14 th Annual Spine, Orthopedic and Pain Management-Driven ASC Conference + The Future of Spine WHAT THE DATA HAS TO SHOW: How Shifting Procedural Site of Service Affects Competitive Strategy in the Orthopedic Device Industry Friday, June 10, 2016 4:25 5:00 p.m. By René Azeez By René Azeez 1
René Azeez is the manager of the orthopedics and dental Medtech Insights team at the Decision Resources Group. About the Presenter My research experience extends to a number of therapeutic areas related to orthopedics, including spinal implants, orthopedic biomaterials, soft tissue solutions, hemostats, internal tissue sealants, adhesion barriers, veterinary orthopedic devices, trauma implants, and large joint reconstructive implants. I graduated from the University of Toronto with an honors degree in developmental biology. PAGE 2
GLOBAL ORTHOPEDIC MARKETS There is no shortage of high level orthopedic industry market research and estimates ~$40 BILLION 5-6 MAIN SEGMENTS 5 MAIN COMPETITORS 1 NORTH AMERICA 2 EUROPE Asia Pacific 3 4 LATIN AMERICA DRG MARKETING TEMPLATES PAGE 3
ORTHOPEDIC INDICATIONS Road Injuries Bone Deformities A P Osteoporosis & Osteopenia Aging Population Osteoarthritis B D O & O O D & O RI BC Diabetes & Obesity Bone Cancer
FOCUS ON ASCs Number of Operational Outpatient Surgery Centers, US, 2004-2009 7000 6000 5000 4000 3000 2000 1000 0 2004 2005 2006 2007 2008 2009 Number of Medicare Certified ASCs by State (CMS, May 2015)
ASC LANDSCAPE 8 KEY FACTS ABOUT ASCs (Becker s Healthcare, August 2015) 23 Million 5K+ 700+ 20-25% Each year, physicians perform more than 23 million procedures in ASCs There are presently 5K+ Medicare-certified ASCs Of the 766 ASCs owned by the largest chains about half are HQd by Nashville firms Approximately 20-25% of ASCs in the US have some ownership by a hospital partner $90 Billion $2.3 Billion $57.6 Billion 100K+ The national total economic impact of ASCs in 2009 was $90 B including more than %5.8 B in tax payments Medicare and its beneficiaries share in more than $2.3 B savings each year for care as ASCs ASCs have the potential to save Medicare an additional $57.6 billion over the next decade ASCs employ the equivalent of around 117,700 full-time workers PAGE 6
KEY EVENTS Evolving sites of service in patients with orthopedic indications represent an important opportunity that should be taken into consideration in portfolio development and marketing initiatives. JANUARY 2015 CMS approved new spine codes for ASCs JUNE 2015 Critical legislature ensuring that ethical consideration for ASCs as an option for site of service for healthcare was tabled OCTOBER 2015 CMS-mandated change from ICD-9 to ICD-10 JANUARY 2016 11 new procedures became part of the ASC payable list as of January 2016. PAGE 7
KEY INFLUENCER INSIGHT I don t know that the government is creating an environment for that to happen. -Orthopedic Surgeon Yes, absolutely. You re saving a lot on hospital costs without a doubt. -Orthopedic Surgeon Regarding ASCs versus hospitals, do orthopedic surgeons tend to favor one setting over the other? PAGE 8
KEY INFLUENCER INSIGHT Absolutely, hands down most surgeons I know prefer working in the ASC. - Orthopedic Surgeon It s not that simple, it is important to remember, there are good ASCs, and bad ASCs, good hospitals, and bad hospitals. - Orthopedic Surgeon In your opinion, is having more orthopedic procedures in ASCs versus hospitals a good thing as far as overall healthcare costs goes? PAGE 9
KEY INFLUENCER INSIGHT From what I understand, ASCs pay less money for devices compared to hospitals; that much is a given. However, device companies need to be flexible, and understand that partnering with ASCs is still profitable; there is lucrative potential. -Orthopedic Surgeon Given all the challenges like reimbursement and other factors, why should device companies pay attention to ASCs? I think it s important to understand first that a device company cannot target ASCs as such. They cannot create and target a device to ASCs in order to make money. -Orthopedic Surgeon PAGE 10
ORTHOPEDIC PROCEDURES IN ASCs KNOWN HIGH LEVEL MARKET DATA GENERAL KNOWLEDGE OF PROCEDURE TRENDS GENERAL UNDERSTANDING OF THE HEALTH CARE IMPACT OF ASCS UNKNOWN A DEEP UNDERSTANDING OF ASC TRENDS THE POTENTIAL IMPACT ON ORTHOPEDIC IMPLANT MANUFACTURER STRATEGY PAGE 11
WHAT THE DATA HAS TO SHOW: How Shifting Procedural Site of Service Affects Competitive Strategy in the Orthopedic Device Industry
DRG RWD REPOSITORY 3.2B 240M 1.6M 100% Medical and Rx Pharmacy Claims Unique US Patients US Healthcare Providers Represented Of US Health Plans Deep Longitudinal Coverage of Care Our Claims database aggregates data from multiple sources and represents over 2/3rds of US claims. Large and Diverse Patient Coverage Our data covers nearly 70% of US patients, including EHR Detail. Multi year outcome data available. The DRG RWD Repository provides broad and deep coverage of the US Healthcare System Assembled from multiple claims and EHR sources our data can be leveraged to profile patients, geographic regions, hospital systems, HCPs, disease areas, therapeutics, devices, and health plans. Analytics DRG applies expertise to this data to produce, HEOR, Epidemiologic, Forecasting, Market sizing, Network influence Adherence/Compliance, Economic, and Pricing Dynamic analyses. Full Coverage of HCP Behavior Physician's, PA s, NP s, and RN s activities, behavior, and decision making are covered in intricate detail, including roll up to IDN s and ACO s. Real World Health Data for more effective US Healthcare. Complete Coverage of US Payer Dynamics Complete coverage of RW payer behavior, including Rejection, Prior Auth, Co pay, Rebates, and Full Payment amounts. PAGE 13
WHAT THE DATA HAS TO SHOW: VERTEBROPLASTY Stable and (relatively) substantial procedure volumes 5000 Vertebroplasty Procedure Volumes, RWD ASCs, 2015-2015 4000 3000 2000 1000 0 2013 2014 2015 14
KEY INSIGHT: Some procedures are particular well suited to ASCs
WHAT THE DATA HAS TO SHOW: CERVICAL ARTIFICIAL DISCS Overwhelmingly positive procedure growth in the last two years Adoption was significant in 2014 but has seemingly reached a plateau Cervical Artifical Disc Procedures, All RWD Facilities, 2013-2015 Cervical Artificial Disc Procedures, RWD ASCs, 2013-2015 3500 3000 2500 2000 1500 1000 500 0 2013 2014 2015 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% 120 100 80 60 40 20 0 2013 2014 2015 180% 160% 140% 120% 100% 80% 60% 40% 20% 0% -20% -40% Year Growth Year Growth 16
KEY INSIGHT: Overall procedure adoption does not necessarily equate to adoption in the ASC to the same extent even if the procedure is performed in hospitals and ASCs
WHAT THE DATA HAS TO SHOW: TENDON MUSCLE RECONSTRUCTION The Over 50 demographic makes up the vast majority of tendon muscle reconstructions in hospitals Contrarily Under 30s dominate procedure totals in ASCs for this procedure Hospital Tendon Muscle Reconstruction Procedures, by Age Group, by % of Total, 2012 to 2015 ASC Tendon Muscle Reconstruction Procedures, by Age Group, 2012 to 2015 Under 30 Between 30 and 50 Over 50 Under 30 Between 30 and 50 Over 50 18
KEY INSIGHT: Patient demographics can vary significantly in different settings
WHAT THE DATA HAS TO SHOW: ALIF The split of surgeon specialties is close to equal between orthopedic surgeons and neurosurgeons in hospitals with a significant proportion to other surgeons The ASC setting has a higher proportion of orthopedic surgeons compared to hospitals 60% 50% 40% 30% 20% 10% 0% Hospital ALIF Procedures, by Surgeon Specialty, by % of Total, 2013-2015 2013 2014 2015 80% 70% 60% 50% 40% 30% 20% 10% 0% ASC ALIF Procedures, by Surgeon Specialty, by % of Total, 2013-2015 2013 2014 2015 Orthopedic Surgeon Neurosurgeon Other Orthopedic Surgeon Neurosurgeon 20
WHAT THE DATA HAS TO SHOW: UNICONDULAR KNEES Orthopedic surgeons perform the vast majority of total unicondylar knee procedures This is true in both settings Hospital Unicondylar Knee Procedures, by Surgeon Specialty, by % of Total, 2013-2015 ASC Unicondylar Knee Procedures, by Surgeon Specialty, by % of Total, 2013-2015 100.0% 100.0% 80.0% 80.0% 60.0% 60.0% 40.0% 40.0% 20.0% 20.0% 0.0% 2013 2014 2015 0.0% 2013 2014 2015 Orthopedic Surgeon Other Orthopedic Sugeon Other 21
KEY INSIGHT: The surgical specialty mix may vary between settings depending on a number of variables including the procedure itself
DRG PRICETRACK Unique SKUs 2.2mil present 600+ US Hospitals Trendable Data SKU-level product detail available 2010 manufacturers 3,000+ >90% of facilities report quarter over quarter
WHAT THE DATA HAS TO SHOW: SPINAL CORD STIMULATORS Spinal Cord Stimulators Hospital ASPs are relatively stable ASC pricing is much less stable over the same period 4500 4000 3500 3000 2500 2000 1500 1000 500 0 Spinal Cord Stimulators Hospital ASP, by Month, Q1 2013 to Q4 2015 $4,500 $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 Spinal Cord Stimulators ASC ASP, by Month, Q1 2013 to Q4 2015 24
WHAT THE DATA HAS TO SHOW: CERVICAL ARTIFICIAL DISCS AND INTERBODY DEVICES Both CAD and IBD ASPs are more heavily fluctuating in ASCs compared to other settings Cervical Artificial Disc ASPs, by Facility Type, 2013-2016 Interbody Device ASPs, by Facility Type, 2013-2016 $7,000 $3,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $2,500 $2,000 $1,500 $1,000 $500 $0 2013 2014 2015 2016 $0 2013 2014 2015 2016 Health System Hospital ASC Health System Hospital ASC 25
KEY INSIGHT: Pricing strategies in ASCs are often not as established as in the hospital space
KEY TAKE AWAYS CAPITALIZE ON INGENUITY Hospital care and ASC care are undeniably intertwined, and the coevolution of these two sites of service will address orthopedic patient needs in both unique and overlapping ways for years to come. UNDERSTAND VARIABILITY INNOVATE INFORM PRICING AND MARKETING STRATEGY PAGE 27
QUESTIONS? Please Don t Hesitate.
THANK YOU For Your Precious Time and Attention.