Funny you should ask - I used to be a healthcare consultant for the Advisory Board Company - my last research project (finished this April) was on large capital investments for hospitals, including the da Vinci Robot and other clinical technology. I interviewed about 100 hospital CFOs and finace executives who had purchased the robot. While I didn't have access to all the relevant financials, the following statements about da Vinci are generally true. This is off the top of my head, so apologies if I jump around, especially as I try to respond to the previous statements.The vast majority of hospitals (90%+) do not see a positive ROI on surgical robot investments. They move ahead with purchasing the technology for a number of reasons. For one, in some cases, there is clinical evidence that recovery time for certain procedures, so there is a small argument that it increases quality of care. However, independent studies have shown this is rare, and that recovery time is as much dependent upon the skill of the surgeon as it is the techonolgy used during surgery. The most often cited reason to purchase is the huge pressure from physicians to purchase the robot - surgeons prefer to use the most advanced technology, even for procedures that have no clinical advantage. For those that are not familiar with hospital economics, physicians are the "true" customers of hospitals - they often split between multiple hopsitals in a region and are most responsible for bringing patients into the hospital for inpatient procedures. Hopsitals therefore bend over backwards to make their docs happy- especially their high-margin surgeons.While da Vinci robots are featured promintly on hospital billboards, there is little to no evidence that it has any impact on volumes. I've heard anecdotal evidence of patients requesting the da Vinci robot for things like CAT scans - most individuals have no idea what the technology is or what it's for. This is indicative of the typical patient - they don't have the time nor the inclination to dive deep into the clinical benefits that technology can and can't provide - it's confusing even for the experts, as there's a ton of contradictory evidence available. Direct to consumer hospital marketing is a hot topic right now, but the general consensus is that it's still a few years away. Patients still go where their doctors tell them - refer to the last paragraph to understand the importance of this fact in hopsital/physician relations.In general, even though they will lost money on it, most hospitals that consider the da Vinci robot still buy it. It's a presteige item for one, and it makes their docs happy. If a competing hospital purchases one, it's very likely that a hospital will take the multi-million dollar plunge even if it's a huge financial black hole. I spoke with a number of hospitals who had other surgical volumes drop b/c procedures with the robot took much longer than expected. It was expected that docs would eventually get up to speed on the robot, but in the meantime those hospitals were getting crushed. In general, hospital spending has exploded over the last few years. This was of course fueled by strong margins, easy credit, and cash reserves high above historical averages. My feeling is that this will have to slow eventually, but probably not for a few years. Hospitals will continue to upgrade technology, especially at large academic med centers and huge health systems. The small community hospitals wouldn't buy a da Vinci anyways. However, if spending was really crunched, I would think even larger hospitals systems would pass on a surgical robot or an upgrade.Again, sorry to ramble, but I only had a few minutes. I'm not sure how this will impact ISRG, as I haven't looked at their revenue streams, and how often they plan upgrades. I realize also that I've provided some pro and con material, and I've not really weighed them against one another. My impulse is to be skeptical of any company that only offers one clinical technology product - there are always new technologies coming out, and there are huge sharks in the water like GE and Siemen's who have exclusive or restrictive contracts with certain hospitals. In addition, hospitals that were eager to buy the first generation of the da Vinci robot may not buy updated versions, so earlier sales figures are likely bolstered by taking advantage of low-hanging fruit. There are only so many large hosptials in the country. Just my 2 cents. -Tom
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