Research: price tag counts more than long-term results when purchasing medical devices

In a recent study, researchers from Aalto University, the University of Bath and Erasmus University Rotterdam examined the criteria for purchasing equipment in public health care. 

More than 1 300 purchasing managers, medical professionals and general managers in the UK took part in the study. Researchers were particularly interested in how individual financial incentives, buyer-supplier contracts and medical evidence of health outcomes influenced device choices.

Participants were presented with a hypothetical, but realistic, scenario in which they had to choose between two pacemakers to fill a large purchase order. The cheaper, basic pacemaker cost £2200 while the pacemaker with infection-reducing qualities had a price of £3000. There were 1 000 pacemakers to be purchased.

In the decision scenario, participants were described a situation where the decision-maker gains a personal bonus based on cost-savings if the cheaper device is chosen. The purchasing professionals chose the cheaper device despite the potentially poorer treatment outcomes while medical professionals did not.

The researchers are concerned by this finding, as healthcare procurement in Europe is increasingly the responsibility of purchasing professionals.

‘While not every purchasing decision is a matter of life and death, looking at price in procurement decisions has a human cost and indirect economic effects,’ says Katie Kenny, a doctoral researcher at Aalto University.

‘The results show that it is important to align the internal incentives of different functions - in this case, purchasing managers and medical professionals - with the incentives of suppliers in a way that makes everyone strive towards healthcare effectiveness,’ says Katri Kauppi, professor at Aalto University.

Risk sharing pays off

Another variable in the decision was a possible risk-sharing agreement, which offered an opportunity to share post-operation treatment costs with the pricier pacemaker manufacturer in the event that infections still occurred. In this case, medical professionals were much more likely to choose the more effective device than without this contract option. Purchasing professionals were not affected by the risk-sharing agreement. 

The third variable examined was reliability of the medical evidence: whether the improved health outcomes of the higher priced device were verified in a clinical trial at a single hospital or in a global randomized controlled trial. The reliability of the medical evidence only influenced the device choices of medical professionals.

Value-based procurement requires medical evidence to support efficacy claims - and the skills to understand that evidence. This, in turn, requires additional training for purchasing managers working in public health, the researchers point out.

Juri Matinheikki, a visiting scholar at Aalto University and Chief Specialist to the Ministry of Finance, says Finland also has room for improvement in value-based healthcare. Finland, too, lacks incentives that encourage a focus on longer-term health outcomes rather than short-term costs.

‘Although the study was based on a controlled trial in the UK, it is useful in real life - including in Finland. Our research shows that these longer-term health outcomes should not be at odds with shorter-term individual benefits for employees, such as bonus schemes and internal performance indicators. Health benefits, including their economic importance in terms of, for example, labour inputs and tax revenues, should be better valued so that they can be taken into account in procurement alongside short-term price savings,’ Matinheikki stresses.

The research has been funded by the Research Council of Finland.

The study was published in the International Journal of Operations & Production Management.

Link to the research (emerald.com)

Further information:

Doctoral researcher Katie Kenny
katie.kenny@aalto.fi 

Professor Katri Kauppi
+358 50 401 7112
katri.kauppi@aalto.fi 

Professor Erik van Raaij
Erasmus University Rotterdam

Professor Alistair Brandon-Jones
School of Management, University of Bath