Insight

Re-launching elective procedures

An opportunity for medical device companies to shape their future customer base

Roger van den Heuvel

Roger van den Heuvel

Principal, Corporate Strategy, Life Sciences Lead, KPMG US

+1 212-997-0500

Jeff Stoll

Jeff Stoll

Principal, National Strategy Life Sciences Leader, KPMG US

+1 617-988-1000

Jessica Lin

Jessica Lin

Managing Director, Healthcare and Life Sciences Strategy, KPMG US

+1 212-954-5627

The COVID-19 public health emergency compelled governments worldwide to free up limited hospital beds, ICU space, operating rooms, and clinical staff for COVID-19 patients. As a result, elective procedures—many of which require medical devices—were postponed and will not fully resume until the burden on hospitals from COVID-19 lessens.

Although the suspension of elective surgeries has hurt medical device manufacturers in the near term, we believe revenues are likely to return to normal in the longer term. Demand hasn’t fundamentally changed.

At the same time, medical device manufacturers have an opportunity to do more than simply return to pre-COVID-19 business as usual. This is a time to implement strategies to defend the current business and capture additional market share where possible.

Resuming elective procedures

Relaunching elective surgeries will depend on a variety of factors, including government regulations, strategic prioritization, and patient willingness.

Waiting for regulatory guidance: Reaching normal volumes will require differentiated and targeted efforts, since decisions about rescheduling depend on national (or, in the U.S., state-by-state) infection levels, testing prevalence, and containment plans. Some examples of re-openings:

  • In the U.S., nearly 20 states had resumed some elective surgeries as of May 1, with more moving in this direction based on government mandates.1 In New York, for example, decisions about reopening are made on a county-by-county basis. Hospitals can only get the green light if 30 percent of the county's inpatient beds and ICU beds are available. If there have been fewer than 10 COVID-19 hospitalizations in the county over the previous 10 days.2
  • In the U.K., elective procedures have resumed at private hospitals that haven't been treating any COVID-19 patients, and plans are in place for National Health Service (NHS) hospitals to restore elective surgeries in the coming months.3
  • In Switzerland, the government is "bucketing" cases according to three rules of thumb: Surgery that is critical to a patient's survival will be the highest priority; patients with no immunological issues or comorbidities will be prioritized ahead of complex patients, and surgeries on patients infected with COVID-19 will not take place unless failing to act could impact their survival.4

Strategic prioritization: The ability to prioritize elective procedures will vary based on the type of surgery. Elective procedures have been classified as either less deferrable (conditions requiring attention as soon as possible) or more deferrable (conditions where delays carry minimal or no risks). When elective surgeries resume, less deferrable procedures will have priority, although those that require devices that aren't readily available will be deferred further.

  • Less deferrable procedures include trauma, cardiac surgery, stroke management, diabetes-related treatment, dialysis, and oncology surgery.
  • More deferrable procedures include hip and knee implants, spine surgeries, cataract/LASIK, and aesthetic procedures.

Patient willingness: Efforts to resume elective procedures will also hinge on whether patients believe that they won't contract the COVID-19 virus while undergoing treatment in the hospital. Health systems need to have appropriate equipment for testing patients and staff; comprehensive cleaning and disinfection policies; and adequate personal protective equipment (PPE), hospital beds, ventilators, and other medical supplies. To bring patients back for elective procedures, health systems also must deal with the psychological impact of COVID-19. Older patients with underlying health issues may delay procedures until they have been vaccinated, regardless of hospital measures, to ensure patient safety.

Impact of unpredictable demand on the industry

While the delay in elective surgeries has constrained revenues for the medical device industry, some of the loss has been offset by rising demand for commodity products such as masks, surgical gloves, and thermometers; products that are critical to COVID-19 treatment such as ventilators and other ICU supplies; and diagnostic and infusion systems to test for infection and antibodies and manage complications. In response to this demand, manufacturers have repurposed manufacturing lines.

Demand could also be affected by the fallout of COVID-19 among providers. For example, some small- to mid-sized hospitals could close due to the COVID-19 lockdown and revenue loss from the suspension of elective surgeries. Ambulatory Surgery Centers (ASCs) could be the most vulnerable since almost all of their procedures are elective. In the short term, hospitals and ASCs may be able to tap into national relief funds, although there are still many questions about how funding access is granted and distributed.5 Even in the tumultuous COVID-19 environment, there are multiple opportunities for medical device manufacturers to help hospitals and ASCs restore patient confidence as they begin to reopen and ramp up elective procedures. 

Recent discussions with cardiovascular surgeons suggest that unique regional recovery scenarios are occurring. For example, one surgeon indicated that, in April and May, ICD surgeries were down 90 percent in his institution. However, volumes then recovered in late May and June by up to 120 percent. During the same period, a Florida electrophysiologist said he only saw a 20 percent decline and has since seen a full recovery. The implications of this research suggest that, as COVID-19 spreads across the U.S., there will be a regional ebb and flow of surgeries restarting that may happen multiple times. This type of regional uncertainty creates the necessity for flexibility in the medical device supply chain and commercial model.

Capturing additional market share post COVID-19

As elective surgeries resume, device manufacturers may be able to get ahead of the curve with initiatives to capture additional market share. For example, companies can:

  • Expand working relationships with medical associations and patient advocacy groups to assist in developing guidelines for relevant procedures
  • Intensify working relationships with hospital associations to develop elective-surgery relaunch plans, e.g., by identifying best practices, planning for capacity issues, and establishing PPE thresholds

While these actions will help offset the customer base's contraction, medical device companies should also pursue strategies to capture additional market share. Some critical issues, as well as questions to ask as an organization, are as follows:

  • Customer base segmentation: How will national and, where applicable, state regulations limiting elective procedures impact our financial viability? Are there ways we can not only defend but also expand our existing market share?
  • Scenario planning: Can we conduct scenario planning analyses to prioritize customer accounts? Can we develop contracting strategies to meet customer needs, which will vary nation by nation, state by state, and account by account? Are we ready to shape and serve a new customer mix?
  • Supply chain modifications: Is our supply chain prepared to serve the backlog of elective procedures? Could supply chain efficiencies be a lever for capturing competitors' volumes? What actions can we take to ensure the security of our supplies, e.g., from China?

As we move out of the COVID-19 lockdown and into the new reality, medical device manufacturers will need to do more than stabilize their businesses and wait for the old normal to return. It's time for organizations to adjust their focus and shape the future customer base before others do.



Contact us

Jeff Stoll

Jeff Stoll

Principal, National Strategy Life Sciences Leader, KPMG US

+1 617-988-1000
Roger van den Heuvel

Roger van den Heuvel

Principal, Corporate Strategy, Life Sciences Lead, KPMG US

+1 212-997-0500
Jessica Lin

Jessica Lin

Managing Director, Healthcare and Life Sciences Strategy, KPMG US

+1 212-954-5627

Footnotes

  1. Dr. Tiffany Chung, How doctors are keeping patients safe as elective surgery resumes, ABC News, May 2, 2020, retrieved June 12, 2020 from www.abcnews.com.
  2. Lydia Hu, NYC Hospitals obtain waivers to resume elective surgeries, New York 1, June 6, 2020, retrieved June 12, 2020 from www.ny1.com
  3. Michael O’Riordan, Hospitals plan cautious restart to elective procedures as COVID-19 wanes, tcdmd, May 12, 2020, retrieved June 12, 2020 from www.tcdmd.com
  4. Rebecca Soistmann and Rachel Zuckerman, One Swiss hospital's "3 bucket" approach to rescheduling planned procedures, The Advisory Board, June 4, 2020, retrieved June 12, 2020 from www.advisory.com.
  5. Source: Coronavirus Aid, Relief and Economic Security (CARES) Act, impact on healthcare providers, KPMG, April 2020