Contributor: Karen Gierszewski and Mickel Phung

As the time frame for year one of the meaningful use of electronic medical records (EMR) incentive program draws to a close, US policymakers will no doubt be examining what caused the adoption of this program to be so lackluster. One survey by the College of Healthcare Information Management Executives (CHIME) noted that only 26% of hospital respondents said that their organization had met the criteria for meaningful use as of September 30, 2011 (the end of the first full year of the program), while over 30% of respondents in a March survey predicted that they would qualify by that time. And it’s not that the incentives aren’t there—eligible professionals can receive up to $44,000 over 5 years under the Medicare incentive program, or up to $63,750 over 6 years under the Medicaid program. Hospitals are eligible for payments starting at a base of $2 million under both programs.

So what happened? For physician practices, it seems likely that these systems are just too expensive to afford—a client/server ambulatory EMR system can put a practice back by more than $20,000 per physician, and annual fees reaching up to 20% of the licensing fee would be required for maintenance. For a web-based system, where an initial purchase usually isn’t required, annual fees can reach well over $6,000 per physician. For hospitals, the difficulty seems to stem from uncertainty regarding stage 2 criteria for meaningful use—many hospitals are not yet willing to invest in this expensive technology to meet stage 1 criteria when they don’t know what will be required for stage 2. As a result, many hospitals have made a strategic decision to postpone the implementation of EMRs until 2012, when the stage 2 criteria will be released; there is no immediate pressure on hospitals to adopt because total incentive payments for eligible hospitals will not start to decrease until 2014.

As a result of this slow adoption, the Health IT Advisory Committee recommended delaying the qualification date for stage 2 of meaningful use, although there is not yet a final word from the Centers for Medicare & Medicaid Services (CMS). Stage 2 was originally anticipated to begin on October 1, 2012.

Nonetheless, it should be noted that the shift toward EMRs is still happening overall—MRG predicts that the US EMR market will reach a value of over $8 billion by 2016. Furthermore, the meaningful use program has had a positive effect on demand for related systems, such as high-acuity information systems, which can help facilities achieve meaningful use criteria. By contrast, however, systems that have not been included in Stage 1 of meaningful use, such as picture archiving and communication systems (PACS), have experienced lowered demand.

While incentive dollars has certainly proven to be a catalyst in the market for adoption, the underlying reason that health providers want an EMR is to improve both quality and efficiency of care. The meaningful use program has generated uncertainty in the market and has spurred rapid, and often unsuccessful, adoption. Overall, the approach that the CMS takes to stage 2 of meaningful use will set the stage for the industry over the next few years.

Contributor: Karen Gierszewski

When thinking about medical tourism—involving posh resorts where you can get a complex cardiovascular procedure thrown in—the BRIC markets come immediately to mind. And that’s for a good reason—Brazil, India, and China are all becoming increasingly popular destinations for medical procedures because of low costs, well-trained surgeons (in the urban centers, that is), and the ability for patients to bypass lengthy waiting lists in their own countries. Russia unfortunately will likely continue to lag in this respect as long as corruption in the health care system continues to be a problem. India in particular is growing as a powerhouse in medical tourism—the industry is projected to generate as much as $3 billion a year going forward . Brazil, meanwhile, is renowned for tourists coming for cosmetic procedures—Brazilians are generally very aesthetically conscious and there are therefore a high number of medical spas and other treatment centers in the country. This is likely to help spur the strong medical procedure volume growth expected in these countries over the forecast period.

Nonetheless, the eastern European countries cannot be overlooked. In MRG’s most recent European Markets for Dental Implants report, it was found that not only were the eastern European countries going to benefit from dental tourism, but tourism to these countries was in fact going to negatively impact the markets in the big 5 European countries. This is partially due to the fact that the European countries are relatively close together—it’s not a big deal for a German to hop over to Poland or Hungary for a quick dental implant. Some of these countries are even creating package deals involving sightseeing to make having the procedure done in a foreign country more appealing. Spain has also been showing potential, with some patients coming to the country to have spinal implant procedures done due to the lower costs.

When it comes to spinal nonfusion technologies, however, MRG has found that medical tourism is booming in Germany—typically the largest of the European markets. This is likely due to the fact that most procedures have become available in Germany before the rest of Europe, and high rates of tourism might therefore die off as the devices are launched in the other countries.

In any event, this is definitely an area worthy of more investigation so companies are better able to identify target markets—particularly in Europe, where the smaller countries are often overlooked.

Contributor: Karen Gierszewski

As we commented earlier , the Chinese medtech market is gaining considerable attention among major medical device manufacturers because of a rapidly expanding economy and fast procedure growth. But, it is worth noting that in many markets much of this growth stems from a small procedure base, which makes the growth numbers somewhat inflated. So when will China and the other BRIC countries actually reach a point to make a dent in the revenues of large international medtech companies?

According to recent MRG research, the answer is very soon. Take the interventional cardiology (IC) device market, for example. By 2015, the BRIC countries will generate nearly 43% of global revenues (“global” in this case including revenues generated in France, Germany, Italy, the UK, the US, Japan, plus the BRIC countries), while the US—the next largest market—will generate under 39% of the total market. In 2011, China accounted for over 65% of the total revenues generated in the BRIC countries. On top of that, growth is still anticipated to be stronger than in the US beyond the forecast period, although that is a little harder to judge for certain. There is no doubt, however, that companies that ignore the potential of the BRIC countries—particularly China—will fall behind.

The BRIC countries do, however, come with their own sets of pitfalls. The Chinese market is characterized by a large number of local competitors able to substantially undercut pricing. In India—which is poised to surpass China’s working-age population by 2035 —poverty and a lack of access to health care continue to plague a large chunk of the population despite efforts to improve health standards. In Brazil, a similar problem exists because of rapid urbanization resulting in inadequate quality and timeliness of care. Meanwhile, in Russia, corruption continues to plague the health care system, with some patients needing to bribe hospital staff to receive basic services.

Additionally, many of these countries have approval systems that are difficult to navigate and small rural health care centers that are harder to access, particularly for smaller companies. As a result, working through local distributors currently tends to be norm for foreign companies.

Nonetheless, companies that focus on the maturing US and European markets will likely see their global market shares decline as the BRIC governments work to address these issues. This is particularly of interest given that these markets have traditionally been much more recession-proof, which may help companies offset financial challenges as the US and Europe teeter on the brink of another economic crisis.

Contributors: Karen Gierszewski and Daniel Brown

On October 1, 2011, the New York Times reported that metal-on-metal hip implants have been associated with severe and permanent side effects, with the article even saying that one surgeon found a “biological dead zone” when replacing a failed metal-on-metal hip in a patient. Additionally, the New York Times reported in September that rates of failures in metal-on-metal implants were increasing, according to the National Joint Registry for England and Wales. This article also cited that the US Food and Drug Administration received a record number of complaints regarding these devices in the first 6 months of 2011 compared to the previous four years combined. This attention comes in the wake of a number of studies published at the beginning of 2010, which also questioned the performance of these devices. The effects of these studies were examined in detail in MRG’s Physician Forum titled Controversies in Hip Arthroplasty published in May 2010.

While at the time it was not predicted that these articles would have a major impact on adoption patterns of physicians—unit sales volumes were anticipated to increase despite declining as a proportion of overall hip implant sales—continued attention on failures leaves us to wonder whether the metal-on-metal hip implant market will die out completely. Some sources indicate, however, that they might remain useful in certain circumstances—for example, if a patient is very old and the surgeon is concerned about dislocation. In these cases, the patient is unfortunately unlikely to live long enough to feel any negative effects of using a metal-on-metal implant.

One of the main issues, however, is that surgeons continue to remain divided over whether or not there is one “gold standard” material to be used in hip implants. Ceramic-on-ceramic? Too expensive. Metal-on-highly-cross-linked-polyethylene? Too many concerns about polyethylene wear. Ceramic-on-metal or polyetheretherketone (more affectionately referred to as “PEEK”)? Both too new to know for sure.

Maybe this market is just waiting for a game-changing material that will sweep everyone away.

Contributor: Alex Jablokow

Back in 2008, at the height of the financial crisis, many of our clients called us and asked for our take on how the market was doing in general. How closely tied is confidence in medtech to confidence in the economy? How were procedure volumes likely to change?

All good questions—we thought they deserved an answer. So our analysts dug through our data and our survey results, looking health care facilities’ levels of confidence in the national economy, facility financial health, and procedure volume outlook, and produced our now widely watched Medtech Confidence Index (MCI).

We issue the MCI quarterly. It scores three therapeutic areas: cardiovascular, orthopedics, and facial aesthetics. We felt that those three distinct areas could serve as reliable proxies for the entire market. The MCI remains the only overall measure of medtech industry health.

We’ve just generated the Q3 2011 MCI. The results?

The medtech industry, along with the national economy, is looking at a downturn. After several quarters of growth, the MCI trended negative in Q2, and has continued its slide in Q3. In fact, the MCI score is now lower than what it was in Q3 2009, right as the economy began to recover.

The optimism of the past year has faded, and once again companies will likely be more cautious in their business moves, affecting everyone in the medtech space.

For a more detailed view into the components of the MCI and deeper analysis of the various factors that will affect the medtech business in the coming quarter, go to the Q3 2011Medtech Confidence Index.