Healthcare purchasing is changing in a complex way. Although most medical device sales opportunities still start with creating demand at the physician or end user, they must now go through many barriers before a hospital purchase order is issued. More and more CEO’s and CFO’s are included in the final purchase decision as hospitals move away from private practice to hospital employed physicians. This is usually done to help control costs. I met with a hospital CFO to discuss the purchasing decision flow and rational. This article will discuss the purchasing decision flow broken into five steps.
Demand from Surgeon Level: The surgeon must show significant demand and interest in a medical device product or service. They are required to reach out to the OR manager, supply chain, and/or service line director requesting a trail or new product.
Interest from OR Manager/Service Line Director: After receiving the request from the Surgeon the manager will review the information and decide if the hospital is interested in learning more about the product. Very often this step will require an evaluation from the Value Analysis `Committee (VAC). This committee will decide if the product or service has value. Value is usually decided by improved healthcare to patient, cost benefit, both, or a new product that will bring more patients to the hospital.
Supply Chain: If the product makes it through the first two steps you will need to meet with supply chain. Supply chain check if your product is part of the hospitals group purchasing organization (GPO). GPOs are companies that group together supplies to offer hospitals better pricing. Hospitals are encouraged to only order from their GPO affiliated vendors. Some GPOs will penalize hospitals if they use vendors not affiliated. (It is best to do your GPO research before) Supply chain will coordinate new product numbers and ordering. Supply chain will also look at costs and competitive product costs. Sometimes supply chain will issue a request for pricing (RFP) that will allow you to submit your best pricing. In a competitive situation this is usually done closed bid.
Trial: Each product is usually put into a trial period. This period can range from days to months. The hospital will monitor the new product based on surgeon preference, patient outcome, medical representatives service, and price.
Final Decision: If your product is a larger purchase price item, it will then go to the CEO/CFO to decide if the purchase can be justified. How does the CFO make this decision? This decision usually varies from hospital to hospital. Usually the CFO/CEO will decide based on the following: Does it improve patient care or reduce complications? Are there funds available to purchase? Is this a must have product or service requested by the physicians?
As a medical device representative it is your job to create a clear product value for each of the five levels of decision making.