Revenue growth remains high despite new COVID variants, but pricing and sales compensation increases are necessary to combat ongoing supply chain issues, clinical staffing challenges, and high employee turnover.
Historically, the healthcare industry averages 5-6% revenue growth per year. However, in 2021, as companies bounced back from the effects of COVID-19, healthcare sales leaders optimistically projected 12% growth and ultimately exceeded this target, achieving an average of 14% revenue growth. While a recent Alexander Group survey conducted with over 30 healthcare executives suggests a decline in revenue growth from 2021, leaders are still projecting almost twice as much growth in 2022 as the historical average.
Most survey respondents expect the Omicron variant to have a moderately negative impact on Q1 business performance. During January of 2022, while Omicron was at its peak in many areas, healthcare companies achieved 90% of their January revenue target. As we learn to live with COVID disruptions, sales organizations and providers will become better equipped to deal with future variants, leading to a decrease in their overall impact.
Even as the healthcare industry learns to operate in the ongoing pandemic, there are additional industry challenges that concern healthcare sales leaders, including supply chain constraints and hospital staffing shortages. One-quarter of survey respondents indicated that these would cause a significant or extreme impact on 2022 business performance, while only 4% of respondents indicated that COVID variants would cause that same level of impact.
Organizations plan to combat the impact of supply chain issues by increasing list prices. Alexander Group’s research shows that 78% of healthcare organizations plan to increase prices during 2022, with an average price increase of 4.3%.
The Centers for Medicare and Medicaid Services (CMS) recently announced a vaccine mandate for Medicare and Medicaid-certified providers and suppliers. The majority of survey respondents (75%) indicated that they were not concerned, or only mildly concerned, with the mandate impacting their sales force. On average, only 2.2% of the sales force is expected to exit due to the vaccine mandate, which aligns with leader’s low concern level.
In 2021, sales force turnover was 14.4%, and per survey results is projected to go down to 11% in 2022. However, Alexander Group’s research indicates that turnover will remain high in 2022 and will not decrease to the extent indicated by respondents.
In addition to high turnover, the job market is presently quite aggressive, and 59% of survey participants reported that it is currently difficult or very difficult to recruit new talent. As a result of high turnover and an aggressive job market, healthcare organizations are planning to increase total target sales compensation for field representatives. Per Alexander Group’s benchmarking database, field representatives are, on average, paid a target total of $183K (comprised of $93K base salary, and $90K target incentive), and organizations plan to increase this by 3% in 2022.
Healthcare leaders are motivated to return to in-person conferences, tradeshows and marketing events. On average, they plan to attend five in-person tradeshows and host six in-person marketing events during 2022. However, 82% of the survey respondents plan to hold any internal sales and kickoff meetings either using a hybrid model or remaining entirely virtual.
Third-party vendor access will continue to be restricted by Omicron and other COVID variants, but the overall impact to business performance should remain limited. Healthcare sales leaders will feel a greater impact from the continuing supply chain issues and hospital staffing challenges. Strategies including increasing prices and sales compensation are on the forefront to manage these current market constraints. To attract quality talent, and decrease turnover, compensation for field reps is expected to increase by ~3%, on average. A return to in-person events is expected, however, internal meetings will remain virtual as healthcare leaders continue to be conservative with employee travel and interaction.
To request a briefing on the full findings from the healthcare survey, please contact an Alexander Group healthcare practice leader.