You know, on one hand, I think that there's a lot of running room for the procedure. And when we look at countries in Europe that have fairly generous reimbursement policies like the United States, we've seen pretty dramatic growth in the use of transcatheter valves. So I do think across the next three to five years, we're going to see a pretty significant expansion in the market,

not only for the clear-cut cases for today, but we'll probably see some indication creep where we're going to see some use, perhaps off-label. But that's always a moving target. The FDA-approved criteria will likely shift over time. So lots of attention, lots of interest there. I don't see any really near-term glass ceiling in terms of number of cases, in part because only so many centers will be able to come online. If you look at CMS reimbursement criteria here, reality is there are only a fraction of today's valve surgery programs have the requisite program volumes and operator volumes to

to provide transcatheter valves. So at least based on those criteria today, I think rate limiting step will be number of centers. For those that are offering it, I think they have a lot of running room. Got it. When you come to, sorry, go ahead. That's it. So we spoke earlier about the number of centers offering endovascular procedures going up. but yet the volume kind of plateauing are going down, but in this case, it's actually going to be the number of centers that are offering TABI or TABR procedures going down maybe, but yet the utilization or procedure volume will actually increase.

Yeah, I don't think we'll see an absolute decline in the number of centers offering TABR, but we won't see the kind of explosive growth that we saw with coronary interventions. And I also think lesson learned. I think there are a lot of programs out there that jumped on the bandwagon offering PCI or cabbage over the last X number of years. And some of them are looking back and saying, gee, we just don't have any economies at scale. We can't get coverage. We're having a hard time maintaining this program. And I think they've learned that, you know, unless you've got all the pieces together, it may not be a wise investment.

and the macroeconomic picture is such that we are seeing more consolidation in the marketplace, and there's pressure to not simply go off in and start a small-scale program. So a little bit more of a rational growth trend, I think, that we'll see with the TABR cases. Got it. Got it. And then maybe quickly talk about you, before I interrupted you, maybe you were going to touch briefly on renal de-inervation. Yep, absolutely. So this is a tricky one. On one hand, if you look at trial results to date for renal de-nervation, it's a really exciting

technology that, at least in theory, has a very large potential population of patients to treat. And so I think the hype that we're starting to pick up on right now in some ways is very much justified. But what's really intriguing to me is when you look at more mature markets in Europe, for instance, that have been offering renal de-nervation, there's interesting dialogue now about whether or not the market is, is it as big as we presume it is. So this could be a case where it's a bit overhyped. Folks will often talk about the fact that there are about 70 million Americans with hypertension

and that there are a few million that have sort of later stage two uncontrolled disease. But what we're finding is it's probably a fairly narrow subset of that population where this procedure makes most sense. Now, reality is that's still a very large market. And the denominator of patients there is much larger than the base of patients for something like Kaver. So I think that there's a lot of room here, but we're not talking about millions of patients that are good candidates for this in the United States. But I do think that the results have been incredibly positive. My expectation is we'll continue to receive great results, and we will see U.S. approval not too far in the future, probably in 2014, when we'll get the first FDA-approved technology. in the market.

And then I think we're really gonna have to work on figure out exactly who are the optimal candidates, how durable is this procedure, do we need to do repeat procedures on patients, how does that stack up potentially to new medications that perhaps may develop across the coming years. But lots of excitement, I think for the most part, it's warranted, but we can look at sort of the European

experience and I think get some nuance. around how much growth we can really anticipate for this procedure. Yeah, and I think I'm going to bring up Omar Ischrak again, but I think last week even maybe there was a piece that I read about him attributing the slower than expected European growth for their simplicity catheter to, I think he tied it to reimbursement in that there's several European countries that sort of, and I'm paraphrasing here, weren't on board with the reimbursement component,

it and that's why maybe the volumes weren't increasing as rapidly as they expected. And that certainly could play a role here. And CMS has a history of, you know, exerting its force when it comes to what is and what is not covered. And sometimes outside of the parameters of what the FDA has even approved, you know, Corrata's senting is part of the classic example where CMS's coverage is much narrower than actual FDA approval. And on a procedure like renal de-inervation that could be a pretty substantial market, it's reasonable to assume that payers will pay extra close attention considering how large the market could possibly be. Got it.

Cool. Okay. So my last question for you, Brian, is with your work at the advisory board company, you're consulting on a daily basis with med tech companies as well as, you know, hospitals and large health care systems. So with that said, what's like maybe the biggest takeaway that you think device companies should focus on, you know, to see results, I guess, are positive results in the coming years? So to me, it really boils down to sort of the catchphrase to shore, but it's really important. and it deals with proving value.

Reality is there are many competing technologies out there for treating the patients in question here, particularly when we think about end of vascular therapeutics in the peripheral vascular space. And historically, I think, we've been sort of able to get away with a tight storyline around the clinical efficacy and safety of technologies, but increasingly that's just not enough, in part because clinicians, I think,

are becoming more savvy to the business side of the house, and they're being pulled into conversations around the overall sort of macroeconomics of their cardiovascular service line, for instance, but also because we are finding that more and more, as hospitals and physicians are aligning, and they're working together on strategic priorities, we need to look at metrics of success that are not just about revascularization rates and things of that nature. But instead looking at, you know,

what's the long-term return on investment here? Are we able to reduce the costs and complications of these patients not only during that acute event, but across time? And how does that accrue? So understanding the broader value picture and how your product fits into that dialogue is really important. Today, so many hospitals are focused on reducing readmissions

and addressing unnecessary redundancies in care. How does a particular product fit into that can make a substantial difference in terms of its ability to end up on the shelf, frankly. So rethinking value proposition really critical here. And understanding what are the motivators of a different and kind purchaser? If it's not the clinician that you need to convince, but it's somebody in the supply chain, you know, executive level, or if it is a VP or CXO in the hospital that's now your new audience,

what motivates them? What are they concerned with? Your traditional pitch around clinical efficacy is probably going to fall in deaf years. So really understanding their top priorities and how they're thinking about their business moving forward is really quite essential. No, those are good points. It sounds like those metrics, those value metrics, I guess, for lack of a better description, are still very moldable and yet to be yet to be sort of determined. In thinking about this topic, I've thought that if you're ambitious and you sort of want to make your mark within a medical device, company. Instead of getting an MBA, you should probably get an MPA, you know, an MPH, just because that seems

like where you're going to be able to bring a lot more value is sort of understanding the healthcare system versus, you know, from a business perspective. Does that make sense? Well, you know, it's actually a really good point. Think about the evolution here where you see joint degrees. Lots of physicians in the last 10 years have pursued MBAs. And I think they've done well to do that. But as we've begun to migrate from sort of a volume to or of a value slash population health management perspective, all of a sudden that sort of MPH-like comprehension of the healthcare universe really becomes important. And that is truly where we are moving. And, you know, it's a palpable change from traditional fee for service to looking at

population health or total cost management, and those are almost synonymous with each other. And appreciating sort of all these dynamics is complicated. It's not sort of the traditional business track that you might approach. So I think we are going to see an evolution in terms of what's the leadership profile that leads to success, whether it's success for folks in the med tech world or success for those folks that are leading large hospitals and health systems or physician practices. Got it. All really good stuff.

I wish we had a couple more hours where I could sit here and pick your brain, Brian. Fascinating information. You're a wealth of knowledge when it comes to this sort of stuff. So I can't thank you enough for coming on. And for those listening that want to learn more about you or your work at the advisory board company, where would you direct them to? Well, I would say for learning more about advisory board, I would simply direct you to our website,

www.advisory.com. Any particular questions for me? I actually welcome emails. So feel free to shoot me an email at contosb at advisory.com. That's C-O-N-T-O-S at advisory.com. Or contos B, C-N-T-O-S-B at advisory.com. advisory.com. Cool. I can't thank you enough for opening up the email correspondence as well. So if you're listening to this, that's one thing that I've recognized in doing these interviews over the past,

you know, three years. If you're listening to this, take action. You know, if you've got a, if you've got a question, reach out to Brian. Hopefully you won't be bombarded. I don't think you will, Brian, but take him up on that offer. And as I found out, you know, before recording this conversation, If you're listening to this and you work for a large strategic or not necessarily maybe even a large strategic device company, you may have access to some of the tools that the advisory board company has. So you may want to check into that because as I dug into the advisory board company, I'm certainly going to take advantage of that and utilize some of those services that I have access to that I didn't even know about. Anyway, I think that's it for now.

Anything else you want to add, Brian? No, I just want to thank you, Scott, for giving. me the opportunity and just reiterate that if anyone does have questions, feel free to reach out, whether it's about this discussion or other work that we're doing at the advisory board or how to access any of the resources that we have available. I'm happy to help with any of that. Great. And Brian, I'll have you hold on the line real quick. But for those listening, Brian didn't mention this, but his cell phone is actually 5, 5, 5.5. I'm just kidding. But for those listening to you, you know, throughout this 30, 40 minutes here that we've been

reporting. Thanks for your listening here and until the next episode of Medsider. Take care.