Time is Running Out to Mobilize Value-Based Selling

The broken theory of healthcare business operations. What’s wrong?

Too many manufacturers and service providers that sell into healthcare organizations are operating with a broken theory of healthcare business practice. While some companies are experimenting with their best clients on innovative ways to improve Clinical Outcomes, support Operational Imperatives, and share Financial Risk, this is not the norm. Sales performance is still being measured using volume-based “rules,” and companies are finding that they are doing just OK, and it is evident that:

• discounts are higher
• deals take longer
• losses are more bruising
• customer relationships are strained

…and it seems all sales interactions are more difficult.

What is this volume-value transition?

As recently announced, government reimbursement for healthcare will steer 30% of payments from fee for service to “value-based payment models.” This includes bundled payments and shared savings with Accountable Care Organizations by 2016. The mandate further stated the value-based model will expand to 50% of payments by 2018.

Won’t this go away? 

Simply put, No. This shift from volume to value will not go away; it will not be reversed; it will not be repeatedly delayed like the Physician Fee Schedule Fix or ICD-10.

• Bundled payments have been a dominant part of healthcare inpatient reimbursement (DRGs) since the mid 1980s
• Shared savings and incentive-based programs have been thoroughly tested by CMS for almost 10 years
• The ACA is almost 5 years old now, and a series of jarring changes have been implemented

What does this mean?

Demonstrations of Risk-Adjusted Payment (the manifestation of Value-Based reimbursement) have shown that imaging procedures typically are reduced by almost 20%. Hospitalizations go down by almost the same amount. Readmissions are also reduced by almost one in five. Healthcare providers are positioning themselves to manage population health, through coordinated care, which de-emphasizes serial diagnostic procedures and expensive interventions. Your takeaway should be that utilization of technologies, generally, will reduce on a per patient basis.

Isn’t this going to strangle hospitals?

Yes and no. Nimble provider organizations have been able to improve their Clinical, Operational, and Financial performance during this time. Some hospitals may not survive, and many providers will be “re-purposed” for this reformed market. However, if you do not evolve your sales and marketing processes, the value-based shift it will diminish your sales volume.

How will this affect me?

Answer the following questions:

1. What part of my business is sensitive to increases and decreases in healthcare utilization and volume of procedures?
2. How dependent is my business on hospital-based care delivery?
3. How dependent is my business on physician preference and high physician reimbursement?
4. How dependent is my business on hospital fee-for-service reimbursement?

If you answered “somewhat” or “significantly” to these questions, it’s time to look at your go-to-market strategy, account management and sales processes and contemplate an adjustment.

A turning point is on the horizon. What do we need to do?

There is good news. There are opportunities for significant growth for some companies. The value-based difference is the rising tide that lifts all boats is now a lowering tide that requires movement to deeper water via specific channels. The inconvenient reality:

• Sales and marketing operations need to change at a fundamental level
• Manufacturers and service providers need to align their value propositions with healthcare providers’ perception of value
• Price cuts and sales volume declines are inevitable, unless you develop a coherent approach to positively affect the Clinical, Operational, Financial Performance of value-based providers

Who can help me?

A number of consulting organizations are positioned to help manufacturers innovate and create new products or commercial forms. These organizations deserve your attention, and scrutiny of their models and novel approaches to healthcare.

If you need to act more quickly, consider accessing Market-Based Training and Market-Based Business Development from TIGI. The effects of the adoption and execution of Value-Based Processes can be profound. Creating a market based sensitivity to what is going on, can significantly improve your current, near term, and potentially long term performance.

By: Sam O’Rear and Gunter F. Wessels
Total Innovation Group, Inc.