Opportunities for MedTech Companies in a Dynamic European Hospital Market
abstract digital healthcare
What are the key challenges and priorities for MedTech companies in the European hospital market? Hear our experts share insights from our European Hospital study and strategies on how businesses can position themselves as leading MedTech suppliers.

part 1 of the series

Executive summary

Over the past several years, European hospitals have faced significant pressure to serve a growing population with an increasingly stretched healthcare team, facing staffing, capacity and budget shortages. The COVID-19 pandemic only added further pressure to the system, and now European hospitals are looking to advance patient care in a ‘new normal’ environment. Today, hospitals remain vigilantly focused on patient outcomes while experiencing significant changes in where care is delivered and how it is paid for. Furthermore, they are carefully evaluating their suppliers across a broad range of competencies and expecting them to act as strategic partners in navigating their key priorities. This environment provides significant opportunity for medtech companies and their investors to better serve the dynamic needs of European healthcare markets and support future progression and innovation in the sector. 

In this Executive Insights, L.E.K. Consulting shares key findings from L.E.K.’s 2023 European Hospital Survey and discusses the implications for medtech companies serving these hospitals. 

Key findings

We have identified six key themes from the European Hospital Survey that are of particular importance to medtech companies: 

  • Quality of clinical/patient care (particularly reduced medical errors, infection controls, patient satisfaction and reduced readmission rates) and staff attraction/retention (in light of staffing shortages) are key strategic priorities for hospitals, and medtech companies should tailor their product design and value propositions to help them address these priorities  

  • The trend towards outpatient/ambulatory care is accelerating; medtech companies should ensure they provide the products and services that will best match the needs of outpatient facilities  

  • Demonstrating supply chain resilience, sustainability credentials (e.g. carbon emissions reduction) and favourable operations strategy as well as accounting for geopolitical context (e.g. of supply chain footprint) will help position medtech companies as attractive partners 

  • To prepare for improved sales rep access as restrictions continue to ease, medtech companies should design a local sales force strategy that targets individual healthcare providers (HCPs) who retain influence over purchasing decisions and therefore would be important to engage with relevant product areas 

  • Despite this practice being relatively uncommon today, medtech companies will increasingly be asked to offer outcome-based pricing models where relevant, based on varied local reimbursement systems, given hospital providers have significant interest in adopting these, particularly for medical and surgical consumables  

  • Hospitals want medtech companies to not only supply products but also help them achieve broader health system goals via new services and support solutions

1. Quality of clinical/patient care (particularly reduced medical errors, infection controls, patient satisfaction and reduced readmission rates) and staff attraction/retention (in light of staffing shortages) are key strategic priorities for hospitals, and medtech companies should tailor their product design and value propositions to help them address these priorities

Hospitals across the EU are balancing a broad range of priorities across patient and clinical care, staffing, broader administration goals, financial metrics, and digital/IT with some considered to be more critical than others (see Figure 1).

Quality of clinical and patient care 
Preserving and improving clinical care quality continues to be at the forefront of hospitals’ priorities as they strive to keep advancing the standard of care whilst grappling with operational challenges such as staffing shortages, capacity constraints and funding pressures. In the UK, Germany, France and Spain, respondents reported at least three of their top five priorities focus on patient and clinical care.

When considering the most important patient and clinical care priorities, there were multiple areas of overlap as well as some nuances between EU countries: 

  • Reducing medical errors was a top hospital priority among all countries surveyed, with c.80% of respondents rating its importance as moderately to very important (6 or 7 out of 7)  

  • Secondly, improved infection control was rated as similarly important by c.60%-70% of respondents in France, Germany and Poland and c.80% in Spain and the UK, likely driven by the impact of the recent COVID-19 pandemic

  • Reducing readmission rates and improving performance on quality metrics, two of the many other patient care priorities, are considered somewhat more important by respondents in Spain and the UK compared to the other countries surveyed (though Spanish and UK respondents tended to provide higher importance scores for priorities in general) 

In France, the focus on quality of clinical and patient care is especially pertinent due to the Financial Incentive to Quality Improvement (Incitation Financière à l’Amélioration de la Qualité, or IFAQ) budget, which provides additional funding to hospitals based on eight quality of care criteria. This creates an incentive for hospitals to focus on improving quality metrics and an opportunity for investments in medtech products to achieve this.

Overall, these priorities must also be considered in the context of staffing shortages, which will be discussed in detail shortly. Achieving high quality in these areas is more difficult when hospitals are short-staffed, and clearly hospitals are focused on maintaining or improving their ability to deliver on key priorities with the teams they have. Due to this, hospitals are likely to be more interested in exploring and investing in new product and service options that offer quality of care improvements and support stretched medical teams. Medtech companies should capitalise on this by tailoring their product design, evidence generation, value proposition, and sales and marketing to explain how their products can help hospitals improve on these metrics.

Staffing 
As in previous years, staffing remains a top priority area for hospital providers as European countries grapple to varying degrees with staffing shortages; for example:

  • In Germany, the German Medical Association expects its current physician shortage to increase in the near future, as over 20% of its physicians are 60 and older as of about 2021. As such, German hospitals rated physician attraction and retention the number two strategic priority, with improved staff utilisation, attraction and retention of nurses and allied medical specialties/non-clinical staff rated the next most important priorities within staffing. 

  • In Spain, while the number of doctors is increasing, there is significant variation in distribution, leaving some areas with far fewer HCPs per 1,000 population than others. Like German respondents, Spanish hospital respondents also rated physician attraction and retention a very important strategic priority, with attraction and retention of nurses and allied medical specialities/non-clinical staff considered somewhat less important.  

  • In the UK, there were over 133,000 vacancies in the National Health Service (NHS) in September 2022 (c.57,000 of which were medical or nursing posts), which was an increase from c.104,000 in the previous year (c.48,000 of which were medical or nursing posts). Clinical staff shortages, including nurses and physicians, have been so widespread that they have triggered government involvement and have been included as a core focus area in the NHS Long Term Plan published in 2019, to support the NHS’ recruitment and training of professionals and to improve staff retention.  

  • In France, staff shortages are concentrated mainly in non-clinical staff and allied medical specialties (e.g. dietitians, occupational therapists and physiotherapists), which is the top staffing priority for hospitals. 

  • In Poland, actions are already being taken to attempt to boost medical staff numbers (e.g. financial incentives to attract doctors to areas with relatively fewer doctors). 

One way that medtech companies can help hospitals address staffing challenges is to provide new innovations that allow more efficient patient monitoring and reduce the number of interventions required (e.g. automated or self-operated IV pumps, portable patient monitors, or automated patient turning solutions) or increase the number of outpatient procedures that can be performed (where, by definition the reduced length of stay will increase the productivity of staff). They can also develop devices and tools that support upskilling nonphysician staff and help providers better utilise their existing personnel.   

Other priorities 
Beyond patient care and staffing, respondents also considered areas of digital, administration and finance to be important. In particular, these include: 

  • Respondents in the UK, Spain and Poland prioritised improving change management as a top administrative priority, with c.70% rating it as moderately to very important (6 or 7 out of 7 in importance) 

  • Several finance areas were perceived to be high priority, including but not limited to participation in other value-based arrangements and access to capital for purchase of medical equipment as well as improved RCM/billing/cash recovery, which were each considered moderately to very important by c.55%-60% of all respondents

  • Lastly, important digital priorities included fully integrated electronic medical records across acute and non-acute settings, patient-facing technology, enhanced data connectivity, and improved clinical workflow efficiency tools, with some variation between countries

Variety of priorities in Poland 
At a country level, Poland’s top priorities span the broadest range of areas, including finance (access to capital for purchase of medical equipment), broader administration (improved change management and implementation of process improvement), digital technology (clinical data connectivity and patient-facing technology) and clinical/patient care; this reflects the stage of development of Poland’s market versus those of Western European countries. Medtech companies serving Poland (and other Central and Eastern European countries) would benefit from offering a diverse and agile product range and communicating to hospital providers how particular products are adapted to fit changing priorities as the market further develops.  

2. The trend towards outpatient/ambulatory care is accelerating; medtech companies should ensure they provide the products and services that will best match the needs of outpatient facilities

Hospitals cite a trend towards increased care delivery in outpatient settings, which they expect to continue and potentially accelerate over the next three years (see Figure 2).

On average across countries, c.60% of respondents cited strong agreement that this trend has been occurring over the past three years, and c.80% reported the same for the outlook across the next three years. This shift is motivated by the need to reduce costs while maintaining or improving quality of care, and it is enabled by improving medical technology (e.g. in minimally invasive surgery, anaesthesia), allowing more procedures to be performed in outpatient settings. 

Germany is at a transition point, as the country will be implementing a new hybrid diagnosis-related group (DRG) reimbursement scheme (expected to come into effect in 2023) that entitles healthcare providers to the same level of reimbursement for an equivalent service, regardless of whether it is delivered in an inpatient or outpatient setting. Additionally, a three-tier hospital classification system has been suggested to encourage further specialisation and improve quality; in this system, hospitals will only receive reimbursement for procedures over a minimum volume threshold so that they focus on fewer types of high-throughput procedures, and hospitals will be compensated for offering more ambulatory surgeries.

In France, similar reforms have already been enforced to equalise the reimbursement of inpatient and outpatient care and foster the expansion of outpatient care. While this has largely played out in the private sector, public hospitals are now catching up and driving the trend towards outpatient care over the next three years. Reimbursement-driven incentives are also present in Poland to promote day surgery; for example, higher reimbursement if a threshold proportion of cataract surgeries are completed in outpatient settings.  

By contrast, in Spain, the state system works on a budget basis (and c.35% of the revenue of private hospitals comes from agreements with the public sector), and therefore the driver of the trend towards outpatient care is more likely hospitals’ general cost considerations. These mechanisms to encourage greater outpatient care will incentivise hospitals to invest in new medtech products or services that allow them to send patients home the same day.  

In line with this trend towards care delivery in outpatient settings, respondents across countries expect that their hospitals will increase their provision of a range of outpatient services over the next three years, including diagnostic imaging, outpatient surgery, primary care, pre-surgery diagnostics, oncology services, laboratory services and same-day urgent care (see Figure 3). Notably, over 90% of UK respondents expect the provision of primary care to increase moderately or significantly by 2025; this is likely driven by the current pressure on specialists’ capacity, requiring general practitioners to take on more patients when possible, as well as government drives to improve primary care staffing. As part of the NHS Long Term Plan, £4.5 billion per year of additional funding will be provided to health services in local communities by 2023-24. The government is also expanding primary care networks by 26,000 staff and rolling out new community healthcare teams to enable patients to leave hospital sooner by providing greater care facilities at home.  

Overall, this shift to outpatient care has two important implications and opportunities for medtech companies:

  • The opportunity to increase sales into a quickly growing customer base of non-hospital-owned outpatient centres and clinics (for example, Medizinische VersorgungsZentren or MVZ in Germany), which will require customer prioritisation and targeting and in some cases, a buildout of sales teams to support these customers

  • The opportunity to help existing hospital customers build their outpatient care footprint, by offering products (e.g. for minimally invasive procedures) that can ensure patients can go home the same day

Key account focus, product focus and strategic support for customers navigating these changes will help medtech companies maximise the opportunity that the shift to outpatient settings presents.

3. Demonstrating supply chain resilience, sustainability credentials (e.g. carbon emissions reduction) and favourable operations strategy, as well as accounting for geopolitical context (e.g. of supply chain footprint) will help position medtech companies as an attractive partner

Competitive pricing, maximal quality, broad product offerings and efficient distribution are just some of the key criteria that hospital providers use to identify and select suppliers of their medtech products. Further to these, L.E.K.’s European Hospital Survey tested the relative importance of four additional criteria that hospitals may employ: supply chain resilience, sustainability considerations, supply chain operations strategy and geopolitical context. Each of these factors was considered moderately to very important by c.50%-65% of respondents, with some variation in the individual importance of each factor across countries and within public versus private hospitals (see Figure 4). Suppliers, including medtech companies, should aim to demonstrate positive and differentiated characteristics in these four areas to position themselves as attractive suppliers for European hospitals.

Particularly after the challenges during the COVID-19 pandemic, hospitals are focused on building resilient and operationally efficient supply chains, and this begins with their suppliers. Overall, supply chain resilience was considered the most important of these four factors for selecting a supplier, reflecting significant value placed on suppliers being able to guarantee service stability during periods of uncertainty such as future pandemics, cyberattacks or economic crises.

The perceived value of this factor means that medtech companies should ensure that they have sufficient resilience in their own supply chains — such as via supplier diversification, insourcing of critical components and increasing stocks — to withstand future periods of volatility. This will not be made easier by the new Medical Devices Regulation, which is likely to force medtech companies to cut certain legacy products deemed not worth re-registering. In addition, having an efficient and cost-effective supply chain operations strategy (e.g., near-shoring, warehousing, distribution, consolidated service centres) will win suppliers favour from hospital providers.

Sustainability considerations are increasingly becoming integrated into hospital provider goals and mission statements; in L.E.K.’s 2023 survey, 98% of respondents reported that their hospital has defined sustainability targets. As a result, procurement and purchasing from companies with clear sustainability considerations throughout device design, manufacturing and distribution is a significant factor influencing supplier selection.

Though considered the least important of the four factors surveyed, geopolitical context (e.g. the supply chain footprint in areas with conflict or other geopolitical concerns) was still a moderately to very important selection criterion for over 50% of respondents, as hospital providers want to know that their suppliers are not adversely affected by increased geopolitical risk when entering new supply agreements.

The survey findings illustrate how multi-factorial the procurement process is for hospital providers and that medtech companies need to demonstrate a strong value proposition in several areas, beyond just their products and services, to compete effectively.

4. To prepare for improved sales rep access as restrictions continue to ease, medtech companies should design a local sales force strategy that targets individual HCPs who retain influence over purchasing decisions and therefore would be important to engage with regarding relevant product areas

Hospital purchasing processes are evolving, and during COVID-19, there was greater centralisation of procurement processes, with more use of group purchasing organisations (GPOs) to better the efficiency of procurement operations (this is particularly noticeable in Germany where there is a high proportion of GPOs). This has reduced the level of individual HCP influence on purchasing of products. Typically, HCP influence is now mainly for specialised products requiring a high degree of skill. Thus, there is a lot of variation in HCP influence on purchasing product by regional systems and different product areas.

Despite this, HCPs remain an important constituency for medtech companies. A large proportion of survey respondents still consider them to retain a moderate to high level of influence over product purchasing decisions. Though this will vary highly from product to product, the expectation that some individuals retain influence over purchasing decisions was reflected across multiple product types (e.g. medical, surgical and diagnostic consumables; IT systems; capital medical equipment; and therapeutic devices) and suggests that product providers, such as medtech companies, should continue to invest in targeted sales force HCP visits alongside other marketing strategies. Medtech companies should also consider that HCP influence is likely to be greater in outpatient settings, where the fragmented nature of the market as well as the strong involvement of physicians in the ownership and management of these practices means physicians have more say over product selection.

While the ability of sales representatives to reach key HCPs was severely impacted during COVID-19, access to HCPs is now increasing as restrictions on in-person representative visits continue to ease. In L.E.K.’s Hospital Survey, on average 50%-60% of hospital respondents anticipate that restrictions will slightly or significantly decrease over the next three years (see Figure 5). 

While the potential for increased sales representative access justifies ramping up sales force size, in-person visits are unlikely to return to pre-pandemic levels given the greater adoption of digital marketing communication and staffing shortages, which are placing strain on the time HCPs have available for sales rep engagement and resulting in greater selectivity over which companies HCPs will interact with.

Further to this, hospital funding reforms may cause hospitals to specialise and result in the consolidation of medtech companies’ customer base for a given product, as is being seen in Germany, where hospitals are expected to start eliminating low-volume procedures for which they will not receive reimbursement.

To most effectively take advantage of increasing sales rep access and the development of outpatient settings, medtech companies should carefully consider their sales strategy to prioritise key accounts and work with key opinion leaders to identify and target relevant HCPs who are the most influential in each market. A smaller and more targeted in-person sales force will help prevent overburdening HCPs, who have limited bandwidth for supplier interactions, and continue to increase provider reach to compete successfully within European healthcare markets.

5. Despite remaining relatively uncommon today, medtech companies will increasingly be asked to offer outcome-based pricing models where relevant, based on varied local reimbursement systems, given hospital providers have significant interest in adopting these, particularly for medical and surgical consumables

In parallel with the move towards outpatient care, respondents also perceive a growing movement towards outcome-based pricing models. Despite this approach still being very much in its infancy, c.65%-70% of respondents agree that this trend is occurring on average across multiple product categories, including medical and diagnostic consumables, IT systems, and therapeutic medical devices.

However, while respondents recognise this as a future trend, interest in adopting such pricing models is varied across countries and product types, ranging from c.35%-80% (see Figure 6). The greatest interest is expressed in the use of outcome-based pricing models for medical and surgical consumables. However, up to now there are few examples of it being applied in practice (such as home continuous positive airway pressure (CPAP) ventilators in France where providers are reimbursed based on the number of hours a patient wears the device).

Primary clinical decision-makers in Spain were within the top two countries most interested in outcome-based pricing (based on the proportion of respondents scoring a 6 or 7 out of 7, or moderately to very interested) for medical and surgical consumables and therapeutic medical devices. Hospitals in Spain have less capital available and thus are likely to have greater need for alternative pricing options.

In order to stay ahead of the curve, medtech companies should consider offering outcome-based pricing options to hospitals for medical and surgical consumables to stay competitive and encourage providers to trial new products that they may not otherwise invest in without a pricing model that helps mitigate risk.  

6. Hospitals want medtech companies to not only supply products but also help them achieve broader health system goals via new services and support solutions 

Alongside providing products, hospital respondents note a clear preference for medtech companies to act as strategic partners. About 85% of respondents agree that they would like medtech companies to help them achieve broader health system goals, reflecting a growing expectation of medtech companies to provide greater support beyond just core product lines (see Figure 7). 

In addition to the type of relationship and level of support hospital providers expect from medtech companies, L.E.K.’s European Hospital Study also highlighted a range of services that providers are looking for from medtech companies and other medical suppliers. Approximately 45%-50% of all respondents on average considered equipment service and support, product acquisition and supply chain management, operations management and efficiency improvement, outsourced clinical/medical services, and non-clinical and clinical IT and analytics moderately to very valuable services that medtech companies and other suppliers could provide (see Figure 8).  

The picture is more nuanced at the country level, with variation in the perceived value of such services among EU countries. In Poland, operations management and efficiency improvement was important, with 60% of respondents rating this as a moderately to very valuable service for their hospital. The Polish hospital market is still maturing to enable greater access to treatments; medtech companies that can help improve processes and operations will be welcomed by healthcare providers. 

In Spain, non-clinical analytics and IT services were rated the most valuable services and considered more valuable by respondents in Spain compared to respondents in other countries (c.60% of respondents rated it as moderately to very valuable). This may be driven by the lack of IT support infrastructure in the region and the need for modernisation of their analytics software to facilitate efficient healthcare delivery.

In these markets, medtech companies would benefit from tailoring their products and/or value propositions to demonstrate they can best serve key market needs and should remain agile to adapt their product portfolios to future challenges and market trends. Finally, in the UK, Germany and France, the value of medtech services was viewed similarly, reflecting a need for medtech companies to continue to provide a broad and varied product offering to providers in these markets.

Conclusion

L.E.K.’s 2023 European Hospital Survey highlights how hospital providers are adapting to cope with significant staffing and budgetary pressures, alongside their continued commitment to maintaining and improving the standard of care for their patients. 

Medtech companies need to continue to prove they can help hospitals solve their critical issues of demand management, staff shortages, capacity constraints, need for supply chain resilience and increasing sustainability requirements. Each of these areas offers opportunities for medtech innovation. Companies should also support hospitals in their transition towards offering more outpatient services to reduce costs and better meet patient needs as well as supporting other outpatient providers that are aiming to increase provision of outpatient services. 

In parallel, as access to HCPs recovers, medtech companies must find ways to ensure their direct sales force visits are seen as helpful and informative, rather than as a drain on practitioners’ constrained availability.

Finally, hospitals want to work with medtech companies that can act as strategic partners able to go beyond offering excellent products and services. Over time, this will allow successful medtech companies to build deeper relationships with their clients — relationships that can help guide future innovation planning.

To discuss the findings of this survey in more detail, please contact Arnaud Sergent or Tobias Koesters.

For more about L.E.K.’s Healthcare practice, visit our dedicated Healthcare page

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