Federal Fiscal Year 2013: October 1, 2012 is Coming Up Fast–Are You Ready?

The next phase of Medicare spending cuts and resulting revenue declines are due at the end of summer.  October 1, 2012, will see a new wave of delayed decisions, canceled transactions, and slower growth.  Most of us await the Supreme Court decision on health reform, and one thing is certain: a repeal of Healthcare Reform will not reinvigorate sales nor reverse spending cuts.

In the May issue of HFM the monthly publication of the Healthcare Financial Managers Association (HFMA), a digest of health reform arguments before the Supreme Court includes this paragraph quoting Richard Gundling, vice president of healthcare financial practices at HFMA where he states:

 “…it’s important to know that a repeal of any part of the law would not provide a reprieve from provider payment reductions…providers should keep in mind that the Medicare and Medicaid savings embedded in the Act have already been ‘locked in’ by both political parties. Even if the Supreme Court were to strike down the entire reform law, the savings are earmarked to be applied toward deficit reduction and other purposes. So providers and suppliers should be prepared for ongoing revenue and margin pressures regardless of the Court’s actions.” (HFM May 2012)

The first part of 2012 has seen transactions for device companies and manufacturers slow.

Many managers have reacted with:

•  Renewed focus on high-value sales activity
•  Recasting their sales mission
•  Increased commitment to develop the team’s talent levels

Some managers have:

• Been puzzled by the 2012 business downturn
• Remained unaware of the October 1 time line
• Delayed investments in staff development, or an organizational change
• Deferred consideration of a change in sales mission

In some sectors transaction volume has seen slight increases, spurred-on by healthcare regs (Meaningful Use for IT), price cutting or share gains, or aggressive group purchasing, with the net effect being a decline in revenue and margins for all players. In the capital equipment sectors, with the exception of IT acquisitions, transactions have slowed dramatically. The typical five-year replacement cycle for the “big-iron” volatile technology (lab automation, MRI, PET-CT, etc) has been replaced with extensions and modest upgrades.

As the 2012 healthcare slowdown extends, and the greater US economy lags, the impact is:

• The healthcare consumer will further delay decisions regarding healthcare
• Healthcare providers are under tremendous pressure to lower their costs of operations
• Reduced revenues will be seen by all payers
• Providers are burdened by bad-debt and charity care
• Hospitals’ primary cap source, BONDS, are receiving a dim outlook from rating groups
• Generating sales has been difficult in recent quarters, forecast is for more of the same

What should we do in this time?

If you’re an executive in a medical company, it’s time to move your organization to the level of the “new normal”:

• Review your mission for alignment to the new healthcare terrain
• Align your people, processes, and tools to the mission
• Re-set the success measures to the re-aligned mission

Where are the bright spots, and is there a silver lining to this cloud?
The bright spots will be those companies that incrementally evolve their organizations to understand and eventually master the new normal of healthcare in the US, to provide their teams and their customers with the ability to leverage the now constantly evolving healthcare arena to their advantage.

If you are responsible for a sales territory, it’s time to look at your customers through a new lens:

• Flex…you must flex to the provider’s evolving mission
• Only the “have to have” solutions will be acquired on the short to mid-term
• The “nice to haves” will be delayed, deferred, or defeated
• Creating value for the provider will be associated with attaining their mission

There are marvelous opportunities apparent in this evolving terrain, and the growth in this market is real, available, and large. However, remaining loyal to a business plan or mission adopted during the prior era, and hoping for relief from a repeal of Health Reform is very high-risk, denies the reality of the needed update to the US healthcare system.The time to understand and integrate the many regulatory changes of October 1, 2012, into your company’s mission is NOW.

Looking to develop a more personalized approach to Federal Fiscal Year 2013?  Talk to our Team of Experts.