Last week, we discussed the changing role of doctors in the medical device buying process. Let’s turn to another important trend – the consolidation of hospitals and the increasing influence of administrators and procurement personnel in purchasing decisions.

Hospital consolidation and the new buyer.  As hospital revenue sources decline (driven by lower utilization, lower reimbursement, and other factors), hospital administrators have gotten serious about improving productivity.   Part of the efficiency equation is consolidation through M&A.  In 2010, 77 hospital M&A deals worth over $12B were announced, a 33% increase over 2009[1].  Another part of the hospital productivity equation is network expansion.  In 2009, 58% of community hospitals were associated with a health system, up from 53% in 2001[2]. For device sales leaders, this continued consolidation means fewer accounts with more buying power.

Coverage Model Impact: To combat the attempts by hospital networks to pass on cost pressure, vendors must deploy a new type of account manager for their most important hospital network accounts.  These account managers are problem solvers who contribute across multiple aspects of the hospital network.   They are clinically competent, but not necessarily at the same clinical level as today’s field reps.  This account manager is expert at selling to the multitude of non-clinical buyers, delivering an economic message, understanding the account’s reimbursement strategy, and providing that baseline level of clinical credibility.  This account manager also knows exactly when and how to engage more competent clinical or technical colleagues.   This account manager has more in common with successful business-to-business sellers than with traditional medical device KAMs.

To grow in the new environment, device companies must take decisive action to deploy a new mix of sales resources.   These resources must help their hospital customers manage through their own upheavals.  A tighter focus on expensive field sales deployment is part of the answer.  A new breed of account management is another.  Together these moves could bring vendors back to double-digit growth.

[1] “Hospital M&A activity jumped 33 percent in 2010” Healthcare Finance News, 2/7/11

[2] American Hospital Association Annual Survey, 2001-2009.

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