By Judy Capko

 

As a medical sales representative, you know that your success is dependent on the relationships that you’ve spent time and energy to cultivate. These relationships are an investment both in selling today and in fortifying your worth to future employers. What you may not fully appreciate is how some major, and accelerating, trends may affect you. What new challenges and opportunities should you expect? 

The trend I’d like to investigate in this Practice Points has been described rather dramatically as The Death of Private Practice – and it refers to a convergence of regulatory and marketplace forces that have resulted in hospitals and healthcare systems purchasing private practices previously owned by physicians. At our firm, we’ve been hearing about the “Death of Private Practice” for many years, but the recent facts are striking and they speak to a changing landscape: MGMA has reported that 2008 was the first year that hospitals owned a majority of medical practices – in 2002 physicians owned about two-thirds of practices.

 

Monitoring the market

Another factor driving consolidation is that fewer residents enter the working world with the expectation that they will be self-employed, eschewing the late hours and weekends that have been an inseparable part of private medical practice for prior generations of physicians. I’ve seen these trends accelerate in recent years and I expect them to continue. What do these changes mean for your career? Will you be selling more often to hospital purchasing agents than to physicians and practice managers? Might you someday soon be selling a different line of products for a different company?

How and to what degree these trends affect you depend on the type of practices you serve. The consolidation of private healthcare practices has been particularly acute in primary care, pediatrics and some specialties such as cardiology, anesthesiology – the rarest specialties are the least likely to be affected. From an economic perspective, large providers know that they can leverage size to negotiate better reimbursement rates, realize cost-savings and increase patient care through integrated IT (EHR) systems.

If you’re concerned about your world being turned totally upside down, don’t panic. First, many private practices are very profitable and their physician-owners are not motivated to sell whatsoever. Additionally, many practices that are purchased by hospitals function largely as they did before the change in ownership. The terms of sales of these practices are negotiated on a case-by-case basis. Make sure your customers know that they can negotiate for the right to continue to handle purchasing as before – and continue to receive the service they appreciate. There will be new opportunities as many sales representatives and their distributors increasingly find themselves selling to hospital systems, likely involving larger volume and smaller margins. In this environment, more than ever, it’s essential to effectively differentiate your products on their benefits from the customer’s perspective. Listen to the priorities of your customers and you’ll likely find that large institutions and small practices vary with respect to their purchase criteria.

For example, we recently worked with a medical device company that had little success in boosting the price of its superior product. The marketing team had been told by sales that they had been unable to persuade a single large customer that the product was anything other than a commodity – meaning that the extra investment in creating a better product was almost for naught. But, marketing learned that even though the administrative staff tended to view all products in the category as perfectly substitutable, patients didn’t. Our client’s product was a much more comfortable solution that patients would prefer over alternatives.   

Realizing that customers would understand that more satisfied patients would easily justify a slight difference in the cost of the product, the marketing team prepared new materials with a story that helped sales change the focus of the conversation away from  cost and toward an incredibly inexpensive method to improve patient care and satisfaction. If you discern a trend toward your client’s practices being purchased by larger institutions, a close working relationship with the marketing team in your company could be a key asset – with face time so precious, informing your prospects via effective marketing prior to your meeting is necessary and courteous, and could make all the difference in closing a larger, more complex client.    

Lastly, don’t neglect to assess the trends in your area and weigh the likely impact of these changes on your compensation and other elements of your current position. The relationships you’ve built are your primary asset – make sure that your product, your skills and your relationships stay in alignment. Wherever your clients go, they can still be powerful links in your network.

 

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