I had the pleasure recently to chair the third annual Medical Device Contracting and Strategic Accounts Conference in San Diego. On the opening day of the conference the bombshell was dropped: MedAssets was being acquired in a $2.7 billion deal and its GPO business being integrated with Novation. It certainly set the tone for the discussions. The big were indeed getting bigger, and it was never clearer that succeeding in strategic accounts is critical for medtech companies.
Consolidation in the healthcare ecosystem has been a driving force for key accounts groups in the medical device industry, and the announcement emphasized that not only are providers merging, but other players such as GPOs are as well. The race to gain leverage and the upper hand continues. As consolidation rambles forward, we can imagine a time in the not too distant future when the entire landscape of the medical device industry could be controlled by 100 to 150 large integrated providers—and a huge responsibility for the success of the company will fall on the shoulders of key accounts organizations.
Several important themes emerged from the conference in addition to the impact of consolidation.
- Healthcare environmental changes are affecting the medical device commercial model and the fundamental value proposition the industry is offering is changing. The implementation of new payment models, such as Medicare’s Comprehensive Care for Joint Replacement (CCJR), provides an opportunity for orthopedics companies to develop a broader value proposition to help their customers meet new needs. CCJR is a new bundled payment program that provides a single payment to providers for the inpatient joint replacement and 90 days care thereafter.
- There are a number of challenges in organizing and managing an effective key accounts organization. My colleague Brian Chapman outlined seven critical moves required for key accounts success, from finding the best talent and selecting the right accounts, to empowering KAMs, to outside-in innovation, investing in analytics and building the teams’ capability over time.
- Winning strategies are evolving with regard to contracting of larger and more sophisticated consolidated providers. Risk sharing is a hot topic everyone is talking about, but upon deeper inspection, few are actually doing it with regularity. Many questions remain for how to leverage risk-sharing contracting for competitive advantage and execute successfully. It should be a top priority for contracting organizations to figure this out.
- Building capabilities to better analyze and manage the contracting and price management process is essential to success. While some of the larger players in the industry that have invested significantly in systems and staff have strong capabilities, the majority of midsize and smaller companies struggle with this.
While the healthcare market changes are well documented and present significant challenges, the industry has certainly not been standing still. In fact, some recent ZS research found that over three-quarters of companies in the industry are taking meaningful and specific actions to address these issues—revising their value propositions to align with new needs of customers, redesigning sales forces and investing in larger and more capable key accounts teams, and investing in systems and capabilities to support the contracting and revenue management process. However, it’s going to be a journey, and as the provider landscape changes, so must the industry to keep pace and adapt to meet the needs of customers.
Pete Masloski is a principal in ZS’s Medical Products and Services practice. He has experience in an extensive range of sales and marketing issues, such as opportunity assessment, sales process design and account management.
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