Navigating Selling Challenges in the Changing Healthcare Industry

Challenges at industry, institutional, and individual levels are building in healthcare, and they’re expected to persist. These challenges are especially threatening since they are not always outwardly visible. If reps can recognize them, and do it early, they can overcome these challenges and improve their outcomes.

Our work with professionals in the healthcare industry shows that three key challenges are emerging:

• Margin Compression in Healthcare Has Made Stakeholders Even More Cost-Conscious
• Physician Burnout Is on the Rise Leaving Sellers With No Margin for Error
• A Patent Cliff Is Near and It’s Threatening Revenue

Here we bring clarity to these three and offer ideas on how healthcare reps can respond.

Margin Compression in Healthcare Has Made Stakeholders Even More Cost-Conscious  

The Challenge

Hospital margins are decreasing. As recently as April of this year, the median year-to-date operating margin index for hospitals was 0.0%, based on data from Kaufman Hall. These declining margins stem from three trends.

First, since the end of the COVID public health emergency (PHE), states have begun redetermining eligibility for Medicaid. It’s estimated that this process will lead to anywhere from 8 million to 24 million Americans losing their Medicaid coverage, leading to a reduction in patient visits.

Second, hospitals are increasingly relying on labor from contract staffing firms in response to long-standing labor shortages. This leads to higher labor expenses. In fact, total contract labor expenses surged 257.9% from 2019 to 2022.

Third, non-labor expenses have risen amid inflation. Essentials like drugs and medical supplies are becoming more expensive. Non-labor expenses have climbed more than 16% per patient since 2019, based on a range of data from Reuters, Jama, and the American Hospital Association.

These three factors mean that spending is under a microscope, leaving sellers to face far more difficulty when negotiating price. These challenges are unlikely to end soon. As Erik Swanson, Senior Vice President of Data and Analytics with Kaufman Hall, remarked, “It’s clear that today’s challenging financial environment is here to stay.”

The Solution

In such a cost-conscious setting, sellers need the skills to control the negotiation, reinforce the relationship, convert demands to needs, and make smart trades where necessary. Together, these skills represent an approach to negotiating that prepares sellers for more difficult cost conversations. However, difficult does not mean adversarial. Sellers also need to negotiate with the intention of reaching mutually beneficial outcomes. This leads to more selling opportunities in the future.

The key to balancing both outcomes – protecting value while preserving the relationship – means seeing negotiations as a continuum rather than something with a definitive start and end point. It means taking the time to understand the customer’s deeper needs early to create a context for reinforcing value later. It means understanding when and how to make trades or stand firm. And it means using emotionally intelligent selling skills to navigate challenging and sometimes drawn-out negotiation conversations.

Learn more in our article, “Three Skills Healthcare Sales Representatives Need to Be Competitive”

Physician Burnout Is on the Rise Leaving Sellers with No Margin for Error

The Challenge

About two-thirds of US physicians have recently reported experiencing some degree of burnout based on data from the Mayo Clinic Proceedings. This trend has intensified as about one-third of registered nurses (RNs) surveyed in the U.S. have expressed an interest in leaving their direct-patient-care role, according to McKinsey. This level of stress makes it much more likely for a physician or HCP to shorten discussions with healthcare reps or dismiss them altogether. 

This environment might explain why healthcare professionals grant access to so few healthcare reps. Research from Veeva shows that 70% of key opinion leaders (KOL), like physicians, hospital executives, and health system directors, only interact with one biopharma company. This suggests that healthcare professionals have narrowed their attention to very few relationships and rarely expand their purview to include others.

All of this means that sellers cannot afford a single misstep. HCPs are unlikely to make time unless there is some immediate indication of relevance.  

The Solution

When working with burnt-out physicians, sellers need the emotional intelligence required to make the sales dialogue more physician and patient-centric. This means understanding the HCP’s pain points. Doing so equips the healthcare rep to position the solution in a way that resonates with the challenges that are top-of-mind to HCPs.

This is more difficult than it sounds because it requires the sales rep to track a moving target. That is, the HCP’s core challenges change frequently. This was the case during COVID. It is the case again today as Medicare reimbursements fall, patient needs change, and telehealth implementation all create new hurdles. Sellers need to be clear that they and the HCP have a true understanding of what is needed. Positioning a solution without this crucial step will end the opportunity because the HCP is under a lot of pressure and cannot waste any time.

The key is to remember that physician burnout is not just a challenge, it is also an opportunity. The solution will be more salient if the seller can position it in a way that addresses the cause of their burnout.

A Patent Cliff Is Near and It’s Threatening Revenue

The Challenge 

In the next seven years 190 drugs will lose patent exclusivity, 40% of which are blockbusters according to research from The Economist. This trend is forecasted to risk about $236 billion in pharma sales between now and 2030.

An Accenture survey shows that most biopharma executives expect margins to decline “in nearly every therapeutic area over the next five years.” Part of the reason for this decline is the fact that the average tenure for a market-leading treatment in this area has declined from 10.5 years to just 5.1 years. Adding to these challenges is the fact that biopharma companies will experience more difficulty in passing increased costs to consumers who are already burdened with rising premiums and increasing out-of-pocket costs.

These challenges put more pressure on professional representatives to differentiate their solutions. As competitive and affordable options enter the market, it will be critical to develop messaging that is more compelling.

The Solution

Sellers need a stronger questioning strategy to understand the healthcare provider’s (HCP) core, underlying need so that they can more effectively position their solution in a way that is differentiated. This approach is critical now that HCPs have a greater number of affordable alternatives. By taking the time to explore the HCP’s criteria for value, the healthcare rep can begin to develop messaging that supports the cost of the solution even if that cost is higher than the competition.  

Those same sellers will also need a clear plan for resolving objections when physicians cite lower-cost options. Here again, a questioning strategy is needed. Sellers need to know where the specific objections lie. If the objection is purely based on price, then the healthcare rep needs to understand why the HCP believes that all other aspects of the solution are considered equal to the competing option. Exploring this question will often reveal the ways in which the healthcare rep’s solution is in fact different. Once this is clear the HCP can begin to illustrate how those unique features support both the price and the HCP’s unique set of needs.

What Winning the Sale Means in the New Healthcare Setting

Winning the sale means gaining visibility into a new set of challenges that are quietly pervading the industry. Negotiation skills are crucial amid hospital mandates to lower costs as margins sink to zero or even negative numbers. Overburdened physicians have little or no time to engage with sellers who cannot deliver a physician-centric approach. Finally, rising patent expirations make it even more important to isolate the most relative points of differentiation in a solution.

Learn more about how Richardson can help you Sales Reps by Exploring our Healthcare Sales Training Programs