MedTech’s Shift from Transactions to Partnerships
Over the last two years perhaps no industry has been forced to rethink its marketplace and go-to-market strategies quite like MedTech. Increased customer concentration, coupled with supply chain challenges, cost pressures, labor shortages, and lack of access has increased complexity and solidified the requirement to incorporate multi-channel key account strategies and programs into commercial organizations for MedTech companies.
Historically, however, medical device leaders have struggled to make the shift from transactional product relationships to true partnerships for their portfolios. A great opportunity for partnership exists, with 41% of health care leaders saying that they need to prioritize strategic partnerships and collaborations in a Future of Health Index 2021 survey. With this in mind, we have identified five key account trends:
Trend 1: Clinical Value Over Clinical Preference
The number of community hospitals affiliated with larger health systems increased by 9% from 2010 to 2018 according to the American Hospital Association. At the same time, cost pressures continue to mount. In fact, the AHA estimates that US hospitals lost an average of $50.7 billion per month between March 1st and June 30th of 2020.
It is no surprise then, that Value Analysis Committees (VAC) have become the standard for product evaluation, approval, and purchasing. These committees, which bring together a variety of cross-functional stakeholders including nurses, physicians, purchasing, supply chain, and the C-suite have caused a shift in the traditional purchasing dynamics from clinical preference to clinical value. Clinical value weighs the impact of a product across a range of factors including outcomes, efficiency, cost, quality, sourcing, and education requirements.
As purchasing decisions move from end-user to system(s) wide, key account programs must tailor their value propositions and messaging to address these multi-dimensional personas and enable their sellers to navigate the complexity of the VAC process.
Trend 2: Increasing Size, Scale and Reach of Key Accounts
Large healthcare systems have moved away from geographically focused aggregation and turned their strategic focus outward, looking for new ways to expand their market footprint resulting in larger, more stratified customers than ever. In fact, over half of hospital mergers between 2010 and 2012 were between hospitals outside of the same area with approximately 15% of all mergers occurring across state lines. This trend has continued through 2019 when cross-state M&A activity has become more relevant.
As this expansion continues, commercial leaders must develop differentiated sales motions requiring coverage models that allow for coordination of sales, marketing, and resources across geographies and product types. Thoughtfully developing roles, responsibilities, and governance models reduce frictions and promote the execution of strategy at multiple levels.
Trend 3: The “Quadruple Aim” and the Need for Partnerships
The “quadruple aim” of better outcomes, improved patient experience, lower cost, and enhanced clinical experience is the north star that inherently drives innovation and product development within Medtech. The evolving market dynamics present MedTech companies with new opportunities to transform from feature-first products to valuable solutions, leading many organizations to enhance their product portfolio and diversify their lines of business across call points and specialties.
As MedTech organizations build key account programs, it is imperative to consider how to best leverage the full scope of their products and services to deliver on the quadruple aim. In many cases, commercial leaders must look beyond their own organization and evaluate potential complementary partnerships to provide the required level of value key accounts require.
Trend 4: The Consumerization of Hospital Buyers
The age of information and democratization of data has resulted in increased customer access to information. Like patients, key hospital stakeholders are constantly interacting with and through digital channels, creating an opportunity for Medtech commercial leaders to create data-driven strategies to scale engagement across large health systems.
Given that each key account and healthcare system has its own priorities, MedTech organizations must develop well-coordinated, customized, multi-channel account-based marketing programs targeted at driving specific outcomes throughout the value chain.
Additionally, digitally-enabled sellers may be utilized to gain access to new stakeholders and expand the footprint within large key accounts. In combination with account-based marketing, digital sales can have a profound impact on deployment models and channel economics by allowing strategic account managers to focus on high-value customer interactions.
Trend 5: Long Term Focus
Moving from a transactional relationship to strategic partnerships within large healthcare systems does not happen overnight. The complexity and length of the sales cycles require commercial leaders to align key account programs, management, and incentives to focus on long-term results rather than short-term wins and losses.
In doing so, leaders can ensure sellers stay motivated and maintain a strategic focus to effectively expand the footprint to develop durable partnerships that result in incremental revenue opportunities.