Selling To Hospitals

Long, drawn out, complex, painful—just a few words used to describe selling a service to a hospital.  There is no silver bullet in hospital sales, as the number of friction points seem limitless.  Splash 4 Partners has seen companies’ sales efforts to hospitals be derailed due to:

  • A hospital being acquired by another system,
  • The procurement officer for the hospital taking a new job, 
  • A grant never coming through,
  • A hospital’s EMR presents interoperability problems with the service provider’s platform,
  • Changes to reimbursement rules or standard of care,
  • A hospital employing an under defined decision making process,
  • The service is already delivered by another area hospital under a hub and spoke relationship, and
  • Shifting administrative priorities and budget allocations.

The hospital market is one where a service company has to be well capitalized, patient, and process and people focused.  To help those enter this process, we’ve prepared the broad steps of selling to hospitals.

Step 1—Find an Internal Advocate:  Hospitals are complex entities.  Hospital administrators find themselves juggling a multitude of competing priorities ranging from the routine—staffing, budget management, payor negotiations—to the regulatory—Meaningful Use compliance—to the urgent—like the EMR hack MedStar experienced earlier this year. This means new and unproven providers are likely to be crowded out without an internal advocate, who makes adoption and implementation their passion project. 

One thing that is clear from our work with healthcare services firms, is that hospitals are managed in teams and across departments.  Any successful sales of services must account for this.

Step 2—Define The Hospital (and Department’s) Use Case:  Very few hospitals are exactly the same.  Many have the same purchasing and servicing needs but few are exactly identical from a staffing, process, and decision making process.  One head of neurology for a rural hospital recently told Splash 4 Partners (S4P), “Our needs are like many who can’t recruit another fulltime set of hands for 24/7 neuro coverage in the emergency department.  What makes us unique though is management’s priorities, and the personalities you have to managed across groups.”  What this physician described is the need to help prospective hospitals define the organization’s use case, along with identifying the decision makers that will need to be educated to the problem and proposed solution. 

Use this part of the process to help determine if they are going to be a good customer for your services.  Some hospitals that meet your company’s addressable market criteria might not be an adequate fit after all.  Some hospitals cost more to service.  Defining the use case is a period in which your company can tune in cost estimates, pricing, and better estimate your return, as well as the hospitals.

Step 3—Know The Hospital’s Processes & Idiosyncrasies: Each hospital is laid out differently, staffed differently, and uses numerous vendors.  Many departments are managed by physicians whose age, medical training, and perspective on healthcare originates from multiple decades, all of which creates potential for variation.  Given that services being sold to a hospital require user adoption, it should go without saying that a certain level of customization to your product, tech, and service will have to occur.  Identify where the variation impacts adoption and quality of your service and make it work for the hospital’s individual needs.

Adding complexity to this already complex sale is the increase reach of hospital chains and hospital affiliate agreements. The largest hospital chains float between the mid-100s to low 200 hospitals.  Increasingly, agreements covering services meeting the chain needs of these hospitals are being handled at the corporate level.  In some instances, a “hunting license” is needed to be issued just to have the privilege to sell services to individual hospitals of a given hospital system.  

The hub and spoke model is creating affiliate hospital groups as well. Affiliates (spokes) of larger hospitals often find themselves with agreements that requires set services provided by the parent hospital (hub) or their contracted providers.

The moral found in the variation of hospitals seeking scale is to know what you are up against.

Step 4—De-risk the Sale: If possible, find ways to de-risk the purchase.  Adopting a new service often means asking the hospital to do things differently and that means uncertainty.  De-risking might look like:

  • Making introductions to satisfied current customers.
  • Running a pilot program within a department to test efficacy before scaling to full rollout
  • Estimating the ROI and payback period for the hospital.
  • Taking your fee as a percentage out of the multi-year savings, rather than asking for payment upfront.
  • Inviting key hospital decision makers to either your office or where you are currently operating on a live client site to pull back the current on how the service is implemented and provided.

Step 5—Hunker Down, This Might Take a While:  Be prepared for a long sales cycle. Telemedicine services from the time a hospital formally seeks a solution to the time of rollout can range anywhere from a few months, to more than three years, depending on the solution chosen and the scale of the project.  One firm selling a hospital inventory management system indicated that at least one large sale was delayed until a grant was awarded to the hospital to cover the initial installation fee.  Budget constraints, competing priorities, shifting regulations, and multiple decision makers translates to a long time to booking actual revenue. Make sure you are well capitalized to survive the hospital sales process.  Use your internal advocate to identify all relevant decision makers and have them make introductions as needed.

Step 6—Work with the Hospital’s Legal & Compliance: If you find yourself talking to staff members from legal and compliance you are inching closer to a service agreement.  Be patient, answer their questions, and remember to keep your internal champion in the loop to help streamline this process. It is not over until the ink is dry on the contract signature line.

Step 7—Streamline Implementation: Congratulations, you closed a hospital sale.  This is where process mapping for user adoption is critical.  Make sure you identified all departments involved in consuming your service and where they will interact with your technology or staff. Create regular points of contact with them to preemptively identify points of friction to prevent future customer churn.  One physician stated, “If I weren’t routinely holding everyone’s hand, both my employees and the company’s, the whole process would fall down.” 

Step 8—Hurdle Past the Basic Service Levels: Many services provided to hospitals promise to provide:

  •  Improved patient care,
  •  Lower hospital costs,
  • Streamlined workflow / efficiency,
  • Lower risk,
  • Improved reimbursements, and / or
  • Higher compliance rates.

If you promise any of these, make sure to find the appropriate measurement, track it, and provide a report to prove to the hospital you are producing value.  Aim not to be replaced by competition, but rather, aim to provide service levels beyond the basic terms of service, and quantify your value proposition.

Contact Splash 4 Partners— jgrosshandler@splash4partners.com–to help develop or improve your sales strategy or diligence your next health care focused acquisition.

Jacob Grosshandler