Purchasing Decisions

REGULATIONS AND REIMBURSEMENT DOMINATE THE HEALTH CARE PURCHASING DECISION 
We all know that the health care is one of the most heavily regulated businesses in America.  On top of that, the health care provider deals with a dizzying array of ever changing reimbursement systems; insurance, local, state and federal. 

By the time the health care facility manager has spent his capital equipment budget on regulatory and reimbursement driven equipment and services, there isn’t much budget left to spend on discretionary items. 

But, have you ever stopped to think how the regulatory and reimbursement systems impact manufacturers? 

Having been the head of purchasing for two different multi-billion dollar health care companies, thousands of health care products have come across my desk over the years.  To deal with that volume of contacts (all of whom wanted a lot of my time) I developed some qualifying criteria based on current and pending regulatory and reimbursement guidelines.  Those five categories were: 

Never going to be!  This doesn’t mean these aren’t good products or good ideas. It means that either they don’t have a regulatory or reimbursement application or the manufacturer is selling in the wrong health care distribution channel.  I believe there are four distinct health care distribution channels.  Look at hospital type beds for example.  There are hospital beds, long term care beds and home health (DME) beds.   All these beds are, generically speaking, “hospital beds”.   Yet, each style bed is pretty much worthless to the other two distribution channels. 

Potential!  These are products that may not have current regulatory or reimbursement support but pending changes or operational efficiencies make them attractive to know about and support.  I always try to keep one of these in the HealthCare Source basket of products (more on this later). 

Current commodity.   HoHum… These are the products and manufacturers who currently have a regulatory or reimbursement niche, but are also engaged in the toxic, downward spiral of copying other manufacturers and then value engineering that product.  “Value engineering”, there is a term that has become an oxymoron at the hands of some health care manufacturers.  Too often the purpose of the product is lost in the process of copying and value engineering.  Also, gimmicks are often proffered as solutions by these companies. 

Innovative Alternative!  These are products developed by manufacturers who have a current regulatory or reimbursement niche, AND they are seeking/finding innovative new ways to fill the niche, AND they are constantly developing new products to be current with our ever changing industry.   These are also the manufacturers who “deliver value” not “engineer” it.  HealthCare Source draws the majority of its manufacturers from this category. 

Used to be.  Due to regulatory or reimbursement changes, some products and manufacturers become obsolete.  Sad, but true!   

So we all know that Dennis prefers to spend his time with products in the Potential and Innovative Alternative categories … get on with your story Dennis! 

I thought that those of you who are interested in product development, might like to keep watch on a product that MAY transition from the “Potential” category to a “double hit” regulatory AND reimbursement “Innovative Solution”. 

The product, Live-Vu, is a low band width, remote, medical assessment system.  If you want to know more about the product you need to schedule a demo. 

What you need to know for this article is that this product is a unique, well tested, innovative solution. It is well channeled in the Long Term Care distribution segment, but because it did not match up to regulatory or reimbursement criteria, the manufacturer was left to fighting for that very small pool of discretionary dollars that is available at the end of the budget year. 

AND THEN, ALONG CAME RUGS-IV! 
RUGS-IV (resource utilization groups) is the new MediCare reimbursement companion to MDS 3.0.  Both are scheduled to be implemented nationwide in October 2010.   

What is intriguing is that CMS is planning to run a demonstration test of the RUGS-IV program starting in October of this year.  Four states will participate in that test program. 

The demonstration is called NHVBP (Nursing Home Value Based Purchasing).  As I understand the program (no one really knows yet, it’s brand new), RUGS-IV is a value calculation that includes four new domains:  Staffing, Appropriate Hospitalization, MDS outcomes, and survey deficiencies.  Again, as I understand it, superior NHVBP ratings will pay incentive bonuses to the facilities getting superior ratings. 

So what is the big deal?   

Live-vu is a unique product that should help facilities to be 100% compliant within  the “appropriate hospitalizations” domain.  If true, that application hits the perfect nexus of product, regulations and reimbursement! 

Hey, there is a lot more to learn about the RUBS-IV and MDS 3.0 systems, and this initial assessment by HealthCare Source is based only on what we have read about the program, so far … but like I said, it will be fun to watch. 

I’ll keep you updated as things progress.