Follow Up From April 2013 Webinar with Chris Provines
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Q: What are the top 1-2 things that manufacturers need to be aware in terms of the new value-based purchasing rules?
A: The first thing you should be aware of is that they are very complicated. If you’re a manufacturer and you’re curious about it, you can go on the CMS website and have a look. There are three or four main areas that you should be aware of. The first is value-based purchasing, which is a host of incentives for hospitals and providers to get paid more for delivering better value in a couple of areas. One is mortality benefits, which will be put into place beginning of this coming fiscal year. There are patient satisfaction measures, and there are other measures related to process. Each of these are tied to a reimbursement percentage that the hospital either gets penalized or rewarded for. Under the ACO model, the hospitals are at risk for managing costs of the patient over periods of time, both in-patient and out-patient.
And then there are readmission penalties for hospitals that have incentives to prevent patients from coming back within thirty days, getting readmitted and incurring more costs. If you’re a manufacturer you should be familiar with all these areas, and then start to map how your product or solution impacts each of these parts of healthcare reform.
Q: How will physician employment trends and bundled payment programs impact customer buying behavior and pricing?
A: In the past, physicians were independently employed and could go out and move their volume from one institution to another. While that’s still the case, if you look at all the trends, physicians are being increasingly employed by the hospitals. Trying to get people within your own organization to work for you and change their spending habits is really a challenge. All of that is rapidly changing But now that they are employed and have a piece of the bottom line of the hospital, now they’re asking questions around how to get involved in purchasing, how to begin to standardize, and things like that. So employment is going to play a big role in this.
The bundled payment is another mechanism where the insurers and Medicare have gotten smart, and they provide the hospital and the physician one combined payment where it’s up to the two parties to split it. Part of the behavior that this drives is better alignment on driving outcomes and cost reductions between the hospital and the physician. This should have a large impact on buying behavior over time.
Q: Who at the hospital do you begin to engage with to start to communicate their value?
A: You want to think about three or four different call points in the hospital. One would be the department head of where the product is used, another might be someone in materials management, and the other is who are either formally or informally designated as the quality person. What’s increasingly happening in hospitals is, because of the quality incentives that are built into the healthcare system, most hospitals have a variety of quality metrics that they are accountable for at the end of the value-based purchasing program, which impact their top-line reimbursements. You want to start to think about those people in the organization, and to the extent your product can impact not only cost but also the quality metrics, you should be looking at that person as well.
Q: How soon before the hospitals will begin to buy direct and bypass the sales process?
A: There are startups in the procurement space that are trying to do just this for products, where there is not a need for high clinical support from a salesperson. They are trying to get hospitals to buy from an online exchange rather than a salesperson. Right now they are targeting products that are much more mature and that physicians have been using for a long period of time, since they are comfortable using them and don’t need a lot of technical support.
So I think the sales model generally is changing for devices, diagnostics, and other manufacturers. In fact, there was a paper published not long ago called “The Death of the Med Tech Salesperson” which argued that you weren’t going to need salespeople anymore because of all the changes. I think it will be just the opposite; I think that you’ll need much more skilled salespeople because they’ll have to stretch the realm of not only clinical, anatomy, physiology, and working with physicians and clinicians, but also they will need to connect the value of their product or solution to the customer’s business model and changing reimbursement models.
