At the Advamed conference last week in beautiful San Diego, the Medtech industry\u2019s big national meeting, executives expressed the need look beyond selling \u201cwidgets\u201d in a fee-for-service world that is coming to an end. They are looking to become more of solution providers, and also embracing the growing consumerism sweeping across healthcare. At the same time, the industry\u2019s innovation ecosystem is challenged, and revenue growth is likely to be driven by emerging markets, at-risk models, and solution selling.\nThe age of the healthcare consumer\nThough Healthcare is talking about becoming more \u201dconsumer-oriented\u201d the sector does not really understand what that means, having never had to focus on the consumer in the first place. The industry acknowledged that healthcare enterprises have to change to align to the values associated with being a consumer-focused company.\nIndeed, the question being debated was: who is the consumer? Is it the provider, the payer, or the patient? \u00a0\nEven within a definition, the answer is not simple or straightforward. There is no homogeneous view of a typical patient, for instance. Millennials look at healthcare very differently and may look at discrete costs and options, compared to senior citizens on Medicare who may like to be managed holistically in a managed care program.\nWith deductibles going up significantly in new plans, the burden of financial responsibility is shifting towards patients, and they are becoming much more discerning about the costs of healthcare, which is driving them to shop around for options when they have to undergo treatment. Indeed, there may be an inexorable shift in the industry towards looking at the patient as the consumer due to this trend.\nThe new business model\nThe key question that all healthcare enterprises have to answer today from a business model standpoint is:\n-- What is the total cost of care related to their product or service, and what are the metrics to compute it?\nMedtech companies are now under pressure to demonstrate clinical and financial outcomes, and health economics is a big part of the overall pricing and bargaining process between Medtech, providers, and payers.\nAs industry pricing moves from piece-meal to value-based pricing, there will be less carve-outs an exemptions and each Medtech device will have demonstrate its own value.\nA big legislative issue for Medtech today is the medical device tax: a 2.5% tax on manufacturers of medical devices that the industry is trying to get repealed. Many executives at the conference went around wearing badges supporting a repeal of the tax.\nAnother big issue is the innovation ecosystem in Medtech. Given the long product development cycles of up to 10 years, driven mainly by regulatory approvals, Medtech is struggling to fill the pipeline with enough new products. In addition, venture capitalists have been abandoning the market, which has put further pressure on the already challenged innovation ecosystem.\nEmerging markets, especially China, India, and Latin America are part of pretty much part of every Medtech company\u2019s growth strategy. However, regulatory environments and local market characteristics require a carefully thought-out approach.\nNot everybody wins\nAs healthcare aligns itself to the triple aim goals and moves towards a population health management model, several shifts will take place. Here are a couple:\n-- Treatment will take place outside of a hospital setting, which will put existing acute care facilities at risk. This will be driven further by consumers unwilling to bear high deductibles of between $2000 and $ 5000 for hospitalization, who will now want to be treated in outpatient settings. Dr Eric Topol, one of the keynote speakers and author of The Patient Will See You Now, went even further to say that the hospital visits of the future will be more \u201ctele-visits\u201d and less physical visits. Home health will make great strides, enabled more and more by digital technologies that enable remote consultation, diagnosis, treatment, and monitoring.\n--\u00a0 Product standardization is accelerating in hospitals, driven by provider consolidation. There will be some winners and some losers. However, hospitals are also looking to strategic partners to address key needs \u2013 this could be a great opportunity for Medtech companies.\nThe ongoing wave of digital health startups is an emerging trend that needs to be closely watched, especially in terms of how they manage the regulatory environment and accelerate innovation while remaining fully funded. The startups who participated in the conference seemed to be developing stand-alone Medtech products that are a combination of hardware, software, and services. The products also seemed designed to avoid FDA approval processes in order to get quickly to market. The long term viability of this strategy is unclear. One common approach seemed to be to drive monetization through data analytics on the devices, as opposed to the actual devices themselves.\nThe key takeaway for me was that Medtech companies need to evolve rapidly in the current environment. Specifically, they need to:\n-\u00a0 Articulate value\n-\u00a0 Understand and align with provider evolution\n-\u00a0 Offer optimized commercial models\nFrom a revenue model standpoint, going \u201cat-risk\u201d is the only way now to hit \u201chome runs\u201d, however risk-based contracting also requires a level of trust between contracting parties for it to work.\nAll of these changes require healthcare enterprises and Medtech firms to learn to \u201cskate where the puck is going to be,\u201d or more aptly, where the \u201cMedtech widget\u201d is going to be.