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Recently, I virtually sat down with Marshall Steele, M.D., a widely-respected voice in orthopedics, business and medical leadership as well as a friend, to pose questions in this time of COVID-19. Dr. Steele offers a unique perspective on orthopedics and on how the pandemic may be a catalyst for positive change in the long-standing relationships and contracting strategies among vendors, physicians and health system supply chain leaders. His views are built on having practiced since 1977, performing more than 18,000 joint surgeries and founding a company that focused on orthopedic and spine service line implementation.
In our conversation, Dr. Steele shared that he anticipates that the future for orthopedic companies includes growing expectations for price transparency, tangible evidence of quality for buyers, continued downward price pressure and premium pricing only for truly differentiated products. Dr. Steele suggests that the primary near-term vendor opportunity is strategic pricing that aligns with value-based care while seeking customer partnerships that support value well beyond surgery.
Vega: With COVID-19 in mind, has orthopedics faced and responded to large scale disruption in the past?
Dr. Steele: Within orthopedics and healthcare, there has not been a comparable event or pervasive disruption as with COVID-19.
On a wholly different level, Medicare’s implementation of DRGs in 1983 did have a dramatic impact on reimbursement for orthopedic surgery.
As we see our nation and economy emerging from this pandemic, I anticipate that there will be unprecedented opportunities for vendors to initiate or respond to collaborative overtures with hospitals, health systems and physicians in areas previously considered the sole domain of each constituent. Examples might include aggressive sole source agreements, risk-sharing, sharing financials, collaborative product development and testing, migrating vendor solutions in one product category to another product category. An example of this migration is United Parcel Service’s leveraging and commercializing their logistics expertise beyond parcel delivery.
The diagram that follows illustrates a potential focus around partnering. Ideally with the collective strategic assets of the three parties, each is enabled to achieve together what is often not possible alone.
Illustration of a potential focus around partnering. Ideally with the collective strategic assets of the three parties, each is enabled to achieve together what is often not possible alone.
Vega: What do hospitals want vendors to know (and apply to their sales and service)?
Dr. Steele: Vendors are an essential, unique partner for hospitals to achieve their goals. Historically, some hospital/vendor relations have been characterized by tension that is naturally created by attempting to balance necessity, cost, value and performance. Hospitals rely on vendors for products, support and the achievement of their mission and vision.
I have great respect and admiration for healthcare manufacturers and vendors. For example, pharmaceutical companies have dramatically increased quality of life and life expectancy. They provide a valuable service and much of the criticism aimed at them is undeserved. Also, as hospital reimbursement remains flat or decreasing, vendors will be asked to maintain or decrease pricing. It is incumbent on the vendor to establish and quantify the immediate and long-term value that supports pricing, especially increased pricing.
Vega: What are the 2 or 3 most common vendor pitfalls relative to their provider customers?
Dr. Steele: Many sales staffs are often focused on talking to surgeons about their products and services rather than asking questions of the surgeon to better understand their needs and aspirations. My experience was that vendor representatives who asked many relevant questions about my processes and preferences (along with good products) were those that I wanted to work with most. This mentality is almost an account management approach rather than strictly sales focused.
New and promising product introductions without mentorship for the surgeon and other key staff can often result in poor or no adoption. I have observed new and expensive technologies that could have had a very positive impact, ultimately ignored and underutilized. Vendors that craft and execute a defined plan of mentoring new product users will increase the likeliness of adoption, procedural growth and long-term success for patients, surgeon and hospital.
Additionally, I’ll share a couple of examples of desirable sales rep characteristics: a strong service mentality, honesty, surgeon advocacy and academically curious. Sales reps are often very knowledgeable, especially with revisions since they oftentimes see multiple revision cases whereas an individual surgeon may only episodically perform revision. Furthermore, vendors must be completely transparent with their physician and hospital customers, informing them of product recalls, underperformance or other problems.
Vega: Can you offer examples of innovative vendor products or services that are a win/win for vendors and providers in terms of meeting a clinical/provider need and achieving commercial success for vendors?
Dr. Steele: Patient satisfaction is a useful metric, but it does not indicate quality. I have maintained for years that for surgeons and hospitals to be effective, they must support the collection and measurement of outcomes, including clinical, operational, patient-reported, financial and physician performance. An illustration I frequently share is that of a golfer. When asked how he is playing, the golfer states, “My game is great…,” but he can’t actually demonstrate with an accepted measure that his game is indeed great.
To the degree that vendors can participate and support measuring performance, they are more differentiated from competitors. I strongly advocate for keeping score, publishing and sharing key information with patients, colleagues and referral sources that substantiates better outcomes and quality.
Service is also a very tangible way for vendors to acquire, grow and retain business. Using the car industry as an example, for some buyers, post-sales service is among primary considerations when selecting a dealer, even at a higher cost. Reliability, responsiveness and anticipating needs all drive loyalty. Buyers of virtually any product often become less price sensitive in the context of great service.
To recap, device manufacturers should aspire to:
- Maximize the receptivity to collaborate and consider new, mutually beneficial partnerships with hospitals, IDNs and physicians brought on by the pandemic,
- Seek to better understand hospital systems of care and how their product “lives” in the provider and patient environments,
- Seek a seat at the “strategy table” with hospital leadership through intentional, deliberate and sustained commitment to mutually beneficial partnerships,
- Offer demonstrably differentiated products with data-supported outcomes,
- Complement sales transactions with physician mentorship programs and strategic account management support,
- Achieve conversance in all provider reimbursement models,
- Assure both manufacturing (product origin) and price transparency in all business transactions.
Thank you very much, Dr. Steele, for generously sharing your expertise, insights and experience with our vendor audience. The current upheaval in healthcare has not only forced change, but it can also foster opportunities for nimble organizations to seek and sustain change that results in better health. As noted throughout this column, opportunities for vendors to collaborate with their customers will continue and, with post-COVID-19, even proliferate.
Recently, I virtually sat down with Marshall Steele, M.D., a widely-respected voice in orthopedics, business and medical leadership as well as a friend, to pose questions in this time of COVID-19. Dr. Steele offers a unique perspective on orthopedics and on how the pandemic may be a catalyst for positive change in the long-standing relationships...
Recently, I virtually sat down with Marshall Steele, M.D., a widely-respected voice in orthopedics, business and medical leadership as well as a friend, to pose questions in this time of COVID-19. Dr. Steele offers a unique perspective on orthopedics and on how the pandemic may be a catalyst for positive change in the long-standing relationships and contracting strategies among vendors, physicians and health system supply chain leaders. His views are built on having practiced since 1977, performing more than 18,000 joint surgeries and founding a company that focused on orthopedic and spine service line implementation.
In our conversation, Dr. Steele shared that he anticipates that the future for orthopedic companies includes growing expectations for price transparency, tangible evidence of quality for buyers, continued downward price pressure and premium pricing only for truly differentiated products. Dr. Steele suggests that the primary near-term vendor opportunity is strategic pricing that aligns with value-based care while seeking customer partnerships that support value well beyond surgery.
Vega: With COVID-19 in mind, has orthopedics faced and responded to large scale disruption in the past?
Dr. Steele: Within orthopedics and healthcare, there has not been a comparable event or pervasive disruption as with COVID-19.
On a wholly different level, Medicare’s implementation of DRGs in 1983 did have a dramatic impact on reimbursement for orthopedic surgery.
As we see our nation and economy emerging from this pandemic, I anticipate that there will be unprecedented opportunities for vendors to initiate or respond to collaborative overtures with hospitals, health systems and physicians in areas previously considered the sole domain of each constituent. Examples might include aggressive sole source agreements, risk-sharing, sharing financials, collaborative product development and testing, migrating vendor solutions in one product category to another product category. An example of this migration is United Parcel Service’s leveraging and commercializing their logistics expertise beyond parcel delivery.
The diagram that follows illustrates a potential focus around partnering. Ideally with the collective strategic assets of the three parties, each is enabled to achieve together what is often not possible alone.
Illustration of a potential focus around partnering. Ideally with the collective strategic assets of the three parties, each is enabled to achieve together what is often not possible alone.
Vega: What do hospitals want vendors to know (and apply to their sales and service)?
Dr. Steele: Vendors are an essential, unique partner for hospitals to achieve their goals. Historically, some hospital/vendor relations have been characterized by tension that is naturally created by attempting to balance necessity, cost, value and performance. Hospitals rely on vendors for products, support and the achievement of their mission and vision.
I have great respect and admiration for healthcare manufacturers and vendors. For example, pharmaceutical companies have dramatically increased quality of life and life expectancy. They provide a valuable service and much of the criticism aimed at them is undeserved. Also, as hospital reimbursement remains flat or decreasing, vendors will be asked to maintain or decrease pricing. It is incumbent on the vendor to establish and quantify the immediate and long-term value that supports pricing, especially increased pricing.
Vega: What are the 2 or 3 most common vendor pitfalls relative to their provider customers?
Dr. Steele: Many sales staffs are often focused on talking to surgeons about their products and services rather than asking questions of the surgeon to better understand their needs and aspirations. My experience was that vendor representatives who asked many relevant questions about my processes and preferences (along with good products) were those that I wanted to work with most. This mentality is almost an account management approach rather than strictly sales focused.
New and promising product introductions without mentorship for the surgeon and other key staff can often result in poor or no adoption. I have observed new and expensive technologies that could have had a very positive impact, ultimately ignored and underutilized. Vendors that craft and execute a defined plan of mentoring new product users will increase the likeliness of adoption, procedural growth and long-term success for patients, surgeon and hospital.
Additionally, I’ll share a couple of examples of desirable sales rep characteristics: a strong service mentality, honesty, surgeon advocacy and academically curious. Sales reps are often very knowledgeable, especially with revisions since they oftentimes see multiple revision cases whereas an individual surgeon may only episodically perform revision. Furthermore, vendors must be completely transparent with their physician and hospital customers, informing them of product recalls, underperformance or other problems.
Vega: Can you offer examples of innovative vendor products or services that are a win/win for vendors and providers in terms of meeting a clinical/provider need and achieving commercial success for vendors?
Dr. Steele: Patient satisfaction is a useful metric, but it does not indicate quality. I have maintained for years that for surgeons and hospitals to be effective, they must support the collection and measurement of outcomes, including clinical, operational, patient-reported, financial and physician performance. An illustration I frequently share is that of a golfer. When asked how he is playing, the golfer states, “My game is great…,” but he can’t actually demonstrate with an accepted measure that his game is indeed great.
To the degree that vendors can participate and support measuring performance, they are more differentiated from competitors. I strongly advocate for keeping score, publishing and sharing key information with patients, colleagues and referral sources that substantiates better outcomes and quality.
Service is also a very tangible way for vendors to acquire, grow and retain business. Using the car industry as an example, for some buyers, post-sales service is among primary considerations when selecting a dealer, even at a higher cost. Reliability, responsiveness and anticipating needs all drive loyalty. Buyers of virtually any product often become less price sensitive in the context of great service.
To recap, device manufacturers should aspire to:
- Maximize the receptivity to collaborate and consider new, mutually beneficial partnerships with hospitals, IDNs and physicians brought on by the pandemic,
- Seek to better understand hospital systems of care and how their product “lives” in the provider and patient environments,
- Seek a seat at the “strategy table” with hospital leadership through intentional, deliberate and sustained commitment to mutually beneficial partnerships,
- Offer demonstrably differentiated products with data-supported outcomes,
- Complement sales transactions with physician mentorship programs and strategic account management support,
- Achieve conversance in all provider reimbursement models,
- Assure both manufacturing (product origin) and price transparency in all business transactions.
Thank you very much, Dr. Steele, for generously sharing your expertise, insights and experience with our vendor audience. The current upheaval in healthcare has not only forced change, but it can also foster opportunities for nimble organizations to seek and sustain change that results in better health. As noted throughout this column, opportunities for vendors to collaborate with their customers will continue and, with post-COVID-19, even proliferate.
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Patrick Vega is Consulting Director for Vizient Advisory Solutions. Mr. Vega consults to member hospitals, health systems and physicians in musculoskeletal services with a focus on high-value care by aligning cost, quality and performance.
