MedTech Companies Are Leaving Money On The Table

CONTRACTS DRIVE REVENUE, BUT ARE STILL UNDERUTILIZED

MedTech companies push the boundaries of what is possible by innovating on technologies that revolutionize healthcare. But to get these new products in the hands of providers, small and large MedTech innovators increasingly need to navigate the process of contracting with integrated delivery networks (IDNs), group purchasing organizations (GPOs), and regional purchasing coalitions (RPCs). These networks are becoming more and more prevalent, with over 80% of hospitals in the United States belonging to one or more IDNs or GPOs. A key function of these networks is to help control spending. By using their group power, they can negotiate lower prices for volume sales of new medical technologies, rather than paying full price for each one-off sale to an individual provider. This in effect turns them into gatekeepers that MedTech vendors must work with to get their product into providers’ hands.

A recent survey of 150 MedTech executives asked how MedTech companies are dealing with this challenge. The data show an increasing reliance on the establishment of contracts in order for MedTech companies to grow; 80% of all respondents agree that contracts will be a significant generator of revenue over the next 5 years.

Contracts benefit both healthcare networks and MedTech product manufacturers. The approval process for new products involves multiple stakeholders and follows a lengthy, detailed process of reviewing products before approving and setting purchase levels. In the end, healthcare facilities gain peace of mind knowing that products under contract meet their safety standards, usage specifications, and provider preferences without repeated reviews, and that the MedTech product manufacturer has guaranteed that supply levels won’t fall short and negatively impact procedure volume or patient care. In turn, MedTech vendors are given permission to approach HCPs in the network, knowing they have achieved a level of approval and that there will be fewer purchasing barriers if doctors become interested in their product(s). 

CONTRACTS ARE NECESSARY BUT NOT ENOUGH

Unfortunately, even when a MedTech supplier has a contract in place with an IDN or GPO, it does not guarantee revenue for the supplier. Many contracts will establish pricing, and in some instances compliance terms, but actual purchases are still left to the discretion of providers, and thus, a MedTech company must still do the legwork of approaching those providers for a sale. 

Having a contract in place does not guarantee a sale.

The good news is that the MedTech supplier now has an easier path to sale by targeting providers that are already on contract. The challenge arises when trying to equip their sales teams with information about which providers and facilities fall under a certain contract. 

Given the complexity and constantly changing nature of network memberships, MedTech vendors must keep network memberships up-to-date in order to honor their existing contracts with the appropriate facilities. There is currently no industry-standard way of doing so, and many companies are attempting to maintain these rosters manually.

MedTech executives who believe that it is becoming more challenging to accurately manage IDN/GPO/RPC contracts cite the following reasons for the increase in difficulty:

Sales teams need to understand what facilities and HCPs are on contract for a simple reason: If they target on-contract opportunities, they are more likely to close on a deal and close it more quickly because a contract is already in place. While an off-contract opportunity may also result in a sale, the process can potentially take much longer because often a contract must be put in place before the sale can go through. Waiting for that process to be completed could add months to the sales cycle and delay revenues considerably.

Unfortunately, according to the survey, all respondents agree that the information does not effectively get into the hands of their sales teams, which results in untapped revenue being left on the table. 

Stat: 100% of survey respondents believe that additional revenue could be unlocked if they could fully leverage negotiated contracts.

HOW TO GET MORE REVENUE OUT OF CONTRACTS

Despite understanding that there is a workflow gap between a signed network contract and their sales teams, MedTech vendors are struggling to find a way to bridge that gap and fully tap into the potential revenue hidden in their contracts. Although contract lifecycle management systems (CLMs) can help them get a contract written, reviewed, and signed, they do not offer tools to help facilitate sales after signatures are collected. Similarly, revenue management systems (RMSs) can help with price quotes and revenue leakage and compliance terms, but they do not facilitate new revenue acquisition through sales. Even so, MedTech vendors are attempting to address the gap by investing in one of these technology solutions, or simply hiring more staff to expand their manual methods. 

The key to getting the most possible revenue out of a contract is to provide sales teams the ability to find on-contract opportunities after a contract is signed, using a system that can help map network rosters to actual facilities and HCPs. This would open the doors for sales representatives to target on-contract opportunities and capture the untapped potential revenue in those hard-won signed contracts.