January 12, 2015 by Brian Johnson
Medtronic CEO Omar Ishrak highlights how the Covidien buyout will enable his company to expand its value-based model into the operating room.
Almost exactly a year ago Medtronic (NYSE:MDT) CEO Omar Ishrak insisted that value-based healthcare is the salvation, not the damnation, of the medical device industry.
Speaking today at the J.P. Morgan Healthcare conference in San Francisco, Ishrak cast Medtronic’s $43 billion mega-merger withCovidien (NYSE:COV) in that light, saying it will help expand the mission to capitalize on value-based healthcare.
The deal, expected to close Jan. 29, will help Medtronic on several fronts, Ishrak told investors today, getting it into the hospitals much earlier in the sales process due to the nature of the products produced by Covidien. That Mansfield, Mass.-based company has 1 of the largest suites of general surgery products in the medical device industry.
That will help Medtronic lengthen 1of the key planks in Ishrak’s platform: Inking supply-and-service deals with hospitals. In those arrangements, Medtronic finances the construction of new cath labs or hybrid operating rooms and manages their operation and workflow, in return for a 7-year commitment to a fixed per-patient fee that includes the cost of any Medtronic devices used in procedures.