Medical device sales leaders: New challenges to revenue growth

Now is the time to evolve your sales model.

By Alex Tolmasoff, Director, KPMG Sales Transformation and HCLS Lead

Growing revenue in the medical device market has always been challenging. Leaders are faced with new entrants, new products, and raised patient and provider expectations. COVID-19 only increased the pressure to maintain revenue growth and margins while offering new services to engage providers virtually and digitally.

Legacy commercial model issues did not go away or get easier–if anything, the situation became more complex and challenging across the entire front office (e.g., sales, marketing, service). Commercial leaders today need to re-examine their sales models to ensure they are keeping up with expectations.

The “big rocks” blocking revenue growth

There are six key changes in healthcare that medical device sales leaders must adapt to if they want to drive profitable revenue growth.

 

While government healthcare spending is going up, managing this business is becoming more complex 

  • Healthcare spending is expected to be nearly $6T by 2027 and 20% of GDP1
  • Medicare and Medicaid programs are trying to control costs using vehicles like Accountable Care Organizations (ACOs) and price transparency and controls via recently passed legislation (e.g. Health Care PRICE Transparency Act, Inflation Reduction Act)
  • Implication: Sales leaders will need to help their teams navigate and thrive amidst changing rules with large payers and providers

 

Shift toward economic buyer

  • Private payers continue to erode hospital margins by increasingly managing their cost of care with narrow networks and digital / virtual offerings, and public payers as a result of slow / limited Centers for Medicare & Medicaid Services (CMS) led reimbursement increases
  • With sites of care and health systems operating on increasingly thin margins, the power Finance and Procurement continues to grow
  • Clinical perspective, while still important, is no longer a sufficient call point to cover account decision-making processes
  • Implication: Sales leaders need to manage and balance the needs of both clinical and economic buyers

 

Increased medical device consolidation 

  • With medical device leaders seeking both inorganic and organic growth in the face of innovative or consolidating competition, mergers and acquisitions (M&A) amidst medical device companies is at a record pace2
  • Many organizations are increasing economies of scope versus scale–such as robotics, software, and infrastructure offerings–rather than consolidating a specific treatment in a specific disease state
  • Implication: Sales leaders will need to help their teams understand new technologies and how these offerings get sold as a part of an integrated ecosystem

 

Rising acceptance of telehealth by providers and patients 

  • COVID-19 accelerated the use of virtual technology, such as telehealth–this also changed provider behavior and their expectations of medical device vendors
  • CMS changes in 2020 and 2021 opened doors for comprehensive telehealth coverage and virtual clinic models, cementing these changes
  • In 2021 less than 25% of clinicians said they will go back to "business as usual," and expect to make telehealth and virtual vendor interactions a normal part of how their practice operates3
  • Many providers are now flexing to remote and hybrid work environments both for themselves and their staff, making digital and virtual technologies and interactions crucial for medical device sales success
  • Implication: Sales leaders need to help their teams adapt to hybrid sales models and more flexible account management approaches 

 

Increased patient and provider expectations of an excellent and digital-enabled customer experience

  • Personalized patient and provider experience has become a differentiator in a competitive but regulated marketplace
  • Artificial intelligence (AI) is being used to make personalized treatment possible, with 84% of medical device industry leaders saying that AI will soon transform personalization in healthcare4
  • Patients want and expect on-demand healthcare, with 77% of patients going online to book medical appointments in 2021, and a plethora of service apps are helping patients and providers expand home health, wearables, and mobile-enabled devices4
  • Implications: Sales leaders need to prepare sellers to understand and help sell alongside these increased expectations and patient-focused ecosystem

 

Supply chain issues continue to change the game, even before COVID

  • In 2018 between 59% and 83% of organizations reported delays or increased lead times in acquiring supplies, and 81% adjusted or increased inventories to weather demand fluctuations and disruptions5
  • 62% of hospitals increased spend on supply chain applications and 64% of executives called their cloud-based supply chain management applications business-critical.5
  • Implications: With COVID and inflation only making these worse in 2022, sales leaders need to understand how their supply chains work as well as expect pressure from customers for visibility, support, and concessions


New market entrants with deep pockets emerging from non-traditional sectors

  • Well-resourced software, insurance, and pharma companies have all entered the site of care and health infrastructure market in a big way
  • Health IT innovation and medical device/pharma/biotech M&A hit record highs in 2020 and 2021, with an expectation that the trend will continue beyond 20226
  • Blending traditional medical devices with new offerings brings complexity to organizations who acquire companies, as well as new entrants trying to adapt to new market realities
  • Implications: Sales leaders need to pay attention to and anticipate the impacts of rule-breaking and well-funded new competitors


To face these challenges, medical device sales leaders must adapt their sales models to compete:


To fend off margin erosion and grow revenue, economic benefit value props are becoming almost as important as clinical efficacy


Smaller medical device companies need to act more nimbly to counteract full suite offerings and revenue portfolios


Larger medical device companies need to coordinate across disparate offerings and teams to provide an attractive and high-value patient and provider offering


Traditional medical device selling teams and providers must become more nimble in how they bring offerings to the market or risk getting flanked by more agile digital-fluent competitors


Patients are increasingly willing and able to take their health into their own hands–medical device organizations must recognize this change by scaling up to meet their digital preferences


The global supply chain disruptions of 2020-2022 reveal the dangers of limited supply chain visibility. Customer now expect vendors to be transparent and accurate on product availability


New market entrants are competing for sales talent, willing to pay for it, and are carving off profitable niches of customers that were once well-protected


To gain ground medical device sales leaders must shift to a new way of thinking and adopt a holistic commercial approach.

KPMG can help you improve the ROI on your sales investments. We’ll help you manage winning sales strategies, processes, and talent with connected insights.

See the next blog in our series on the issues medical device companies can face using traditional sales models.

Footnote

  1. Source: Health Affairs, “National Health Expenditure Projections, 2018-27: Economic and Demographic Trends Drive Spending and Enrollment Growth” (2019)
  2. Source: West Monroe, “Understanding Major Trends in Healthcare M&A and Investment” (2022)
  3. Source: KPMG Provider Research Study (2022)
  4. Source: Forrester, “The State of Customer Obsession in Healthcare” (January 2022)
  5. Source: Digital Authority Partners. “Digital Transformation in Healthcare in 2022: 7 Key Trends” (January 2022)
  6. Source: KPMG, “Medical devices 2030” (2018)

Contact us

Alex Tolmasoff

Alex Tolmasoff

Director Advisory, C&O Commercial, KPMG US

+1 415-963-5100
Walt Becker

Walt Becker

Principal, Advisory, Customer Solutions, KPMG US

+1 267-256-7000