What’s Different About Selling To Healthcare Organizations?
Selling To Hospitals – Entering the Twilight Zone
If you are new to Healthcare, selling to healthcare organizations, especially selling to hospitals, can be very intimidating. My first meeting at a large hospital was terrifying.
I arrived, dressed in a suit, briefcase in hand, I walked through busy hospital hallways with clinicians in scrubs running from room to room, patients roaming the halls in smocks, scary-looking at the equipment being wheeled by.
It wasn’t like going to a meeting at a bank.
The executives spoke a language that was completely alien, using acronyms I had never heard. They discussed operational and financial issues that were Greek to me.
It was like entering a parallel universe.
The good news for anyone coming into healthcare is that there are many similarities to other industries you have worked in. Healthcare organizations act like large corporations in most ways.
They are financially driven, they buy technology to solve problems, they have defined processes in the way they buy, they want to lower costs and increase revenues and they are full of smart people who want to be good at their jobs.
But, there are some important differences that you have to understand. For anyone making the transition to healthcare, these are things you have to learn.
So, if you can master these issues, you are on your way to being successful.
The Seven Major Differences Selling to Healthcare
1. Healthcare is like a parallel universe with its own economic model
Healthcare is a multi-trillion-dollar industry with a different economic model. Many healthcare organizations make hundreds of millions or even billions of dollars in revenue but behave like they have no money.
Most of their consumers, (also known as patients) don’t pay for most of their services.
In most cases, insurance companies or the government charge fees and it is the employers and taxpayers who provide the funds.
So why is that important? Well, it means that healthcare organizations have to wait to get reimbursed for the services they have delivered.
These services are based on codes for each procedure. There are hundreds of thousands of these codes and the pay rate for each is different depending on where you are in the country and other variables. Forecasting is a headache. They rarely get reimbursed what they expected as the payor negotiates for lower rates.
It takes a long time to receive payment
Imagine trying to run a retail business like this? The cash flow of a healthcare system is a nightmare.
Tip: Learn as much about the money flow in healthcare and especially the changes that are happening in Washington. You will understand your customers better and you will also pinpoint new opportunities early.
2. Healthcare organizations have a different purpose
Most healthcare providers are Not-for-Profit. So, while they take in hundreds of millions in revenue, the majority of organizations are not doing this to make a profit.
Their purpose is to cure people and the health of their community. They are commercial organizations. And so, their motivation is not happy shareholders but a higher purpose.
In fact, many organizations are faith-based.
This is important, because, when you are selling to healthcare systems, raising revenues and lowering costs is important, but you can’t lose sight that patient care is the most important issue.
3. Sales cycles are incredibly long
When you are selling to hospitals, the first thing anybody tells you is that the sales cycles are very long. I am going to dedicate a future blog post to this. The reality is that there is not much you can do about this, but you have to factor this into your business model.
Therefore, if you have a business that sells into other industries, expect that selling to healthcare will take 50-100% longer and build this into your business plan.
4. The complex sale is even more complex
Why? The sales process involves typically more people, and different types of stakeholders with very different needs and expectations. Understanding the stakeholder map is critical.
These include IT, medical, nursing, informatics, security, finance, and purchasing execs as well as a few subject matter experts have thrown in for good measure.
Everyone gets involved and as decisions are most often by consensus, everybody gets a voice.
5. Many people in healthcare have little business experience
Many of the stakeholders you will meet selling to hospitals, e.g. doctors and nurses, have very little experience working in the business.
They are typically smart people, but you may have to go the extra mile to explain the commercial benefits of what you are selling.
6. Healthcare organizations are often more loyal
In my experience, healthcare organizations stay with their vendors longer than in other industries. Why? Firstly, they are not as ruthless as more profit-driven organizations and there is a lot of risk in switching. This is the positive side of the long sales cycles.
7. Technology lags behind other industries and moves slower
Healthcare organizations are more risk-averse and more financially constrained the businesses in other industries. Consequently, they innovate more slowly and technology lifecycles are often longer.
There is a lot of legacy technology, even faxes, and pagers. This means that you may need to integrate with technologies you don’t see very often in other industries.
In this post, I will go into why the sale cycle takes so long and who is involved in the sales process.
Other Insightful Posts:
- Shortening the Sales Cycle in Healthcare
- Healthcare Targets – Stakeholder Maps
- 8 Most Common Healthcare Market Entry Barriers