Richard Manley

Manufacturers and specialty distributors have to work together to educate buyers about the cost�and savings�ramifications of new medical technologies.

For years, medical technology companies have been working to convince their customers to focus on the long-term or life-cycle costs of their offerings, rather than on the acquisition price of those products. Buyers may be cynical about this approach, but only at their own peril.
        The reality is that new medical technologies are often priced higher than those they are meant to replace. That�s why, in today�s cost-cutting environment, many providers have simply shut their doors to such technologies.
        This is the �hear no evil, see no evil� approach to new-technology acquisition. Buyers with this mindset don�t want to see anything that might increase their expenses, and they won�t even consider the potential long-term savings that could result from adopting a new device or technology. That�s a tough frame of mind for medtech marketers to grapple with.

Overcoming Resistance

        True, specialty distributors and reps get paid to overcome such resistance. After all, they have the relationships, the credibility, and the track record with providers. But they are much more successful in their efforts if they and the manufacturers they represent take the time to educate buyers on evaluating the cost-effectiveness of new technologies.
        What would such an education include? Nancy Reaven, founder and president of Strategic Health Resources (La Canada, CA), has asked herself this question. Her company helps makers and buyers of new technologies quantify their value.
        It makes sense that, before any other consideration, new technology has to yield clinical results that equal or exceed those of the existing technology or modality. One technology that specialty distributors brought to market some years ago�the titanium suture anchor�reduced the number of revision surgeries. Another technology�blood filtration devices�offered protection against costly infections and adverse reactions to blood transfusions. These were novel technologies at the time; now they are the standard of care. Certainly, medtech executives can fill in many of their own examples. This kind of clinical information can be documented.
        Provided that such documentation is presented in a clear, easy-to-understand format, distributors and manufacturers can then help their customers consider a host of other (often economic) factors surrounding new-technology acquisition, says Reaven.

Professional Purchasing

        The medtech marketer�s main task must be to determine how the technology�s clinical benefits contribute to the hospital�s goals of improving patient care and improving profit. In order to understand the hospital�s profit potential, some basic information about the hospital�s economic situation needs to be understood. Key elements considered by buyers include the following.

• Payer mix.
• Reimbursement.
• The cost and service structure of the hospital.
• Patient population.

        Having considered all these variables, the buyer has to consider the impact of the technology on the following areas.

• Admissions.
• Length of stay.
• Per-procedure direct costs.
• Unit operating costs.
• Efficiencies.
• Complications or errors.

        The process of selling medical technology is becoming increasingly complex, fueled in part by a more educated, health-conscious and Internet-savvy public. In response, hospitals have become smarter buyers. The days when clinicians�enamored of a new technology�could demand that it be brought into the hospital without delay, are numbered. Professional buyers are more involved than ever in making purchasing decisions, and clinicians themselves have grown to understand how their practice patterns�including the kind and amount of devices they use or consume during procedures�affect their hospitals� margins.

Steps to Take

        The Independent Medical Distributors Association (IMDA) and its members are helping manufacturers to spread the message that it pays to take the long view of technology costs.
        Two years ago, for instance, IMDA sponsored a presentation at the annual meeting of the Association for Healthcare Resource and Materials Management (Chicago) on analytical techniques for determining the cost-effectiveness of new technologies. This audience was chosen because materials managers are the gatekeepers for many product and equipment decisions in today�s hospitals. Most such managers are rewarded according to their ability to reduce the current year�s supply budget by a certain percentage, without regard to the potential for long-term savings. Consequently, if they are to bring long-term savings to their facilities, they need an understanding of the analytical tools required to measure such savings.
        Since hospital CFOs are often the source of pressure to reduce expenses, they represent another audience to be educated � perhaps via their association, the Healthcare Financial Management Association (Westchester, IL).
        Finally, specialty manufacturers and distributors currently have a singular opportunity to educate clinicians about the cost-effectiveness of new technologies. Because of the financial pressures on both hospitals and private practices, clinicians are more receptive to this message than ever before. Assuming that quality of patient care is assured, thoughtful, well-presented data on the ROI of new technology will help clinicians to be able to choose overall cost-effectiveness above price savings.

Conclusion

        If ever there were a time for cooperation between specialty distributors and manufacturers, it is today. If we fail to join together to educate our mutual customers about how to make smart purchasing decisions about new medical technologies, those same customers may retreat further into their �hear no evil, see no evil� approach to purchasing. And that�s not good�for patients, for providers, for distributors, or for manufacturers.

Richard Manley is president of CVC Inc. (Arlington, TX), a specialty sales and marketing company, and president of the Independent Medical Distributors Association (Mission, KS), the specialty sales and marketing association.

Copyright � 2002 MX: Business Strategies for Medical Technology Executives.