Hospital Capital Equipment Sales: Value Trumps Cost...But It's Up To You To Prove It

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[Installment # 2 of 2]

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In Installment 1, we laid out the current state of affairs in healthcare capital equipment sales, including lingering pandemic challenges, staffing shortages, and ever-tightening budgets. To sell effectively in today’s CapEx environment, companies must emphasize value and shift the focus from price alone.

HOSPITAL CAPITAL EQUIPMENT SALES

VALUE TRUMPS COST … BUT IT’S UP TO YOU TO PROVE IT.

BY JEFF LITTLE

Partner

[July 11, 2023] – Flexibility, creativity and relentless follow-up are critical to success in today’s world of capital equipment sales. Together, these elements lay out your case for delivering great value and allow you and your prospect to move beyond discussions of hefty price tags.

What do I mean by flexibility, creativity and relentless follow-up?

As we noted in Installment 1, many hospitals and hospital systems are still seeking a return to pre-pandemic levels for certain medical procedures. Some procedural categories are thriving while others continue to lag but there’s good news … perhaps. A March 2023 poll of 40 key hospital executives indicated a cross-the-board belief that all will be well no later than 2025 [though, personally, I believe many issues and challenges will linger].

Regardless of what the next few years hold, nothing changes the fact that purchasing, maintaining and upgrading big-ticket healthcare equipment is a constant pressure for a hospital that seeks to be competitive and profitable. Waiting until 2024 or 2025 to make cap-equipment purchases means some hospitals will fall behind competition because they either lack the necessary equipment or are operating with outdated technology. Meanwhile, budgets are tighter than a drum these days.

That’s where flexibility enters the picture. While it was never really an all-out, take-it-or-leave-it proposition when it came to CapEx pricing, more than ever sales professionals have got to be flexible and work within the parameters hospital administrators set for those who purchase. You’ve got to be in tune with those guidelines, hospital by hospital, system by system.

Some hospitals are open to discussions about signing agreements based on operating leases or pay-per-use scenarios in lieu of making a significant upfront investment. Meanwhile other hospitals do not allow this and insist all equipment must be outright purchased which reduces or eliminates your ability to be flexible on any basis other than price. A facility’s purchasing philosophy is created at the very highest levels of authority.

And now you know where creativity joins flexibility.

The Sales Pitch Is Changing

I was at a conference recently where newly released OR sanitization technology carrying a per-unit price tag of $60,000-$80,000 was displayed and promoted by a vendor. The innovation quickly and thoroughly sanitizes the entire OR space once all have left the area and accelerates timing for the next surgical procedure to begin.

I had many conversations about subscription-based pricing, pay-per-use arrangements and discussions of cost-versus-revenue benefits [i.e., if Device A costs more than Device B in a particular category but Device A can help increase hospital revenues more meaningfully than Device B, the decision is easy and ROI demonstrable].

Offering creative and flexible purchasing terms helps those hospitals or systems that are currently capital-cash-poor. Further, these arrangements may, in some situations, be considered an OpEx versus CapEx which can be helpful at tax-reporting time.

These discussions also reminded me of the days when only the richest of companies could keep pace with the latest copy machine technology. Many companies, due to initial financial outlay, had to stick with clunkier, lower-volume, lower-speed copiers of days gone by to justify the original purchase price. Somewhere along the line, somebody suggested newer, more efficient copiers be provided and set up at no cost to the customer who would then only be charged on a per-sheet usage basis. That same dynamic is in place with home and office printers, on-demand TV, even computer operating systems.

Printer manufacturers make little, if anything, on the actual printer they sell to a business or consumer but they backfill profitability with ongoing sales of costly ink cartridges. Cable and streaming services evolved their thinking in recent years and created multi-tiered bundling and on-demand options that gave the viewer programming they desired and less of what they didn’t. Basically, they no longer had to pay for viewing options they didn’t want or need.

And remember the days of purchasing early versions of Microsoft Office in a box with multiple floppy disks, confusing loading instructions, and free-trial-period anti-virus disks from third-party suppliers? These days, you pay for your Operating System [OS] on an annual subscription basis and updates are automatically delivered online overnight while you sleep, allowing you to rest assured you’re using the best, latest and most robust OS available.

Virtually everything that can be done online these days is being done online and that trend will continue ad infinitum as technology of all sorts continues its warp-speed advancement.

Follow Through on Your Follow-Up

Now let’s talk about relentless follow-up, the third leg of the stool and perhaps the most obvious. It’s one thing to close a CapEx contract, it’s yet another thing to deliver on your promise to maintain, repair and upgrade the purchased item[s] quickly and efficiently. Those who close a CapEx deal and disappear will never enjoy sustained success or repeat purchase.

Equipment durability, reliability and patient throughput are key value considerations. When a piece of equipment goes down, if even for a short period of time, so, too, do hospital revenues. Uptime and revenue guarantees are powerful nudges towards closing a deal. Additionally, being able to prove your field-support coverage has been optimized and localized to provide rapid response when issues arise is huge. You may also consider showing how your field-support model prioritizes key accounts that have the most to lose if there’s downtime. Basically, “Help is nearby and on its way!”

This type of field-coverage model also benefits manufacturers. A recent online article in a healthcare trade publication said that prioritizing and localizing key accounts service territories “enabled clearer and more frequent communication across service and sales, deeper insight into customer operations, identification of site-level penetration opportunities, non-competitive installations, and a 10% overall gain in market share”.

Finally …

Other key factors when it comes to closing a CapEx deal are data that demonstrate improved patient outcomes when using your particular innovation, as well as enhanced patient throughput.

And don’t forget the A-Team when making your value-based sales pitch. Having the best-available equipment enhances a hospital’s ability to attract the top surgeons in healthcare [who are like moths to a bulb when it comes to the latest-and-greatest medical technology]. Having elite surgeons and specialists on staff drives meaningful volume in the OR, a huge revenue stream for hospitals and a great demonstration of a product’s inherent value.

More than ever, tailored solutions matter in hospital capital equipment sales. Especially with Medicare, Medicaid and many private insurers now making value-based reimbursements based on quality of care. If a patient undergoes a procedure and is discharged on a timely basis but is readmitted three days later with post-procedure complications, your reimbursement versus actual cost-of-care will be significantly less. Those facilities delivering the highest level of care with the lowest percentage of re-admissions stand to gain the most.

If it all sounds like one big, delicate balance you must achieve to convince a purchaser to sign on the dotted line, it is. The old way of doing things doesn’t fly in today’s healthcare capital equipment sales marketplace. Value is king and it’s your responsibility to demonstrate overall value … or you’re wasting your time.

At Excelerant Consulting, we never stop researching and monitoring what’s happening in healthcare. We understand how today’s CapEx world works and we’re here to help coach and guide your sales force through what can be more complex than it needs to be. Contact us today.

info@excelerantconsulting.com

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ABOUT JEFF LITTLE

With more than three decades of healthcare industry and hospital-related experience, Jeff is a recognized thought-leader in various aspects of hospital supply chain, purchased services, hospital operations, facilities and construction, and medical capital equipment.

Jeff offers clients a unique perspective and is well-connected throughout the healthcare industry, having worked in clinical settings within world-class hospitals, and multiple Integrated Delivery Networks [IDN] and Group Purchasing Organizations [GPO]. He is able to educate clients on subtleties and nuances of the complex healthcare ecosystem and excels at the development of commercial strategies. His primary role at Excelerant is to be a “growth engine” for clients seeking to expand their footprint by gaining greater access to the market and to key stakeholders within.

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ABOUT EXCELERANT CONSULTING

Excelerant Consulting is the go-to organization for med-tech companies that need to position products and services successfully for value analysis committees, contract acquisition, and sales modeling and execution to commercialize the launch of medical devices or services with Group Purchasing Organizations [GPO], Integrated Delivery Networks [IDN], or Regional Purchasing Coalitions [RPC]. Our clients rely on us to enhance their product positioning, navigate corporate contracting opportunities, and provide sales support to accelerate growth and profits.

For more info, contact Excelerant Consulting at info@excelerantconsulting.com