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\"The Business of Healthcare Innovation is a wide-ranging analysis of business trends in the manufacturing segment of the healthcare industry. It provides a thorough overview and introduction to the innovative sectors fueling improvements in healthcare: pharmaceuticals, biotechnology, platform technology, medical devices and information technology. For each sector, the book examines the basis and trends in scientific innovation, the business and revenue models pursued to commercialize that innovation, the regulatory constraints within which each sector must operate and the growing issues posed by more activist payers and consumers. Specific topics include market structure and competition, the economics and rationale of product development, pricing, sales and marketing, contract negotiations with buyers, alliances versus mergers, business strategies and prospects for growth. Written by professors of the Wharton School and industry executives, the book shows why healthcare sectors are such an important source of growth in any nation's economy\"--Provided by publisher.

The USA devotes roughly $200 billion (6%) of annual national health expenditures to medical devices. A substantial proportion of this spending occurs during orthopedic (eg, hip and knee) arthroplasties - two high-volume hospital procedures. The implants used in these procedures are commonly known as physician preference items (PPIs), reflecting the physician's choice of implant and vendor used. The foundations for this preference are not entirely clear. This study examines what implant and vendor characteristics, as evaluated by orthopedic surgeons, are associated with their preference. It also examines other factors (eg, financial relationships and vendor tenure) that may contribute to implant preference. We surveyed all practicing orthopedic surgeons performing 12 or more implant procedures annually in the Commonwealth of Pennsylvania. The survey identified each surgeon's preferred hip/knee vendor as well as the factors that surgeons state they use in selecting that primary vendor. We compared the surgeons' evaluation of multiple characteristics of implants and vendors using analysis of variance techniques, controlling for surgeon characteristics, hospital characteristics, and surgeon-vendor ties that might influence these evaluations. Physician's preference is heavily influenced by technology/implant factors and sales/service factors. Other considerations such as vendor reputation, financial relationships with the vendor, and implant cost seem less important. These findings hold regardless of implant type (hip vs knee) and specific vendor. Our results suggest that there is a great deal of consistency in the factors that surgeons state they use to evaluate PPIs such as hip and knee implants. The findings offer an empirically derived definition of PPIs that is consistent with the product and nonproduct strategies pursued by medical device companies. PPIs are products that surgeons rate favorably on the twin dimensions of technology and sales/service.

Context: There is a widespread belief that the US health care system needs to move \"from volume to value.\" This transformation to value (eg, quality divided by cost) is conceptualized as a two-fold movement: (1) from fee-for-service to alternative payment models; and (2) from solo practice and freestanding hospitals to medical homes, accountable care organizations, large hospital systems, and organized clinics like Kaiser Permanente. Methods: We evaluate whether this transformation is happening quickly, shifting risk to providers, lowering costs, and improving quality. We draw on recent evidence on provider payment and organization and their effects on cost and quality. Findings: Data suggest a low prevalence of provider risk payment models and slow movement toward new payment and organizational models. Evidence suggests the impact of both on cost and quality is weak. Conclusions: We need to be patient in expecting system improvements from ongoing changes in provider payment and organization. We also may need to look for improvements in other areas of the economy or to accept and accommodate prospects of modest improvements over time.

This paper reviews the rationales and evidence for horizontal and vertical integration involving hospitals. The authors find a disjunction between the integration rationales espoused by providers and those cited in the academic literature. The authors also generally find that integration fails to improve hospitals' economic performance. Seven lessons from hospitals' efforts to integrate are offered, and four alternative models for achieving integrated delivery of health care services are suggested.

Accountable care organizations are intended to improve the quality and lower the cost of health care through several mechanisms, such as disease management programs, care coordination, and aligning financial incentives for hospitals and physicians. Providers employed several of these mechanisms in forming the integrated delivery networks of the 1990s. The networks failed, however, because of heavy financial losses stemming from hospitals' purchase of physician practices and their inability to align incentives, garner capitated contracts, and develop the infrastructure to manage risk. Although the current mechanisms underlying accountable care organizations continue to evolve, whether and how they will have an impact on quality and costs remains open to question. Care coordination and information technology are proving more complicated and expensive to implement than anticipated, providers may lack the ability to implement these mechanisms, and primary care providers are in short supply. As in the 1990s, success depends on targeting specific populations, such as people with multiple chronic conditions who need and may benefit from coordinated care.Accountable care organizations are intended to improve the quality and lower the cost of health care through several mechanisms, such as disease management programs, care coordination, and aligning financial incentives for hospitals and physicians. Providers employed several of these mechanisms in forming the integrated delivery networks of the 1990s. The networks failed, however, because of heavy financial losses stemming from hospitals' purchase of physician practices and their inability to align incentives, garner capitated contracts, and develop the infrastructure to manage risk. Although the current mechanisms underlying accountable care organizations continue to evolve, whether and how they will have an impact on quality and costs remains open to question. Care coordination and information technology are proving more complicated and expensive to implement than anticipated, providers may lack the ability to implement these mechanisms, and primary care providers are in short supply. As in the 1990s, success depends on targeting specific populations, such as people with multiple chronic conditions who need and may benefit from coordinated care.

Accountable care organizations are intended to improve the quality and lower the cost of health care through several mechanisms, such as disease management programs, care coordination, and aligning financial incentives for hospitals and physicians. Providers employed several of these mechanisms in forming the integrated delivery networks of the 1990s. The networks failed, however, because of heavy financial losses stemming from hospitals' purchase of physician practices and their inability to align incentives, garner capitated contracts, and develop the infrastructure to manage risk. Although the current mechanisms underlying accountable care organizations continue to evolve, whether and how they will have an impact on quality and costs remains open to question. Care coordination and information technology are proving more complicated and expensive to implement than anticipated, providers may lack the ability to implement these mechanisms, and primary care providers are in short supply. As in the 1990s, success depends on targeting specific populations, such as people with multiple chronic conditions who need and may benefit from coordinated care. [PUBLICATION ABSTRACT]

Rising health care costs are an international concern, particularly in the United States, where spending on health care outpaces that of other industrialized countries. Consequently, there is growing desire in the United States and Europe to take a more value-based approach to health care, particularly with respect to the adoption and use of new health technology. This article examines medical device reimbursement and pricing policies in the United States and Europe, with a particular focus on value. Compared to the United States, Europe more formally and consistently considers value to determine which technologies to cover and at what price, especially for complex, costly devices. Both the United States and Europe have introduced policies to provide temporary coverage and reimbursement for promising technologies while additional evidence of value is generated. But additional actions are needed in both the United States and Europe to ensure wise value-based reimbursement and pricing policies for all devices, including the generation of better pre- and postmarket evidence and the development of new methods to evaluate value and link evidence of value to reimbursement. [PUBLICATION ABSTRACT]

Hospital buyers of medical devices contract with manufacturers with market power that sell differentiated products. The medical staff strongly influences hospitals' choice of devices. Sellers have sought to limit disclosure of transaction prices. Policymakers have proposed legislation mandating disclosure, in the interest of greater transparency. We discuss why a manufacturer might charge different prices to different hospitals, the role that secrecy plays, and the consequences of secrecy versus disclosure. We argue that hospital-physician relationships are key to understanding what manufacturers gain from price discrimination. Price disclosure can catalyze a restructuring of those relationships, which, in turn, can improve hospital bargaining. [PUBLICATION ABSTRACT]

Magnet hospitals are recognized for nursing excellence and high-value patient outcomes, yet little is known about which and when hospitals pursue Magnet recognition. Concurrently, hospital systems are becoming a more prominent feature of the U.S. health care landscape. The aim of the study was to examine Magnet adoption among hospital systems over time. Using American Hospital Association surveys (1998-2012), we characterized the proportion of Magnet hospitals belonging to systems. We used hospital level fixed-effects regressions to capture changes in a given system hospital's Magnet status over time in relation to a variety of conditions, including prior Magnet adoption by system affiliates and nonaffiliates in local and geographically distant markets and whether these relationships varied by degree of system centralization. The proportion of Magnet hospitals belonging to a system is increasing. Prior Magnet adoption by a hospital within the local market was associated with an increased likelihood of a given system hospital becoming Magnet, but the effect was larger if there was prior adoption by affiliates (7.4% higher likelihood) versus nonaffiliates (2.7% higher likelihood). Prior adoption by affiliates and nonaffiliates in geographically distant markets had a lesser effect. Hospitals belonging to centralized systems were more reactive to Magnet adoption of nonaffiliate hospitals as compared with those in decentralized systems. Hospital systems take an organizational perspective toward Magnet adoption, whereby more system affiliates achieve Magnet recognition over time. The findings are relevant to health care and nursing administrators and policymakers interested in the diffusion of an empirically supported organizational innovation associated with quality outcomes, particularly in a time of increasing hospital consolidation and system expansion. We identify factors associated with Magnet adoption across system hospitals and demonstrate the importance of considering diffusion of organizational innovations in relation to system centralization. We suggest that decentralized system hospitals may be missing potential benefits of such organizational innovations.

The Kaiser Permanente model of integrated health delivery is highly regarded for high-quality and efficient health care. Efforts to reproduce Kaiser's success have mostly failed. One factor that has received little attention and that could explain Kaiser's advantage is its commitment to and investment in nursing as a key component of organizational culture and patient-centered care. The aim of this study was to investigate the role of Kaiser's nursing organization in promoting quality of care. This was a cross-sectional analysis of linked secondary data from multiple sources, including a detailed survey of nurses, for 564 adult, general acute care hospitals from California, Florida, Pennsylvania, and New Jersey in 2006-2007. We used logistic regression models to examine whether patient (mortality and failure-to-rescue) and nurse (burnout, job satisfaction, and intent-to-leave) outcomes in Kaiser hospitals were better than in non-Kaiser hospitals. We then assessed whether differences in nursing explained outcomes differences between Kaiser and other hospitals. Finally, we examined whether Kaiser hospitals compared favorably with hospitals known for having excellent nurse work environments-Magnet hospitals. Patient and nurse outcomes in Kaiser hospitals were significantly better compared with non-Magnet hospitals. Kaiser hospitals had significantly better nurse work environments, staffing levels, and more nurses with bachelor's degrees. Differences in nursing explained a significant proportion of the Kaiser outcomes advantage. Kaiser hospital outcomes were comparable with Magnet hospitals, where better outcomes have been largely explained by differences in nursing. An important element in Kaiser's success is its investment in professional nursing, which may not be evident to systems seeking to achieve Kaiser's advantage. Our results suggest that a possible strategy for achieving outcomes like Kaiser may be for hospitals to consider Magnet designation, a proven and cost-effective strategy to improve process of care through investments in nursing.