THE MEDTECH STRATEGIST © 2016 Innovation In Medtech, LLC. All rights reserved.

24 SERVICE STRATEGIES

Zimmer Biomet recently acquired RespondWell, developer of a telere-habilitation technology designed to provide personalized, clinician-super-vised physical therapy for post-sur-gery patients in their own homes. It’s the latest addition to the company’s Zimmer Biomet Signature Solutions offering, a multifaceted expansion of its long-standing hospital consult-ing business. Going forward, says Joe Tomaro, who leads the go-to-market strategy for Signature Solutions, Zim-mer Biomet will be well-positioned to serve the demands placed on its hospital customers by bundled pay-ment models, which require them

to assume responsibility for patient outcomes well beyond the surgical procedure and through their period of rehabilitation.

Whether or not current govern-ment-sponsored bundled care initia-tives are nixed when the incoming Republican administration has its say, there’s a certain logic to the ef-ficiencies and cost savings that can be reaped by paying for the coordi-nated care of a patient undergoing surgery—including the periods before and after the procedure, when prepa-ration and compliance might make the difference between rapid healing

or readmission to a hospital. That’s a thesis that the Comprehensive Care for Joint Replacement (CCJR) program was set up to test. CCJR, a five-year program that began in April 2016 and that is mandatory for Medicare pa-tients in 67 metropolitan areas, pays hospitals a set price that includes the initial hospitalization, all post-acute care (including hospital readmissions), and outpatient care, for a period of 90 days following the surgery. If hospitals are able to deliver care at a cost that’s within the target payment, they make money, but they’re on the hook for costs of care that are in excess of the Medicare target payments.

Zimmer Biomet recently built out it its hospital consulting business with digital health technologies and OR and patient management solutions, all packaged under a first-of-its-kind integrated commercial offering named Zimmer Biomet Signature Solutions. Now, with the company’s recent acquisition of RespondWell, a telerehabilitation platform, all the elements are in place for Zimmer Biomet to help its hospital customers optimize efficiencies and quality across the entire episode of orthopedic care, broadly defined under value-based payment models.

Zimmer Biomet: Using Digital Technologies to Drive Value Across the Episode of Care

by MARY STUART

DECEMBER 22, 2016

25SERVICE STRATEGIES

The future of CCJR and Medicare’s other bundled payment models, such as the voluntary BPCI (Bundled Pay-ments for Care Initiative) is uncer-tain, given that the incoming admin-istration has made it a top priority to repeal and replace the Affordable Care Act. CCJR is currently slated to continue for five years, although the expansion of that model into other high-volume and costly areas of sur-gery, such as hip fractures and car-diovascular procedures, might be put on hold. (See “What’s in Store for Hospitals and Their Suppliers if ACA is Repealed,” in this issue, and also see “First Take: The Orthopedics Industry Faces CMS’ New Bundled Payment Program,” The MedTech Strategist, December 18, 2015; “CMS Issues New Plan for Cardiovascular Procedure Bundling,” The MedTech Strategist, July 29, 2016; and “US Hospitals Shift Cost-Control Priorities as Bundled-Payment Programs Ramp Up,” The MedTech Strategist, June 30, 2016.)

Nevertheless, the private sector appears to be taking up the charge. According to a survey conducted by PricewaterhouseCoopers, 31% of pro-viders and 20% of employers have ad-opted bundled-care models (“Strategy & Annual Bundles Survey, 2015/2016,” which surveyed 277 employers, 261 hospitals and 1000 consumers). In-deed, UnitedHealthcare, a division of the largest private insurer in the US, notes that reimbursements to pro-viders based on value-based arrange-ments have just about tripled in the last three years to nearly $50 billion annually, and will rise to $65 billion by the end of 2018.

Most notably, UnitedHealthcare’s new bundled-care initiative, “The Spine and Joint Solution,” announced in early December, is a vote of confi-dence for value-based care models. The program is targeted to employers with self-funded health plans. Covering

hip, knee, and back surgeries, in Janu-ary, the new program will be rolled out in 28 geographic areas encompassing 40 hospitals and 2.2 million patients employed by 55 companies. In its pilot program for the spine and joint initia-tive, participating employers saved, on average, at least $10,000 per opera-tion, the insurer says.

Value-based payment models are most advanced in orthopedics for sev-eral reasons, not the least of which is the economic burden of expensive procedures—such as knee, hip, and spine surgeries—that increase as the population ages. The volume of knee replacement surgeries in the US is ex-pected to grow 500% by 2030, accord-ing a study from the Healthcare Cost and Utilization project, sponsored by the US Agency for Healthcare Re-search and Quality.

Joint replacement surgeries are also elective surgeries, which provides an opportunity to test models for pre- and post-op care. And, says Zimmer Biomet’s Joe Tomaro, episode-of-care management makes sense in orthope-dics because “it has been known for years that 36% of the costs of joint replacements are incurred after a pa-tient leaves the hospital.”

Using Digital Health to Expand a Hospital’s Reach

Zimmer Biomet’s hospital consult-ing business has for years generated revenues from consulting on a wide range of hospital problems, from helping hospitals reduce readmis-sion rates to instituting a new joint replacement or hip fracture program. It’s a fee-for-service business, not locked in to serving only customers of the Zimmer Biomet implant busi-nesses. “Our purpose isn’t to pull-through revenue [on the implants], it’s to deliver more value to hospi-tals,” Tomaro explains.

To that core offering, Zimmer Biom-et recently added three new tech-nologies: an app for patient engage-ment, gained through a partnership with HealthLoop Inc.; ORControl, a solution for the automation and co-ordination of surgical workflow, on which the company partnered with HealthCare Control Systems Inc.; and the recently acquired RespondWell

platform, which provides the connec-tion to home-based physical thera-py. The additions are in response to what Tomaro characterizes as three things going on in healthcare: “Sim-ple value-based healthcare, deliver-ing the best care at the lowest cost, and working on outcomes and read-missions.”

Tomaro notes that orthopedic care is being institutionalized less and less. “The length of stay for total joint replacement has dropped from five days to two to one day, and in many cases surgeries are performed in outpatient settings,” he says. The home has become the preferred dis-charge destination, because it’s the most cost-effective care setting (see

“It has been known for years that 36% of the

costs of joint replacements are

incurred after a patient leaves

the hospital.”—Joe Tomaro

THE MEDTECH STRATEGIST © 2016 Innovation In Medtech, LLC. All rights reserved.

26 SERVICE STRATEGIES

Figure 1). “Because of that, you need technologies to connect with pa-tients.” (See “The ‘Smart Healthcare’ Revolution: Can Digital Tools, Ad-vanced Biosensors, and Data Analyt-ics Transform Healthcare as We Know It?” The MedTech Strategist, Decem-ber 6, 2016.)

Changing payment models also re-quire hospitals to stay in touch with patients. “As different payors began to look at bundled-payment and other episode-of-care payment mod-els, hospitals and surgeons became responsible for managing patient outcomes and costs throughout the entire episode of care. You have to have ways to connect with those pa-tients, and that’s one of the greatest strengths of Zimmer Biomet’s Signa-ture Solutions.”

The need for patient engagement arises at many points in the con-tinuum of care, starting with pre-surgery. “When patients are sched-uled for an elective surgery, a total

joint replacement, for example, they need education before the surgery,” Tomaro explains. Today, they might be asked to attend a class or read a 40-page booklet. “With our patient engagement app, we can break that down into bite-sized chunks—what you should be concerned about ten, eight, six, four, two days before sur-gery, and two, four, six, eight, ten days after surgery—and feed that to patients through an interactive, ac-cessible digital interface on their mo-bile phones. This can be customized and personalized, and if they have questions, they now have a way to engage with the surgeon and hospital to get quicker, better care.” The pa-tient engagement component is also useful in helping hospitals collect outcomes data, over a broader time period. “Patients receive messages and fill out outcomes forms. This gives the hospital a broad platform for managing the episode of care and adjusting processes and protocols as needed, to improve outcomes.”

Increasing Patient Compliance

Tomaro notes that the RespondWell app also increases patient compli-ance with physical therapy. With Re-spondWell, physical therapy is still managed by a physical therapist, but every day patients log on to Therapy@Home on their computer. Maya, an on-screen virtual therapist, guides them through their daily exercises and they also receive messages from their (human) therapists and clinical care teams. “We want to make sure patients are doing their at-home ex-ercises and doing them well. We ulti-mately believe that this home therapy will help patients get better quicker and reduce some of the costs of post-discharge care.”

In the past, at least one orthopedic company has tried to wrap its arms around the rehabilitation phase of therapy as an adjacent growth oppor-tunity. Stryker Corp., for example, ac-quired Physiotherapy Associates, but eventually divested it to private eq-uity firm Water Street. Tomaro notes that not only does its RespondWell platform leverage information tech-nology to cut down on service costs, “Our goal is to help hospitals do this on their own, at the local level, with our technology.” As was the case for the former consulting business, he continues, the focus of Zimmer Biomet Signature Solutions is on helping hos-pital customers find and implement solutions to solve their own problems.

Where Do We Go from Here?

Future plans for Zimmer Biomet Sig-nature Solutions include a look into pre-habilitation, the notion of having patients do exercises before, as well as after, surgery. “We will be work-ing with some academic institutions to define the best level of care,” said Tomaro. Pre-habilitation before knee or hip surgery is an emerging applica-

Sources: “Hospitals Brace for New Medicare Payment Rules,” Melinda Beck, Wall Street Journal, 4/1/2016, and Remedy Partners

$41,000

$36,000

$20,000

$17,000

Inpatient Rehab Facility

Skilled-Nursing Facility

Home Healthcare

Home

The Shift of Care to the Lowest Cost Setting Figure 1

Average cost of hip or knee replacement surgery

DECEMBER 22, 2016

27SERVICE STRATEGIES

tion of digital health. Start-Up Peer-Well, the developer of a prehab mo-bile platform, raised $2.1 million in a seed funding in early November, led by XSeed Capital.

Zimmer Biomet plans next to move its model into hip fractures, another big-budget item for healthcare, and one that was slated by CMS for the next bundled payment initiative. “We will be looking at how we can apply this same platform and concept to that patient population and care for them post-surgery,” which will test the model on a non-elective surgery, To-maro notes.

Because of the com-pany’s ability to engage directly with patients, To-maro sees additional pos-sibilities opening up. “We have an opportunity to look at population health management. As a com-pany, we don’t just want to help joint replacement patients, we want to help manage arthritis. Think about the number of pa-tients that have back pain or joint pain who need to exercise on a consistent ba-sis. Now we have a mecha-nism for them to do that,” he says. And, although To-maro doesn’t say so, that might give Zimmer Biomet early access to future joint replacement candidates, people who already use and like the RespondWell platform.

Looking to the future, Tomaro notes that it’s all the more important for providers responsible for patient outcomes to have the right tools for engag-ing and tracking patients, because the definition of

outcomes themselves are shifting. “Years ago, for a total joint, people were just concerned about the com-plication and readmission rates.” But now, he notes, a focus on patient-re-lated outcomes considers the quality of life of patients six months, twelve months, even two years after sur-gery. ”What’s your improved ability to go up and down stairs, to engage in daily activities? The definition of outcomes has really expanded.”

Payors ask for this type of infor-mation now as part of their pay-ment reviews. “It’s only a matter of time before payors go from just asking for this information to rewarding providers for having better patient-related outcomes. That is where this is going, and Zimmer Biomet Signature Solu-tions enables them to collect that data.”

MedTechStrategist.com

Contact:Kristy Kennedy • k.kennedy@medtechinno.com • 888-202-5939

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DECEMBER 6, 2016Vol. 3, No. 17

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Published by Innovation In Medtech, llc

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Medical Education and Helps Device Companies

Mary Stuart, 46

ORTOWAY: A Gentle, Hydraulic Device

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Spine Procedures Mary Stuart, 48

PERSPECTIVE A Post-Election First Take for Device Manufacturers Wendy Diller, 4

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Opportunities and Challenges in the Digital Health Arena: A Conversation with John Gardner of Nokia Growth Partners, 18

Israeli Start-Ups Exemplify Global Digital Health Effort, 22

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Putting ASCs on J&J’s Commercial Map, 30

OUTSIDE OPINION TEN SKILLSMedical Device Companies Need

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LUMA THERAPEUTICS: A Home-Based Therapy

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Medical Device M&A, 2000-2016YTD

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RADIATION ONCOLOGY

REFLEXION: Using Biology to Guide

Radiation Therapy David Cassak, 8

RefleXion’s Financing: Turning Skeptics into Believers, 19

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The Long Road to Less Invasive Blood Collection, 30

Medical Device M&A Environment U.S. Device & Diagnostic M&A – 2000-2016 YTD

Source: SEC filings, company press releases, SDC, Wall Street Publications and FactSet as of September 30, 2016. Note: Only includes U.S. domiciled target deals with announced values greater than $20 million and only includes guaranteed payments (i.e., does not include performance-based earn-outs). (1) Includes approximately $12.4 billion Thermo Electron/Fisher Scientific merger and $11.4 billion Biomet/Buyout consortium (Goldman Sachs/KKR/TPG) acquisition. Break in bar delineates transaction value excluding the Thermo Electron/Fisher Scientific merger and Biomet/Buyout consortium acquisition. (2) Includes December 16, 2010 Novartis/Alcon acquisition of approximately $40.7 billion. Break in bar delineates transaction value excluding the Novartis/Alcon acquisition. (3) Includes April 26, 2011 Johnson & Johnson/Synthes acquisition of approximately $21.5 billion. Break in bar delineates transaction value excluding the J&J/Synthes acquisition. (4) Includes April 15, 2013 Thermo Fisher/Life Technologies acquisition of approximately $15.4 billion. Break in bar delineates transaction value excluding the Thermo Fisher/Life Technologies acquisition. (5) Includes Becton, Dickinson/CareFusion acquisition of approximately $12.1 billion, Merck KGaA/Sigma-Aldrich acquisition of approximately $17.0 billion, and Zimmer/Biomet acquisition of approximately $13.3 billion. Break in bar delineates transaction value excluding those three deals. (6) Includes Abbott/St. Jude Medical acquisition of approximately $30.2 billion and Abbott/Alere acquisition of approximately $9.1 billion. Break in bar delineates transaction value excluding the Abbott/St. Jude Medical and Abbott/Alere acquisition.

$25

$13 $14

$6 $6

$20 $19

$49

$66

$26

$12

$63

$50

$16

$27

$67

$28 $26

$65

$25$22

$29

$12

$22 $26

43 44

34

48

62

77

83 91

57

42

59

48 4641

45

58

0

10

20

30

40

50

60

70

80

90

100

$0

$10

$20

$30

$40

$50

$60

$70

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2015YTD

2016YTD

Transaction Value

Number of Deals

(2) (3)(1) (4) (5)

Aggregate Deal Value (US$ in Billions) Number of Deals

(6)

43

37

MEDTECH FINANCING

ELECTION UNCERTAINTY

Stalls Q3 M&A and IPOs Stephen Levin,32

PERSPECTIVE

DISRUPTION in Medtech:Is The Model Changing?

David Cassak, 6

NEW BUSINESS MODELS

CARDINAL HEALTH:Disrupting Medtech’s Business Model

David Cassak, 10

MEDTECHSTRATEGIST.COM

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as Danaher Buys Cepheid Wendy Diller, 30

An Inside View of the Danaher-Cepheid Deal: MTS Speaks with Diagnostics Expert Bob Easton, 33

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