New business models for medical device makers

While the industry insists that technology by itself can contain costs, it's becoming evident that costs are less the issue today than risk.

Philips logoIn an attempt to keep sales high for its high-end medical diagnostic gear Philips is introducing some new business models.

These business models are being tried first in Europe but if they work they might be imported.

  1. A managed service model which includes a guarantee technology will stay up-to-date.
  2. A pay per use model in which it shares the risks of patient volumes and bad exams with its customers.

This is the kind of innovation you expect in a weak economy but hopefully this can be longer-lasting.

While the industry insists that technology by itself can contain costs, it's becoming evident that costs are less the issue today than risk.

The Philips plan deals with both types of risk.

  1. Payment risk caused by Medicare and insurers refusing to pay on botched procedures or tests.
  2. Economic risk caused by uncertainty about demand for new devices.

Much of what is happening in the medical field right now is a game of hot potato, with risk being the potato.

This is as short-sighted as the previous efforts of managed care, which provided only short-term cost relief, but any relief is still relief.

Is this the relief you need?

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