Cardiac Pacemaker Business Model is Broken

The current business model for selling and servicing implantable cardiac rhythm management devices is broken.  The model, used by Medtronic, St. Jude, Boston Scientific, and others, is not sustainable in the current health care environment.  It will be even less sustainable as health care evolves in the future.

Presently, a device is sold to a hospital and implanted at that hospital.  The implantation of the device is only the beginning of the commitment for the health care provider, and the company selling the device. 

Because the device is critical to the health of the patient, the patient must be checked regularly to make sure the device is functioning properly for the patient.

True, some of the checks can be done remotely on most of the devices, but patients are still required to be checked in-person.  Depending on the type of device, the in-person check may be required annually, or as frequently as every three months.  For those complex devices requiring quarterly checking, two of those must be in-person.

The problem is, historically the companies have provided in-person checks at no additional cost.  They would provide the service for free, while the health care provider obtains reimbursement for the service.  The companies have been willing to provide the service because they would continue to obtain new business. 

The majority of people in the field for the companies are not revenue generators - they are people who provide a free service for the health care community. 

In 2011, the number of implants is done, and sales revenue has declined an estimated 7-15% industry-wide.  The burden of servicing the implanted devices in a declining market is forcing the companies to re-evaluate their model.  The current model REQUIRES a growing market. 

Some factors that will help minimize the burden, but will take years to have a major impact, include:

• As technology advances, an increasing percentage of the device checks will be done remotely, where the companies generate revenue;
• New deals are being proposed with separate pricing for devices with service, or without service;
• Responsibility for the device checks being shifted away from the companies to the health care providers;

Regardless, the next few years will be tumultuous as this sector of the medical industry transitions.

As always, I invite comments and CORRECTIONS.  I do my best to share accurate information, but recognize I make mistakes.