Is the independent medical device industry dead?   4 comments

Jerry Sanders, one of the medical device industry’s top entrepreneurs, visited Saïd Business School last month for a series of masterclasses on his role in the startup industry. Sanders’ firm San Francisco Science is legendary for its ability to identify promising innovatons that big medical device companies will pay handsomely for. Given the firm’s success, it was quite a shock when Sanders acknowledged that SF Science’s activities were being gradually run down because of what he believed to be the decreasing attractiveness of the market for independent medical device developers. To that effect, Sanders has reduced the number of deals he runs per year from greater than twenty to two active deals currently and only takes on new projects that meet an unusually high level of return for the risk involved.

To summarize Sanders’ argument, independent medical device firms — often only inventor, engineer, financial-whiz, and a few support staff — have been disproportionately impacted by the FDA’s increasing conservatism in the approval of new drugs and medical devices. Following the Vioxx recall, regulatory approval has become both more difficult and more expensive. This constellation of problems has made it near- impossible for a small medical device firm with perhaps 2-3 early-stage products to actually become commercially successful on its own. Essentially, the only option available to bring a medical device to market is to quickly identify a consolidated medical device company (e.g., Johnson & Johnson, Covidien) who is interested in adding a particular innovation into an existing product platform. This situation puts independent medical device innovators into a difficult strategic position. Rarely will more than one or two of the diversified device companies have interest in a particular innovation, but the inventor is often looking for a quick outcome that either funds him or her to progress with further development or exit and move on to something else. A desperate seller and a large, powerful buyer allows for the latter to capture much of the value generated from the deal and leaves the entrepreneur with limited upside.

Signostics' Signos Personal Ultrasound Device

Does Signostics even have a chance? (Courtesy: Signostics)

To use a real-world example from an earlier post, has the GE VScan device already beaten other handheld ultrasound competitors like Signostic’s Signos Personal Ultrasound because whatever incremental feature benefit Signostics may have will never allow the firm to compete with such an established player in a highly regulated industry? According to some of the leading lights of this industry, the only option for many of these smaller firms is early exit.

What explains Sanders’ complete exit from this industry is that the difficulties he spoke of have little or no chance of disappearing soon. The contentious state of American politics makes ambitious change at the FDA highly unlikely in the near future (although future rumblings do exist). With the increasing role of corporate influence on future regulation, it is likely that any reforms to the FDA device approval process will likely benefit large diversified device firms as much if not more than they do the smaller independent device makers. During a masterclass, Sanders noted that contrary to conventional wisdom “Big Business” (defined here as large consolidated device makers) often welcomes increased regulatory oversight because such hurdles disproportionately hurt small, new entrants to their established industries.

While incremental improvements to existing medical devices will continue to be churned out by the “majors,” the current business and regulatory environment of the medical device industry make the emergence of new, disruptive innovations far less likely.

Strange Bedmates: Global Health and Quality Improvement   Leave a comment

For those of you familiar with my background and specific research interests in global health and quality improvement, it should be no surprise that I routinely get asked how do I connect two very disparate fields of medicine like global health and quality improvement. Just last week, a fellow of my college at Oxford, asked for further clarification. I still find myself falling into the trap of assuming the overlap between the two is obvious to others since that overlap is where most of academic work currently focuses. This particular fellow was a healthcare economist with an interest in financial crises and their impact on global health, so I incorrectly assumed that he would “get it.” This lack of discernment is unusually common, and I believe it only reinforces the relative lack of interest even within the global health establishment for the issues that I find most engaging.

Before one can understand my area of overlap between these two fields, it is important that I re-frame what these terms mean. To understand how  I use the terms and my particular interests within each, most would benefit by briefly reviewing prior posts on the two (global health, quality improvement). At the macro-level, I find both of fields fascinating and ultimately the causative factor for why I am pursuing a career in academic medicine (i.e., not private practice). For me, these two fields are the current focus of healthcare’s greatest obstacles. Globally, we have billions of people around the world who cannot access even basic healthcare services aligned to 21st century standards of clinical care. In the industrialized world, we find that most countries are unable to provide healthcare services in a manner that maximizes capabilities given a set of constrained financial resources.

Albeit in different contexts, the kinds of systematic and institutional inefficiencies that ultimately impair the delivery of quality healthcare in modern health systems like the U.S. are also evident in the delivery of healthcare in even the most resource-limited environments. Global health is quickly reaching a point where the technical capabilities needed to address the world’s healthcare problems (e.g., effective antibiotics, vaccine development and production technologies, low-cost anesthesia equipment) are available, but global health interventions often lack the operational competence needed to achieve their goals.

My belief and where much of my research efforts are focused is that we can use the quality improvement frameworks being developed for modern healthcare systems to also improve the healthcare delivery in less developed healthcare settings as well. Global surgery is an ideal area in which to adopt these analytic models because of the process-driven nature of the surgical resource procurement (e.g., anesthesia and surgical equipment, pharmaceuticals for infection prevention and anesthesia) and direct patient care.

Global Health’s Latest Offspring: “Global Surgery”   1 comment

Outside Hôpital St. Thérèse, Hinche, Haiti

Outside Hôpital St. Thérèse (Hinche, Haiti)

“Global surgery” is a relatively new addition to its parent field of global health. Although the notion of surgeons from the industrialized world sharing skills and equipment with resource-scarce environments has been around for decades (largely arising out of the medical operations of the world powers’ militaries), “global surgery” as an academic interest within traditional global health circles has emerged only recently. The increasing interest in the global burden of surgical disease has largely paralleled the relatively new awareness of noncommunicable disease as a global problem.

I should be clear that a consensus has only just begun to form in the last 10 years around the broadening of the definition of global health. For example, although there is an increasing effort to use “global health” in a more appropriate, literal sense, many well-qualified academics still associate the term with the unique disease burden of low- and middle-income countries. Say “global health” in a professional healthcare setting and poor, non-white people suffering from malaria or HIV is what the majority of the audience will be envisioning. It is only recently that the more complex problems of noncommunicable diseases like diabetes and cancer that span the industrialized and developing world have been authentically engaged by the global health community.

Inside Hôpital St. Thérèse

Inside Hôpital St. Thérèse (Hinche, Haiti)

Within global surgery, I am most interested in the persistent difficulty we have of finding the means of providing even the most basic surgical care for all the world’s communities. Although it will be decades before the poorest countries will have the means of performing complex surgeries like spinal fusions or coronary artery bypasses, the infrastructure and skills necessary to perform hernia repairs and thyroidectomies is well within reach. These latter cases may be less “newsworthy” but they represent substantial quality-of-life improvements for patients suffering from surgically-correctable disease. Although the field of global surgery is still in its nascent stages, a number of expert bodies are catalyzing around the idea of essential surgical care (e.g., ASAP TodayWHO GIEESC) and how best to deliver it.

A note on the pictures: The pictures in this post include two from a humanitarian surgical mission I joined in June 2009. This was the first of a series of many missions (more in a later blog post). I inserted these two images here to demonstrate how even the limited infrastructure of Hôpital St. Thérèse (see “outside” photo) can provide the platform for delivering basic surgical care (see “inside” photo). The bottom picture is provided courtesy of Nick Vittone of AtlantaAperature.com.

Surgical Quality Improvement   1 comment

A man visits a surgeon about a lipoma (usually a benign glob of fat) on his arm that has been aesthetically bothering the patient for a number of years. The surgeon assesses the lipoma and rules out any concerning other health problems. The man is booked for surgery three weeks later. The patient arrives on-time to an outpatient surgery center for the removal of the lipoma. This patient checks in at the front desk and is guided back to the preoperative assessment area. There, the surgeon and anesthesiologist consent the patient for the procedure, start an IV, and ask the patient and his personal friend to say there goodbyes. Shortly thereafter, the patient is brought to the OR and sedated for the procedure. The case goes off without a hitch, and two hours later the patient is comfortably recovering from the effects of the sedative before being taken home by his friend. His wound heals well, the tissue removed during surgery is found to be benign, and he is formally released from the surgeon’s care at a follow-up appointment two weeks later.

This vignette represents a stylized “perfect” surgical encounter. All the various processes necessary to move from diagnosis of surgical disease to remediation of the condition proceed apace without incident. What happens in real life? In more than a few cases, one of the many steps above has a seemingly minor logistical hiccup that ultimately causes far too many resources to be devoted to this individual patient’s care. Sometimes these issues pass without the patient even aware of a problem. For example, it is not uncommon that a patient is brought to an operating room and sedated but the surgical team is not yet available to start the case. Other times, the patient’s entire memory of the encounter is shaped by the issue. It is not unheard of that a patient arrives for surgery and finds that because of paperwork errors he or she was not scheduled for surgery. In the best of cases, the patient has to wait a few hours before being squeezed in. Unfortunately, sometimes the patient is asked return at a later date for the procedure which of course requires the patient finding a new window in his busy schedule that can accomodate such a visit. Regardless of whether the patient is aware of the problem or not, these logistical errors greatly increase the resources and time needed to meet the healthcare needs of a population.

In the U.S., a seminal report by the Institute of Medicine (the profession’s pantheon) in 2001 radically accelerated the industry’s adoption of product quality and operations management practices from other industries. A practical example of this was many of the “cost containment” issues that were discussed — but largely not included — in the 2010 U.S. healthcare reform legislation. For example, the original legislation included powerful politically independent panels of experts (a la the 9/11 Commission) that would provide evidence-based – rather than expert-opinion – recommendations for the highly politicized but necessary changes to align Medicare reimbursement policies with cost-effective care.

Within surgery communities, there seems to be a rather large divide between institutions and programs that “get it” and are willing to spend the administrative resources to address these operational inefficiencies and those who fail to recognize the magnitude of these problems or see no solution from them.

The part of surgery’s newfound interest in “quality improvement”  that is of greatest importance to me is exploring the incremental changes we can make to healthcare processes to prevent the small process problems noted above that ultimately weigh heavily on the costs of healthcare. I specifically am looking at using process mapping and decision analysis tools to question existing healthcare operations through a patient-centered perspective.

What we are trying to do in quality improvement is identify systems (e.g., patient management systems), products (e.g., mobile software), and services (e.g., nursing hotlines), that help us provide healthcare that is more comprehensive but also cheaper than existing practices. The burden that currently weighs on those of us working in this field is developing and testing these new methods of providing care in a way that convincingly demonstrates results with which we can act on.

GE VScan and Handheld Ultrasound Devices   9 comments

Why an amazing product can’t find a market

The Gold Standard: GE Vivid 7 (Courtesy GE Healthcare)

Medical ultrasound is considered one of the most effective imaging modalities for cheap, reliable diagnosis of many disease states from heart disease to infected abscesses. Since the technology’s inception, device manufacturers have been steadily miniaturizing components so that what used to be a desk-sized machine (The GE Vivid7 in the picture to the left is a modern version of these behemoths) has now been succeeded by a laptop bolted to a small rolling cart with a number of ultrasound probes hanging off the side.

In late 2009, GE Healthcare released its VScan (see picture on right) handheld ultrasound device to the American market. The VScan device was most notable for its size — only slightly bulkier than a classic clam-shell mobile phone — and a price that was 80% less than traditional machines. Although VScan’s introduction was accompanied by a number of competing devices from other major industry competitors (e.g., Siemens’ ACUSON P10, Signostics’ Signos) as well as enterprising start-ups, the VScan has generally been considered to be the superior product in the pocket portable product segment because it functions near-identically to larger laptop-based portables but in a smaller form-factor. (Still not quite following? See a short introductory video by GE here.)

GE VScan

GE VScan (Courtesy GE Healthcare)

The VScan’s entry should have been heralded by doctors in a variety of clinical settings. A device exists that a clinician can carry in his or her pocket that with relatively little additional training can be used to detect traumatic injuries, major vessel disease, heart failure, and other maladies all without the need for any further appointments (in the outpatient setting) or bulky equipment often confined to a poorly accessible imaging suite. Unfortunately, the VScan and its competitors have had little adoption in the years since their introduction.

The lack of interest in the VScan illustrates how the current reimbursement system of the American healthcare system has direct effects on how patient care is provided. An example of these skewed incentives can be readily seen in one of ultrasound’s largest markets – outpatient cardiac ultrasound. Without VScan, a cardiologist orders a comprehensive ultrasound study that typically requires a second visit and an advanced cart-based ultrasound machine. Each study performed earns the cardiologist a professional and technical fees exceeding $1,500. In contrast, current reimbursement policies (typically set by Medicare and then voluntarily adopted by private insurance companies) do not cover ultrasound procedures performed with handheld devices so physicians are unable to charge for this service. Thus, the $7,000 cost of each handheld ultrasound machine is not going to be recouped through additional procedural charges.

The only revenue stream from use of the VScan product is any potential efficiency gains met by being able to rule-out serious underlying disease quickly and thereby see more patients in the same amount of time. While such a hidden benefit may be difficult to convey to a private practitioner or a standalone healthcare system, integrated healthcare systems (e.g., U.S. Veterans Affairs Hospital Systems, National Health Service) stand to benefit more from lowering the number of unnecessary comprehensive ultrasound exams. It should be no surprise then that integrated healthcare systems in Europe have been some of the few markets where handheld ultrasound devices are regularly used and clinically studied.

Personally, I’m not convinced by proponents of the VScan that such devices will soon replace the conventional stethoscope. The price and relative ease of use the latter are so superior that any real competition between the two is still a decade or more away. Such a claim is analogous to saying the typewriter would make the pencil obsolete. What is far more likely is growing demand for VScan and its competitors as the American healthcare system wakes up to cost-effective care. A greater focus on comparative cost-effectiveness will lead to reimbursement policies rewarding physicians for at least the limited use of such handheld devices versus comprehensive ultrasound studies. As GE’s marketing efforts in the ultrasound industry demonstrate, the real success of such a product can only be evaluated as a component of a greater imaging ecosystem. For a GE, the real value of such a device is that it allows the company to offer an end of the spectrum poorly matched by any of its competitors.

Conflict of Interest Disclosure: I have never received funding from and have no financial stake in GEHealthcare or its subsidaries. In 2010, GEHealthcare loaned a LOGIQ i portable ultrasound machine to a humanitarian surgical trip I led to Hinche, Haiti.

Blue Oceans? What is with the blog’s name?   2 comments

Blue Oceans for Health? Kind of a strange name, huh? After coming up with the name (and, of course, prematurely securing the naming rights), I realized there are two issues with the name that could make it problematic for the blog’s newcomers. For those readers unacquainted with the management sciences, the name is likely to be incomprehensible at first read. On the other hand, for the strategy mavens out there I am afraid the “blue oceans” referred to may be less intellectually rigorous than what you’re hoping. If I’ve sufficiently disappointed both ends of the knowledge spectrum, my hope is that there is a sweet spot of blog readers who can appreciate the meaning behind the blog’s name without becoming obsessed with a strict interpretation of its underpinnings.

For the Uninitiated (My apologies to experts for any oversimplification)

In 1997, Chan Kim and Renée Mauborgne published an article in the Harvard Business Review, “Value Innovation: The Strategic Logic of High Growth,” that initiated a challenge by the authors to traditional structuralist approaches to management strategy. “Strategy” in the management sciences is the part of running a business that is concerned with how one succeeds against business competitors. In other words, it doesn’t matter if a company sells the greatest toaster in the world if it is not able to use its relative strengths to outcompete other sellers of toasters. For decades, most academics have argued for some variation of a structuralist approach where’s one competitive position in the industry relative to other firms is what determines one’s strategy. Michael Porter (and his Five Forces model) has been one of the most prolific and best-known proponents of such a positioning approach (to the point that a strategy professor of mine at Saïd once remarked that to get something published in strategy basically means its got to out-think Porter).

Kim and Mauborgne had such an impact because they argued that the debate is not about industry structure but about how a firm remakes an industry to make it strategically advantageous. This reconstructionist approach they advocated was ultimately named a “blue ocean strategy.” The basic premise is that the majority of industries in their present form are highly competitive and hold increasingly homogenous products. Competing in such an environment makes a “red ocean” where competitors become increasingly aggressive which leads to a bloody ocean with only marginal success. In contrast, “blue oceans” represent currently unknown markets that are available for entry by the firm but often not yet identified by competitors. One of the most successful firms at employing a blue ocean strategy is Nintendo who has continued to re-invent itself as it brings new products to market that change the nature of by whom and how video games are played.

and…What’s with the name?!

My personal view of the healthcare industry today is that we are too confined to competing in and thinking about the same red oceans. For us to find ways to deliver better care at reasonable costs, we need to look beyond the products, services, and ideas that have largely created the current mess. Rather than using the term “blue oceans” to discuss business strategies, I am adopting the term here to mean thinking about healthcare problems and brainstorming solutions that explore new frontiers of healthcare. Blue Oceans for Health is designed to be an online space that evaluates new concepts for better healthcare by analytically asking how these proffered solutions are different from the current paradigm and what advantages they bring.

Posted January 3, 2012 by Ira Leeds in Introductory Material (For newcomers)

Who am I?   Leave a comment

Who am I? What a most excellent question. Unfortunately, it’s not an easy one to answer.

Warning: This post may get too theoretical and off-issue for the casual blog reader. Alternatively, those looking for the highlights, please see my CV.

To the casual observer, I certainly understand how he undergraduate political scientist, Teach For America alumnus, accused medical school “gunner“, and possibly European MBA “corporate shill” may come off a bit disjointed. I would argue that from the right point of view, my professional career-to-date has been a systematic evolution of personal development as I try to reconcile an overwhelming inner desire to serve others with the practical life questions of career choice and personal fulfillment.

I was fortunate to attend a high school that recognized its role as a resource to the surrounding community and made community service a central tenet of its teaching philosophy. Throughout these formative years, I was actively involved in my high school’s community service program ultimately being given an opportunity to shape the greater community service effort of the school.

Although I greatly enjoyed the sort of “hands-on service” I did in high school, college forced me to realize that I ultimately would need to find a profession that helped me serve others while also addressing the practical demands of life. At the time, I was intensely interested in policy work believing that the underlying problems of society could be solved through properly implemented, innovative public policy efforts. This thinking led me to become involved with and ultimately become Publisher of the campus’ political thought magazine as well as focusing my independent work (search “leeds”)on designing political institutions that improved the health and wellbeing of the entire society rather than a select few.

As I became more knowledgeable on the role public policy takes in service to others, I started to question whether the sort of indirect effects and limited success of that role satisfied my sense of moral obligation for serving others. Reevaluating future career options is what led me to complete a pre-med curriculum in addition to my social science major because of the ability of a physician to have a direct, positive effect on each patient seen.

Additionally, I realized I needed to better understand the communities and individuals that I intended to serve. I was fortunate enough to be able to defer my acceptance to Emory’s School of Medicine to spend two years as a corps member with Teach for America where I taught high school science in an underserved community in Memphis, TN. This experience was fundamental to shaping my understanding of how one could both lead a life of hands-on service while at the same time leading an organization whose reach spread across hundreds of communities through the United States.

Upon arriving at Emory, I immediately jumped at the opportunities before me to combine my interest in medicine with my past service work. I became  heavily involved with Emory Medishare, a student group dedicated to improving the health and wellbeing of the people of Haiti’s Central Plateau region. What has drawn me to international health over the years is the overwhelming need for even the most basic of humanitarian aid. The five trips I have made to date – and those I will make in the future – to Haiti have convinced me of the necessity of our work there.

My role as the group’s Executive Director was to find ways for our work to become a self-sustaining, permanent presence in rural Haiti. We radically expanded our program from a once-a-year presence with our local partners to a cycling of short-term trips and longer-term electives that continue today. These efforts serve as vehicles for clinical research that had led to new health interventions such as community nutrition programs and mental health screening.

Another of Emory’s shining gems is the Global Health Institute. In September 2009, the academic center offered me a position on their Student Advisory Committee that runs the Institute’s student-centered events like the annual Health and Development Symposium and Global Health Case Competition. For the 2010-2011 academic year, I served as chairman of the committee as we continued to develop an independent role within the greater Global Health Institute. Being able to engage such a diverse group of students and faculty involved with interdisciplinary global health work at Emory as been intellectually exhilarating. The Global Health Institute and Emory Medishare have both been formative elements of my Emory experience and have focused the sort of service work I hope to do after I graduate.

It was exactly in this context that I elected to take an additional year to pursue a second degree while in medical school. While extending medical school by a year for an additional degree is not uncommon, choosing an MBA is one of the more unusual degrees of those on offer.  The rationale in pursuing the MBA largely overlaps with many of the interests I explore in this blog. Organizational leadership, operations and implementation, and decision-making under scarcity are real healthcare problems that other degree programs (e.g., MPH, clinical research degrees) are not designed to address. Because my interest in business school lay outside of the mainstream, I purposefully sought out a program structured enough to provide me with the resources I need but still flexible enough that I could forge my own path. At the University of Oxford’s Saïd Business School, I found the right balance for me. The school’s former dean summed it up perfectly when he described Saïd as a place that can “transcend the traditional, functional divisions of a business school in order to address the complex challenges facing business in the twenty-first century.”

My primary career goal is to remain grounded as an academic clinician in the U.S. while pursuing research and advisory roles with organizations dedicated to improving access to surgical care in under-resourced areas of the world. This academic space desperately needs clinicians who understand the administrative capacity needed for organizational changes. With my combined training, I hope to be able to provide the degree of balanced expertise called for.

Still not following (or not buying) my career trajectory? I recently re-watched Steve Jobs’ Stanford commencement speech he gave in 2005 recently after recovering from his first cancer diagnosis. As one of the YouTube viewers noted, the content isn’t just advice for Stanford graduates but a blueprint for how Jobs led a life that he found so personally fulfilling. The most memorable piece of the speech for me was the following:

So you have to trust that the dots will somehow connect in your future. You have to trust in something — your gut, destiny, life, karma, whatever. This approach has never let me down, and it has made all the difference in my life.

Every day I wake up knowing that I am going to be faced with countless decisions. While most decisions will have minimal lasting effect, I know that a handful have the potential to have world-changing consequences for me. I’ve done my best to trust my gut and choose the next “dot” wisely.

Posted January 2, 2012 by Ira Leeds in Introductory Material (For newcomers)