Dive Brief:

• The rise of ambulatory surgery centers (ASCs) is creating challenges for medtech companies, analysts at Bain & Company wrote in a report this week. Analysts predict ASCs will carry out 27 million procedures in 2021, up from 20 million in 2015, with particularly fast growth forecast in the orthopaedic, spine and cardiology markets.

• The analysts think medtech's standard commercial model is too costly and complex for ASCs, which are thought to be more price sensitive and likely to switch to cheaper products than acute care hospitals.

• Faced with the trends, some medtech companies are simplifying their portfolios and creating services tailored to the needs of ASCs, the analysts said.

Dive Insight:

The need for medtech companies to take ASCs, which perform surgeries that do not require an overnight stay, seriously is evident in the data. In 2017, ASCs performed more than half of total U.S. outpatient procedures, as compared to less than one-third in 2005. In cardiology, for instance, Bain thinks ASCs' share of the cardiology market will rise from 4% in 2015 to 33% in the mid-2020s. 

The rise of ASCs creates a new market opportunity for medtech but, as the analysts see it, companies will have to adapt to capitalize on it. ASCs have claimed a growing slice of the market by significantly undercutting hospitals on price and will switch device supplier if offered a discount. 

Medtech companies' ability to provide devices at the prices ASCs want is hindered by the challenges of selling to the surgery centers. ASCs are low-volume operations spread across the U.S., making them more expensive to sell and ship to than the large hospitals traditionally targeted by medtech. Physicians have a bigger say in purchasing decisions at ASCs than hospitals, too.

The differences between hospitals and ASCs make the traditional medtech commercial model a poor fit for the new market, the analysts argue, creating opportunities for companies that adapt to the new environment first.

Bain analysts think companies can capture the ASC market by implementing virtual operating room representatives, outsourcing logistics and otherwise lowering their costs. The analysts also argue that companies should consider simplifying their portfolios and creating procedure-in-a-box kits. Through these changes, companies may be able to offer the 15% discount that would persuade most ASCs to switch to a different device. 

The ultimate impact of the emergence of ASCs could be more dramatic still. The analysts predict medtech companies may consider new business models, such as taking equity stakes in ASCs to drive use of their latest devices.