Savvy marketers can find success in alternate care product sales

Over the last few years, we health care executives have been barraged with a stream of headlines announcing the restructuring of our industry: mega-mergers creating economies of scale and product-line breadth, niche players emerging to exploit new technologies and need gaps, overseas operations expanding to serve the global market. It is easy to forget that the events we consider seismic are actually invisible to 95% of the general public.

After all, how many people do you think lie on the operating table wondering what make of surgical staple they're going to be closed up with?

What the general public thinks about, of course, is access to affordable, quality care - everything else is more or less extraneous. But here, too, there's been a revolution underway, in which care has moved closer to the final customer. The proliferation in the last decade of alternate care options is reconfiguring the front lines of medicine. "Medical malls" offer one-stop shopping for exams and lab tests amidst glass-enclosed atriums. Outpatient surgery is becoming increasingly common for procedures that would have mandated a hospital stay only a few years ago. And the Bureau of Labor Statistics projects that home health care aide will be one of the fastest-growing jobs of the next ten years.

So while much of the sales and marketing executives' focus is still on hospitals, the fact is that more care is being provided outside those wails - away from the hospital's high overhead. Indeed, many of the active players in the ambulatory care market are hospitals themselves, for whom ambulatory centers are a cost-effective way of extending their reach to suburban populations. At a time when a 40% national vacant bed rate is causing many hospitals to shrink, outpatient services are an integral part of the business plan, rather than the "line extension" they were in an earlier day.

This shift is "nothing but good for the medical device industry," notes Scott R. Anderson, president and CEO of North Memorial Health Care in Minneapolis, which has two large ambulatory centers in addition to its main in-patient facility. Anderson points out that it was device breakthroughs like the arthroscope that made many procedures feasible on an outpatient basis in the first place. Indeed, the outpatient environment relies heavily on marginal technological advances - more so, perhaps, than in the traditional hospital setting. "We're constantly looking for new ways to make procedures faster, safer, and more comfortable," says Anderson. "And the device industry is far from the end of the road in terms of technological development."

The home care market - where the role of patient-as-provider makes ease-of-use a key criteria - is another area product development is poised for significant advances. "We need pumps that are easier to operate, equipment that can be remote-controlled, and equipment that makes better use of telecommunications capabilities," says James G. Connelly III, president and COO of Caremark International, which was acquired last year by Medpartners, Birmingham, Ala. But the big challenge will shift from R&D to staying on top of distribution issues. When most care took place at the hospital, the sales and marketing executive at least knew how many potential customers there were and where to reach them. "Now, when you add in all the freestanding ambulatory centers and all the home health care providers, that number of customers increases by orders of magnitude. It's harder to hunt down and get to the decision makers," Connelly observes.

The task is made more complicated by the web of agreements between the various players and the fact that more entities are crossing over into a wider range of services: ambulatory centers offering home care, for example. Boundaries are also blurred due to a lack of consensus regarding the best setting for different procedures, as the current debate over outpatient mastectomies illustrates. With the alternate site industry expanding rapidly on so many fronts, a preferred marketing strategy - whether to segment geographically, for example, or develop nationwide alliances - has yet to emerge. Connelly's advice in the meantime: "You'd better be nimble."

There are, however, at least two footholds available. The first is an increased emphasis on cost-efficiency. In the past, alternate site care enjoyed a built-in cost differential over traditional hospital services. But today, with alternate site care both proliferating and maturing, its own set of benchmarks are coming into place. Cost comparisons will now be made between alternate site options, thus both increasing competition for patients and heightening cost-sensitivity among those charged with buying decisions. This trend will accelerate even further if, as some now suggest, health care expenditures begin a steady climb this year. On the home care front specifically, current governmental initiatives to reduce Medicare spending will be another factor making providers increasingly responsive to cost issues.

The second foothold comes from the innately segmented nature of much alternate site care. While a "medical mall" outpatient facility may offer everything from radiology to pediatrics, it is really a collection of focused, specialized units. (Indeed, it seems that the fate of the medical specialist is not to fade away - as widely predicted only a few years ago - but simply to be repackaged.) This reconfiguration of service in some ways mirrors the rise of disease management that, from the sales perspective, places a premium on being a one-stop shop for a given therapy. Savvy device marketers will try to meet their buyers' needs along this horizontal ordering. This decentralization-within-centralization almost certainly creates more legwork, but it is also the inevitable next chapter in the unfolding health care revolution; one that spells opportunity for the strategically minded and the fleet of foot.

Michael T. Kelly, a former vice president at St. Jude Medical, St. Paul, Minn., now heads the worldwide medical device practice at Russell Reynolds Associates, an executive recruiting firm.

COPYRIGHT 1997 J.B. Lippincott Company
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