Hospital Classification Made Easy!

As a result of new healthcare legislation, hospital consolidation will continue to change at a rapid pace. New specialty hospitals are opening and with a different focus in today’s environment. This dynamic creates a new challenge – for sales professionals trying to keep the business in perspective.

A taxonomy or classification system can help us understand their unique position in healthcare. We can then focus us on where to apply our efforts and the skills required to succeed. Keep in mind that not all hospitals buy in the same way, nor do they buy the same products or in the same quantities.

There are two main types of hospitals: federal and non-federal. Federal hospitals are comprised of those in the Veterans Administration (VA) and military (Department of Defense facilities that include; Army, Navy and Air Force hospitals and clinics) along with federal prisons.

Non-Federal hospitals can be further classified by:

  • Duration of Care: Short-term hospitals usually have an average length of stay of a few days. Long-term hospitals have an average length of stay of 25 days or longer. Only long-term acute care hospitals and rehabilitation hospitals have an average length of stay of 25 days or longer.
  • Location: Hospitals can be located in either urban or rural areas to serve the population. Many rural hospitals are designed as a critical access hospital; this allows the facility to receive cost based reimbursement from Medicare. Rural hospitals generally have fewer inpatient beds.
  • By Licensed Bed Size: Typically hospitals are grouped according to their number of licensed beds into one of the following categories: 6-24 beds, 25-49 beds, 50-99 beds, 100-199 beds, 200-299 beds, 300-399 beds, 400-499 beds and over 500 beds.
  • Types of Patient Services Offered: Hospitals are classified as either community or general hospitals, teaching hospitals or specialty hospitals. Healthcare facilities can be further defined by their area of specialization that can include; rehabilitation, Children’s, long-term acute care, heart/cardiac, behavioral health, specialty surgery, orthopedic/spine or neurology as examples.
  • Ownership: Hospitals can also be classified as “For Profit (FP)” or “Not-For-Profit (NFP).” Not-For-Profit facilities can be owned by county, city, state, or other municipal government entities. In addition, the Indian Healthcare Service (IHS) serves the Native American population who live on reservations. Many religious and fraternal orders also manage and own healthcare facilities.

Why is understanding how hospitals are classified important? A very wise person once said. “Give a man a fish and he will eat for a day. Teach a man to fish and he will feed his family for a lifetime.” This sage advice has special importance to all sales professionals who call on hospitals.

How Understanding Hospital Classification Helps You!

  1. Federal hospitals have widely different product needs, access restrictions and contract requirements. A GSA contract schedule is normally required to sell to federal hospitals. Once your product or service is on contract, with hard work, a steady flow of orders can be achieved.
  2. Rural hospital sales are typically managed by an inside sales team due to their geography and size.
  3. Short-term hospitals can vary widely by the number of licensed beds. The key is to determine the best targets for your product, service or solution. Most manufacturers will look at the number of staffed beds versus licensed beds since not all licensed beds are staffed.
  4. For-Profit hospitals often standardize the products and services purchased and centralize their purchasing approval process. Often times they transfer allocated capital funds from one hospital to another based upon need in order to meet their requirements to their shareholders.
  5. Teaching and specialty hospitals have markedly different product requirements due to their patient acuity level. Teaching hospitals often resist product standardization to focus their “teaching” mission. Teaching hospitals generally buy in much larger quantities and more frequently. Specialty hospitals have very specific product requirements and because most are For-Profit, product standardization and purchase price are major factors in their decision making process.
  6. Philanthropy is another component of hospital funding and has been provided to many community and teaching hospitals. Capital equipment and new building projects are some examples of how specific donations are allocated with these specific donations.
  7. The composition and number of members on Hospital Governing Boards differs markedly between For Profit and Not-For-Profit hospitals.