Value-Based Healthcare: An Industry Perspective

by Bonnie Handke, Jenny Gaffney, and Nidhi Oberoi

In 2017, there is understandably a lot of uncertainty around the future of the Affordable Care Act (ACA) and health care reform. However one certainty is that the transition of our payment systems from volume to value will continue regardless of what administration is in power.

Both parties and multiple stakeholders, including Medtronic, recognize the overwhelming need to control health care expenses while maintaining and improving the quality of care. For example, the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) passed with bipartisan support, and it is intended to fundamentally change the way the United States pays physicians based on the quality and effectiveness of the care they provide to Medicare beneficiaries.

MACRA is expected to survive, no matter what happens to ACA. In addition to federal activities, commercial and state payers continue to push toward value-based health care (VBHC). Leavitt Partners estimates that in early 2016, 7.2 million of the 28.3 million people enrolled in accountable care organizations were covered by commercial payers and 2.9 million were covered by Medicaid.[1]

Volume-based payment models are globally recognized as being unsustainable considering aging populations, rising rates of chronic conditions, and tightening budgets. Global health care leaders and key stakeholder groups are working together to align their health systems with value-based approaches. For example, in 2016, Colombia’s Ministry of Health introduced a new policy to implement a pay-for-performance model for providers linked to patient outcomes.[2]

In the United Kingdom, the National Health System (NHS) requires mental health providers and commissioners to adopt either a capitated or an episode of treatment (year-of-care) payment approach, both of which include a component linked to achieving agreed upon outcome measures.[3]

The goals of a VBHC system are to improve patient outcomes and realize lower healthcare costs.[4] The challenges of shifting to a VBHC system are not to be underestimated. It requires the following:

  • Access to robust data infrastructure to evaluate costs and outcomes for an individual patient over a care cycle
  • Consensus-based patient-centered outcome measures
  • Innovative collaboration

Medtronic recognizes that as the world’s largest medical device manufacturer, we must play an active role in partnering with health care thought-leaders to transform the incentives in health care today to focus on patient outcomes.

“MACRA is expected to survive, no matter what happens to ACA.”

Medtronic’s Role in the Shift to Value-Based Health Care

At Medtronic, our mission to alleviate pain, restore health, and extend life supports the shift to VBHC systems. As many health care systems around the world transition to VBHC, manufacturers face a choice — remain focused solely on the volume of products sold, or adapt their business model to deliver patient outcomes and solutions.

CEO Omar Ishrak has made it very clear that Medtronic is committed to accelerating down the adaptation path. As patients and providers assume greater risk for outcomes and costs, we recognize that we must continue to evolve our offerings and business model to be a better partner.

As a result, VBHC at Medtronic is taking shape in five key ways:

  • Innovation - Developing new services and solutions to help payers and providers better manage patients over the entire care cycle (e.g., remote monitoring of heart failure patients to reduce the rates of avoidable readmissions).
  • Evidence - Generating clinical and economic evidence to demonstrate the value of our products and services on meaningful patient-centered outcome measures and in real-world settings.
  • Care Pathways - Investing in evidence generation and collaborating with key opinion leaders and societies to identify best practices for ensuring the patient gets the right therapy at the right time.
  • Meaningful Dialogue - Engaging with and convening policymakers and key opinion leaders to ensure implementation of robust alternative payment models.

SPOTLIGHT: In addition to hosting regular webinar series with the Harvard Business Review on VBHC, Medtronic commissioned the Economist Intelligence Unit (EIU) to assess the global adoption of VBHC across 25 countries. The EIU’s ongoing, independent assessment is designed to help define strategies and track progress as health systems around the globe make the shift to VBHC. More information on the EIU assessment is available here.

  • New Business Models - Exploring new business models in which Medtronic can share greater financial accountability for the performance of our products and services on meaningful patient outcomes and health care costs.

SPOTLIGHT: Patients receiving cardiac implantable devices are at risk for costly infection. Under Medtronic’s business model, if a clinician uses Medtronic’s TYRX™ absorbable antibacterial envelope and the patient gets an infection, then Medtronic will help cover the costs of treating the patient’s infection. Medtronic is exploring applying this same type of business model to other therapies.

In 2015, Medtronic acquired Diabeter, an innovative Netherlands-based clinic network that specializes in providing comprehensive and individualized care to children and young adults with Type 1 diabetes.[5] Diabeter sets an annual bundle price with insurers for managing its patients and closely monitors its ability to achieve certain patient-centered outcome measures (e.g., quality of life, complications of treatment, HbA1c levels).

Diabeter is among the top pediatric diabetes clinics in Netherlands with superior outcomes and lower direct annual costs for Type 1 diabetes patients. Medtronic is in the process of scaling the Diabeter model and working with payers to agree on outcomes-based reimbursement models.

A Deeper Look: Venous Leg Ulcers

While orthopedic and cardiac conditions may be the dominant focus of many VBHC activities being promulgated by public and private payers in the U.S., venous disease and wound care are likely to be an increasing area of interest for payers given the clinical and economic burden they place on society.

Venous leg ulcers (VLUs) are the most frequently occurring type of chronic wound. VLUs pose a significant clinical and economic burden to patients and health systems.

In fact, VLUs are:

  • Highly Prevalent - VLUs affect between 500,000 and two million people annually in the U.S. They are responsible for most lower extremity ulcers.[6] VLUs are usually associated with multilevel disease affecting the superficial, deep, and perforating veins. The literature suggests that 74 to 93 percent of all patients with VLUs will have superficial vein involvement and many of these cases may also have deep vein or perforator incompetence, or obstruction.[7]
  • Associated With Increased Risks and Reduced Quality of Life - VLUs often require extensive healing time and are associated with increased risk for infections, reduced mobility, depression, and substantial decreases in patient quality of life.[8, 9, 10]
  • Costly to Health Systems - A VLU patient costs U.S. payers $6,000 - $7,000 more each year than a matched non-VLU patient.[11]

“Venous disease and wound care are likely to be an increasing area of interest for payers given the clinical and economic burden they place on society.”

Despite their high prevalence and importance, patients with VLUs are often inadequately diagnosed and/or managed. Medtronic is committed to improving the well-being of this patient population. This will be achieved in part through innovation, evidence generation, and education.

  • Innovation - Continue to support innovation to improve the outcomes of VLU patients. The SVS/ AVF 2014 Venous Leg Ulcer Guidelines recommend ablation of the incompetent superficial veins in addition to compression therapy in certain patients with venous leg ulcers and incompetent superficial veins (Guidelines, Grade 1B).[12] The ClosureFast™ and VenaSeal™ closure systems are both used to manage patients with incompetent superficial veins.
  • Evidence Generation - Continue to support research that will further strengthen the clinical and economic evidence available to patients with different stages of chronic vein insufficiency, including venous leg ulcers, and their providers. A robust evidence base is necessary to support the development of optimal care pathways for VLU patients.
  • Education Programs - Implement education programs to raise awareness of venous disease at wound care centers to drive timely and appropriate referrals to vein specialists.

While we are still in the early stages of VBHC, we believe these initiatives will help us become a better partner in the shift to a value-based care treatment paradigm for venous leg ulcer patients. We recognize this is a challenging disease and look forward to continuing to collaborate with others who are committed to driving value in this space.

Closing Thoughts

The successful transition to VBHC in the U.S. and around the world requires the commitment and collaboration of all healthcare stakeholders. Medtronic’s expertise in partnership with hospitals, payers, and governments will facilitate this transition. We are all in this together.

Bonnie Handke is Vice President, Global Healthcare Economics, Policy and Payment for Medtronic’s Coronary and Structural Heart, and Aortic and Peripheral Vascular divisions. Jenny Gaffney is a Senior Manager for Global Healthcare Economics, Policy and Payment for Medtronic’s Cardiac and Vascular Group. Nidhi Oberoi is a Senior Marketing Manager supporting the endoVenous business in Medtronic’s Aortic and Peripheral Vascular division.


1. Muhlestein, D., & McClellan, M. (2016). Accountable Care Organizations In 2016: Private And Public-Sector Growth And Dispersion. Health Affairs Blog. Retrieved from accountable-care-organizations-in-2016-private-andpublic- sector-growth-and-dispersion/.

2. The Economist Intelligence Unit (2016). Value-based Healthcare: A Global Assessment. Commissioned by Medtronic. Retrieved from www.vbhcglobalassessment.

3. NHS Improvement. (2016). New payment approaches for mental health services. Retrieved from https://

4. Porter, M., & Lee, Thomas. (2013). The Strategy That Will Fix Health Care. Harvard Business Review. Retrieved from will-fix-health-care.

5. Diabeter: Value-Based Healthcare Delivery in Diabetes. (2016, September). Retrieved from en/go-to/value-based-healthcare/.

6. Agency for Healthcare Research and Quality (2014). Chronic Venous Ulcer. A Comparative Effectiveness Review of Treatment Modalities.

7. O’Donnell TF Jr, et al. (2014). Management of venous leg ulcers: clinical practice guidelines of the Society for Vascular Surgery and the American Venous Forum. J Vasc Surg, 60 (2 Suppl):3S-59S.

8. Valencia IC, Falabella A, Kirsner RS, et al. (2001). Chronic venous insufficiency and venous leg ulceration. J Am Acad Dermatol, 44:401-21.

9. Phillips T, Stanton B, Provan A, et al. (1994). A study of the impact of leg ulcers on quality of life: financial, social, and psychologic implications. J Am Acad Dermatol, 31:49-53.

10. Green, J., & Jester, R. (2009). Health-related quality of life and chronic venous leg ulceration: part 1. Wound Care, S12-S17.

11. Rice J (2014). Burden of venous leg ulcers in the United States. Journal of Medical Economics, 17(5), 347-356.

12. O’Donnell TF Jr, et al. (2014). Management of venous leg ulcers: clinical practice guidelines of the Society for Vascular Surgery and the American Venous Forum. J Vasc Surg, 60 (2 Suppl):3S-59S.