It’s no secret that selling into healthcare organizations has gone through a gradual metamorphosis over the last several years due to hospital consolidation, a changing reimbursement milieu and the increasing influence of Procurement. Ask any sales representative or sales leader and they will tell you unequivocally that it’s gotten harder to sell their wares. The result for sales professionals is the number of suppliers have decreased, sales cycles have lengthened, the number of buyers has increased and the negotiation process has changed markedly. While none of this is a surprise to veterans of the industry, we thought it would be useful to place the myriad of changes into context. Rightly or wrongly, we have grouped them into three separate but distinct categories listed below. Ask yourself if you have been pro-active, or reactive in addressing these changes.
1. Oversight (Vendor Management)
Within this category there are four different challenges for the seller.
a) Vendor Credentialing: This originated from a historical lack of enforced controls on restricting vendor access and/or preventing unauthorized vendor access to clinicians and patient files1-2. Increased concerns over privacy/confidentiality, security, and accountability, along with the need for Supply Chain to gain greater control over vendors, gave rise to this market.3
b) Rep-Less (OR): Some hospitals, not all, are still experimenting with different coverage models that replace the sales representative in the OR. This is most common in implant and spine surgery. Although some institutions in the U.S. have reported much success with this model, it is not ubiquitous yet. However, there are numerous organizations out there that are actively promoting that companies go Repless.4
c) Scheduled Appointments: Hospitals have realized that every hour one of their employees spends with a supplier representative is taking away from their workday and the institution is paying for it. (The days of “dropping in” to supply chain to see someone because you “just happened to be in the area”, have long since been over for most Health Systems.)
d) Value Analysis Committee (VAC): From the Healthcare Systems point of view, VAC’s attempt to bring order to chaos. The emergence of VAC’s has made it challenging for suppliers to introduce new technology into many healthcare organizations. Often vendors try and circumvent and/or find it difficult to address the fundamental requirement that VAC’s place in front of them; provide specific (evidenced-based) information as to why their product and service is superior (clinically, economically, or both). Coupled with the fact that many Vendors do not understand who is on the various VAC committees, what role (if any) does their champion (supporter) have with the VAC, and the overall decision-making process the VAC will utilize. (In today’s market if a Vendor does not embrace and understand these fundamentals, their chance of winning and/or retaining business is minimal).
2. The RFP (or RFI) Process
a) RFPs: Over the last decade or so the use, frequency, and range of RFPs has impacted the vast majority of healthcare sales organizations. Everything from gloves to CRT implantable devices, to an endless array of purchased services categories. Even though this has been the industry norm for years, many sales organizations still treat RFP’s as “one-offs” – singular events.
b) RFP format is Rigid: As such it does not always allow suppliers to provide the needed information (i.e. value or areas that should be considered). The rigidity of the format can at times end up “commoditizing” your product or service. How you structure and answer RFQ questions is critical…you must create a nexus between all the questions that tells/illustrates the value of your product or service
c) Black-out periods: With RFPs comes ‘blackout” periods whereby the supplier can have no contact with anyone in the buying organization. The penalty for contact is expulsion forever.
d) No Contact: Many organizations prevent the selling team from having direct contact with anyone on the VAC. This is done to prevent the supplier from being able to influence the committee member.
a) Fixed budgets: In the USA fixed or declining capital and operational budgets are becoming the norm rather than the exception. Because hospitals work in an ever-changing reimbursement environment with low net margins they must manage their supply and capital expenses carefully. In Canada, the healthcare system works on a fixed budget. Hospital CEOs must decide to fund project A or project B or lobby the government for additional funding.
b) Mandated pricing: This is also called capitated pricing. It’s a practice whereby the hospital or healthcare system dictates a price to the supplier. In other words, it’s a ‘this is what we are willing to pay price……take it or leave it.”
c) Guaranteed price reductions: This practice is most common for OEM vendors that manufacture implants for the major manufacturers. By contract they demand that their suppliers reduce their price per device by X% per year or face losing the business.
d) Bundled payments: This is a single fixed payment whereby insurers pay one overall price for all services associated with a patient’s condition and treatments over an episode of care.
e) Competitive bidding: To drive down the purchase price to its lowest point, many areas of healthcare have gone to a process of competitive bidding where the lowest price submitted inevitably wins. A good example is the HME industry.
Company Selling Strategies
So how can healthcare suppliers cope with these problems? They have responded with varying degrees of effectiveness using the following strategies and techniques.
- Highly skilled strategic account team: As hospitals consolidate into healthcare systems and IDNs their purchase power increases dramatically and gives them leverage. Large suppliers are increasingly turning over the account management activities to highly skilled strategic account managers who sell the entire portfolio of products/services and manage the relationship. The traditional sales representative role is increasingly being replaced with a clinical specialist.
- Selling strategies to get to the relevant industry: Increasingly manufacturers are using trade shows, webinars and social marketing strategies to develop a relationship with key stakeholders that are difficult to contact within their organization. This increases awareness, provides differentiation and can help shape RFPs.
- Develop an ideal customer profile: Not all customers are a good fit for every MedTech organization. Savvy sellers are clearly defining the criteria that makes them the best fit through sophisticated customer segmentation.
- Develop an RFP response team: To handle the increasing volume of RFPs and their complexity MedTech organizations are creating an internal dedicated RFP response team.
- Patented and unique technology: With disruptive or patented technology comes price protection for some period. Think Intuitive Technology.
- Understand product needs and that ‘good” is often “good enough”: Increasingly manufactures are recognizing that their customers “feel good”, is good enough. They don’t need the best product to do routine mundane functions. This is forcing manufacturers to re-think their new product strategy and to offer good-better-best products each with different benefits and price points.
- Evidence based data: One way around barriers is clinical evidence. Think Xenex with their robotic infection prevention product.
- Long-Term Contracts: Want to lock out the completion for years i.e. 5,8 or 10 years, use the approach that Medtronic and Philips have begun to employ. Philips uses enterprise-wide, comprehensive partnerships or contracts for a specific hospital area such as patient monitoring and informatics. Medtronic has signed an Integrated Health Solutions Agreement In the U.S. with an organization that will implement their operational models to streamline workflow and efficiency in select catherization (cath) and electrophysiology (EP) laboratories.
Selling within healthcare is changing and evolving but healthcare organizations are still buying products and services. Key to success is recognizing how the market is morphing and being able to predict the next change. MedTech manufacturers would be wise to look at Medtronic with their X model and Philips with their Y model. They are shaping the market not reacting to it.
- Crans, F. (2010). Vendor credentialing: What the dog saw. Journal of healthcare contracting. March 13. 2010.
- Garner, G. (2012). Top 5 reasons for vendor credentialing. Isnare article. No published date. Available: http://ezinearticles.com/?Top-5-Reasons-for-Vendor-Credentialing&id=7058449.
- Ekstein K. Vendor credentialing: Overview, Issues and Prospects. Word Document
- Williams TJ and Williams HL. The Hospital OR Should they go rep-les. Strategic Dynamics Inc. blog December 6. 2016.
- Williams TJ and Williams HL. Selling to hospitals and healthcare organizations: a glossary of business acumen and personnel. 2016 P28.
“If you change the way you look at things, the things you look at change”. Wayne Dyer
As always, we welcome your thoughts and input. Let’s start a discussion and elevate the sales profession with a thoughtful and informative discourse.
Authors: Thomas J. Williams and Heather Williams
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