MTS Blog: The New World Order - Rep-Less OR in Medical Device Sales
The interplay between sales representatives, hospitals, and manufacturers in today’s medical device industry is chaotic yet fascinating. Many sales reps spend their days in hospitals coordinating inventory, selling new products to surgeons, and prospecting for additional sales. Sales reps are often in the operating room (OR) with the OR staff recording product usage and providing technical insight while protecting their business. Hospital administrators are concerned that commission-based sales professionals drive up costs. They also struggle with the space required to store consigned inventory with little control of inventory levels and no visibility of its utilization. Manufacturers hire sales reps, who are great at selling their products and love to sell. The challenges for manufacturers include getting these sales-focused professionals to manage complex inventories accurately and efficiently as well as hiring enough of them to support busy surgery schedules. No one wins in this scenario. Hospitals have commission-driven sales people, who are also product-line biased, in the OR with no inventory control or visibility. Manufacturers have a large number of highly-priced, valuable professional resources doing tasks that protect but do not increase sales, which in turn hurts both profitability and the engagement of the sales team.
But, things are starting to change. Hospitals are starting to take control by limiting sales reps access to the hospital and at an even increased level, the OR. Purchasing decisions are moving, in many cases, from surgeon-directed purchasing to a coordinated process driven by purchasing with surgeon input. This has given large manufacturers a greater advantage. The larger manufacturers can economically provide a broader array of products while supporting the hospitals’ drive to consolidate vendor lists. Hospitals, IDNs, and GPOs are negotiating deals with manufacturers and maintaining compliance to those agreements. Surgeons are increasingly required to justify the use of devices off contract or those distributed by smaller and, at times, more innovative manufacturers. By shifting decision making and purchasing power from surgeons to procurement, relationship-driven sales becomes less instrumental in the purchasing process. Hospitals benefit because purchasing decisions are made with a balance of clinical and economic factors. Manufacturers are appropriately motivated to provide products that are both economically and clinically competitive.
This new sales process does not resolve all challenges. Manufacturers still need visibility of their inventory in hospitals, and they need to capture usage for billing and replenishment of consigned product. This is where a sophisticated inventory management system is valuable. An inventory management system with web and mobile capability allows hospital personnel to schedule surgeries, manage usage for billing, and handle replenishment – all electronically. These procedures can be easily performed by a surgical technician, nurse, or hospital representative through the use of an application on a mobile device or via a RFID cabinet signal. This electronic connection between hospitals and manufacturers provides visibility and a deeper understanding of consigned inventory usage. This deep understanding facilitates reduction in stocking levels and delivers a win for both hospitals and manufacturers. As the surgical and inventory responsibilities of the sale rep reduce, manufacturers will need fewer reps, which will reduce the cost of medical devices as well as allow sales reps to focus on what they are great at, selling.
As for sales reps? The model will change. Sales professionals will focus on promoting the clinical and economic benefits of their solutions working across multiple disciplines within the hospital. They will need to be able to speak to clinicians about the efficacy and ergonomics in surgery, contracts with procurement, and the broader organizational relationship with the C-Suite. This change will be gradual, and the sales professional who develops these strategic skills will be very valuable and continue to earn the compensation associated with their worth.
A new world order where hospitals have greater control of their operating theater, where manufacturers maintain direct relationships with hospitals, and where surgeons work within a collaborative sourcing environment offers many advantages. The inventory management system enables manufacturers to have full visibility of their inventory so less inventory is needed in the field. Paper pushing for both manufacturers and hospitals is eliminated and processes – ordering, tracking of usage, replenishment, and billing – are streamlined. The sales function becomes a significant value to manufacturers, hospitals, and clinicians. Most importantly, there is a real reduction in the cost required provide surgical solutions and the cost of the associated healthcare.
The “rep-full” OR existed for two key reasons. One, manufacturers did not own the relationships with the decision-makers. Two, manufacturers did not have a solid method for effectively and efficiently managing their distribution supply chain. Today these challenges are answered because hospitals are developing more comprehensive purchasing strategies and robust inventory management tools are becoming a viable alternative. The “rep-less” OR offers positive news for healthcare industry costs. In the medical device realm, when sales reps are removed from low value or no value activities, manufacturers’ costs are significantly slashed. Reducing the cost of selling can pull hundreds of millions, if not billions, out of the medical device market and result in lower medical costs overall. As technology continues to evolve, the move from high cost labor to advanced technology provides enhanced efficiency, accuracy, and affordability. In essence, it just makes good business sense.
- Brian Timberlake, Senior Vice President, Sales. Before MTS, he held leadership roles within the Microsoft ERP/CRM Channel and also spent a decade with supply chain industry leader, Manhattan Associates.