Publisher’s letter: When Eras Collide

Most people I’ve talked to will be happy to see 2013 end and 2014 begin. This was a transitional year where two eras collided. We’re in the throes of a transition from a volume-based industry to a value-based industry. It’s easier said than done, when you’re talking about life and death.

The Medical Device Tax that hit manufactures at the beginning of 2013 has been a game changer for suppliers to our nation’s hospitals and health systems. The 2.3 percent excise tax eroded many suppliers’ profit margins by 10, 20 and 30 percent, and made them trim jobs and look for the lowest place to manufacture.

The foreseeable future for these suppliers looks promising if they align their value proposition with the way providers are now being reimbursed. Progressive suppliers are asking themselves how their products and offerings contribute to increasing quality, decreasing cost and enhancing patient experience. For those that aren’t, it may be too late for them.

Physicians, hospitals and health systems have seen their share of change in 2013. Whether they joined or formed an ACO, their compensation models are transforming. Medicare and Commercial ACOs – as well as more and more large employers – are reimbursing on more factors than volume.

For years, supply chain stakeholders have called for transparency, and I think 2014 and beyond will bring more direct “line of sight” between stakeholders. For instance, as huge consumers of healthcare services, we’re already seeing employers get more involved in care decisions, protocols, care settings (and yes) products that are available for their covered employees.

We all know change is hard, and even harder when forced or mandated. In 2013, we certainly had plenty of change given to us. I don’t see 2014 being much easier by any means, but I hope all of us affected by reform and the need for success through this transitional time continue to jump in and contribute the best we can. Our nation is counting on us.

Thanks for reading this issue of The Journal of Healthcare Contracting.

John Pritchard

About the Author

John Pritchard

John Pritchard is the publisher of The Journal of Healthcare Contracting.