As hospitals consolidate and form ACOs and transition from a fee-for-service reimbursement model to one that pays for value (better clinical outcomes, improved patient satisfaction and the prevention of complications, preventable infections and unnecessary re-admissions) the MedTech Sales Model will change.
At the forefront of developing a new Go-To-Market strategy will be MedTech Marketing. Their role is going to be helping their organization understand and learn how to cope with the constant changes in healthcare reimbursement while continuing to develop segment specific strategies for accelerated growth. Marketing will make their presence known by developing new strategies based on data, analytics and insights in each of the following areas.
1. Define New Coverage Models
As stand-alone hospitals consolidate into systems they are consolidating their purchasing activity. Fewer hospital buyers’ means longer sales cycles and bigger deals will be won or lost. This means fewer traditional sales representatives will be required. Geographic and product segmentation of the sales force will be re-examined. Systems and large accounts will be managed by account managers with business acumen. An investment in the traditional sales representative made perfect sense when the physician was the primary purchasing influence because the role of the sales representative was to drive clinical preference and develop trusted relationships with physicians. As the hospital system becomes the customer this strategy will be reexamined and probably follow the path used by most direct sales organizations in international sales. Marketing can be expected to provide insight on new coverage models.
2. Articulate Pricing Pressures & Define Strategies
Healthcare reform will force manufacturers and suppliers to re-think their pricing strategy. As hospitals transition from a fee-for-service reimbursement model to one based on value they will demand lower pricing. This will be in response to six major factors. First, overall revenue will decrease as reimbursement shrinks and hospitals will no longer get paid for re-admissions. Second, consumer demand for price transparency will require hospitals to prove that they are reducing costs and that their prices are fair and equitable. Third, hospitals will continue to use GPOs, IDNs and third-party assessment firms to provide comparative price data on all items used, for various clinical procedures and for potential new product purchases. Their level of purchase sophistication will increase. This will cause manufacturers to seek ways to lower their supply chain and go-to-market costs. Fourth, new direct to hospital purchasing models using generic products will force the existing sales channels to react in order to protect their base of business and to allow for growth. Fifth, RFPs can be expected to be the norm especially for commodity type products and outsourced services. Sixth, physician preference items will decrease as physicians become hospital employees and the incentives of cost and quality are aligned. MedTech marketing will be at the forefront in developing strategies to capitalize on each of the market changes.
3. Define How Customers Buy
Manufacturers and suppliers are seeing purchase decisions move from clinical criteria to economic criteria. With many products clinically acceptable is preferred to clinically superior if the price is lower. Buying decisions are also shifting from physicians and clinicians to cost-conscious personnel in procurement (strategic sourcing) and the C-Suite. GPOs have always had influence over product selection and pricing but now IDNs, RPCs, Value Analysis Committees and third-party-assessment firms are providing greater influence to procurement and the C-Suite. This increases the number of hospital stakeholders and often leads to longer product adoption cycles as gate-keepers can slow or stop product penetration. Status quo is often the new norm. Manufacturers and suppliers will need to understand these new buying influences and develop strategies to engage them. MedTech marketing will be at the forefront by defining the Buy-Sell-Process, developing Buyer Personas and then describing how to win in a Sales Playbook.
4. Content Marketing to Engage
Fewer hospital customers, consolidated buying and restricted access will create an opportunity for content marketing as a means to engage and create interest. MedTech marketing will be required to develop a media strategy that goes beyond a web site and E-mail. They will need to develop meaningful content that clinical and non-clinical personnel will desire to read and that will drive awareness, interest and interaction. When hospital buyers engage with MedTech manufacturers and suppliers they will be well into their buying process for everything but new disruptive technology.
Part 2 of this blog will appear next week.