10 Things to Remember When Selling to Hospitals in 2015
With a new year comes new challenges, but also new opportunities. The health care market is changing as technology is playing a larger role, patients are taking their health into their own hands and the overall hospital customer base is changing.
Are you equipped with the proper products, training and pricing to sell this year?
Thomas Williams, managing director of Strategic Dynamics Inc., recently outlined the following ten things to remember when selling to hospitals to meet or exceed your revenue plan this year.
1. Supply chain costs account for 20-30 percent of a hospital’s budget so aggressive expense reductions will continue to prevail.
You should expect product standardization efforts to increase, Williams writes, continued focus on proper product utilization to eliminate unnecessary waste and usage, increasing difficulty getting new products into the system (committees) and continued pressure to reduce the prices paid for all items.
“Value analysis committees (VACs) will continue to delay the introduction of new products because each new potential entrant will need to be vetted. To displace an existing product or be added to the approved list will require evidence,” Williams stated. “These committees have been in existence for years now and they are growing in their level of sophistication. Use of VACs and other committees adds a level of complexity to the sales process and delays the introduction of new products.”
With an increased focus on price reductions and decreased utilization, sellers will be fortunate to get the same product volume in 2015 as they received in 2014, according to this outlook. Therefore, sellers will need to be aggressive in their competition tactics to grow, or offer new products to sell.
2. Capital budget money will be tight.
According to Williams, clinical information technology encompasses 25-35 percent of a hospital’s capital budget. In the average hospital, this doesn’t leave much for other departments. Sellers should therefore “articulate their measurable value and then be able to prove it.”
3. Hospitals are full of empty beds.
Inpatient census is down in most suburban and rural areas of the country, leaving most available hospital beds unfilled. This can be attributed to demographic defections, investments in new buildings and technology, and changes in how hospitals are paid.
“The end result is that in most communities across the U.S. there are too many hospital beds versus the need. Hospitals will continue to close or be forced to consolidate. Many of the smaller hospitals will be converted to community centers and/or out-patient diagnostic centers,” Williams writes. “If you sell to hospitals this means fewer selling opportunities for many sellers.”
4. Physician employment will continue.
As hospital and physician partnerships flourish, physician preference items will decrease in cost or alternatives will be used. Sellers will need to learn how to sell to new buying influences with marketing providing buyer personas for these individuals as well as an in-depth understanding of how to interface with them.
5. Demographic trends are re-shaping the services each hospital provides.
Predict trends before they happen so that sales quotas can be adjusted properly and territories can be re-aligned if required.
6. Data mining can pinpoint price discrepancies and areas of product over-utilization and product utilization.
According to the Medicare Payment Advisory Committee, in 2013 Medicare paid hospital out-patient departments 78 percent more on average than ambulatory surgery centers for the same procedure.
“This shows that there is a huge price disparity between surgery in a hospital out-patient center and an ambulatory surgery center. This is not going to continue. If your company sells products into these two markets then you can expect hospital supply prices to fall and more patients to be cared for in out-patient surgery centers,” advised Williams. “This means your in-patient product utilization will fall while it increases in the out-patient market. What affect does this have on your sales coverage model and pricing strategy? Suppliers should expect that hospitals will increasingly deploy data driven digital health strategies to reduce costs and improve patient outcomes. If you sell to hospitals that own surgery centers ensure that your data mining is as good as your client. Don’t be embarrassed in a negotiation.”
7. Bundled payments are the future.
This implies strict clinical pathways and a thorough understanding of all the individual costs included in the patients care such as labor, equipment, supplies etc.
8. Consumer price transparency is gaining momentum.
Sellers must be prepared for bundled pricing as hospitals define and scrutinize each cost in the product and service delivery chain.
9. Population health is here to stay.
As new financial models determine how hospitals will get paid, it affects how they deliver patient care.
“New care pathways are emerging to provide cost control and patient outcomes for specific diseases like diabetes, COPD and CHF, to keep these patients healthy and out of the hospital,” said Williams. “This will open up opportunities for new care models outside of the hospital and physician office. This will require new sales channels.”
10. Hospital consolidation will continue and GPOs and IDNs will prevail.
Further consolidation of hospitals has to occur because population health cannot work unless you are the low cost provider. GPOs and IDNs will control decision making for capital equipment, purchased services and supplies using real-time data and placing it into a dashboard.
“If you don’t have a robust GPO and IDN strategy start one now. If you have one, improve it. Your future revenue and margins depend upon it,” concluded Williams.