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Healthcare Mandates Shake up Traditional Sales and Purchasing Models

Posted in Health Reform Watch | Mar 2016 | Comments (0)

Tags: orthopaedic industry trendscost reductionambulatory surgery centersmedical device sales repsbusiness plan

  EJ Duffy_Headshot-web_copy       Stuart Morris-Hipkins_crop_web_copy    Scott Nelson_crop_web      Richard Ruff_crop_web      Brian Timberlake_crop_web  

EJ Duffy

Stuart Morris-Hipkins

Scott Nelson

Richard Ruff

Brian Timberlake

Amid demands to lower costs and increase value, new sales and purchasing models are changing the way that hospitals, surgeons and orthopaedic device companies work together. Examples include the introduction of rep-less approaches and technology-driven inventory models by device companies, and the evolving role of value analysis committees at hospitals.

It seems unlikely that sales reps are going anywhere, though conversations on the rep-less approach continue.

Like any approach, the model offers advantages and disadvantages for device companies and hospitals. For device makers, cost reduction is the main advantage to eliminating or reducing reps.

According to Scott Nelson, Founder of Medsider, the advantages of a rep-less model begin and end with this benefit. Quality of care delivery is more likely to suffer without reps, he says, as hospitals focus more on costs and do not consider the potential long-term impact of diminished customer service on the supply chain.

This will occur at the expense of services provided by their reps, such as inventory management, Nelson says.

“In a rep-less model, [hospitals] won’t be able to call the local rep for ’trunk stock’ inventory,” he says. “Another example would be pricing. What if the OR manager would like to pursue bundled pricing on certain devices? She is going to have a hard time getting this accomplished without the help of a local rep. These are only a few examples. The list could go and on.”

Further, a reduction in reps and a more scrutinized surgeon/rep relationship puts the duty on the hospital to gain better awareness of their inventory management systems and train their personnel accordingly.

“With less emphasis on the relationship between a sales rep and a surgeon, surgeons will have diminished influence over purchasing,” says Brian Timberlake, Senior Vice President, Medical Tracking Solutions. “Hospitals are creating a coordinated purchasing process that includes surgeon input, but is not surgeon-directed. More effort will be required to train hospital staff and third parties to replace the technical support provided by the rep in the OR.”

Nelson notes that this can negatively affect surgeons, as the outcomes will ultimately fall back on them.

“Let’s consider the new scrub tech who is assisting Dr. Jones in his case,” he says. “Who’s going to help that tech become accustomed to Dr. Jones’ preferences? Who will make sure that the case proceeds as smoothly as possible? In a rep-less model, the burden will fall on the physician and his or her support staff. In a lot of cases, the physician and staff are dependent upon their local rep and the device/procedure experience that he or she provides. In this particular situation, without the expertise of a local rep, case times will undoubtedly increase, which could lead to higher per-procedure costs for the hospital. This in turn would eat into any supply cost savings the hospital would experience through a rep-less model.”

Richard Ruff, Ph.D., Managing Partner of Sales Horizons and Sales Momentum, says that the rep’s role will not diminish but be redefined, based on market conditions.

“The highly-trained sales rep will be more important than ever, because there is so much disruption in the market,” he says. “I don’t see any great advantage for the orthopaedic market to use a rep-less sales model, and I don’t think the big companies are going to go that way.”

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