Four by Four: Innovation in Conversation with the Hospital


This article is based on an interview by Scott Nelson, founder of Medsider, with Jonas Funk, Managing Director, L.E.K. Chicago

In our previous issue, we ran an article by Editorial Board member Sebby Borriello on the changing landscape of selling to hospitals, and how it’s become more difficult to climb the decision tree. To follow up on that theme, here’s some wisdom from a study of hospital executives conducted by consulting firm L.E.K.

No surprise: what we’re seeing is a shift from the old fee-per-service world to a new world where outcomes are going to be much more important. And costs are much more important. The old model that med techs were very successful with (making great products and convincing clinicians to use them) is not going to be as successful in the future.

Surprise: there is something you can do about it.

Changes are happening faster than the healthcare industry is used to. So it is required for executives to be able to respond faster. L.E.K has done an annual hospital survey five years in a row, to get a sense of what hospitals are thinking in terms of their purchasing patterns and their needs with respect to med tech companies. Following is a summary of how hospitals define what they are doing to address their needs.

The survey is focused on hospital administrators versus clinicians. About half are C-suite – CEOs, CFOs, COOs – and the other half are administrators involved in the purchase decision-making process – VPs of procurement, materials managers, and others, from both major metropolitan hospitals and community hospitals as well. So it measures both economic and clinical considerations. The decision still involves the clinician, but now administrators have more of a voice. “We would really like clinical outcomes data. For example, we want to know if a knee replacement that costs two times as much as a competitor’s product is actually going to last double the time as the competitor’s model.”

– Director of Purchasing at a Minnesota hospital

There are four key questions L.E.K. identified that help illuminate what companies need to do, and it is all about messaging, something key to the sales and marketing function. It’s a move from emphasizing product excellence to a combination of what L.E.K. calls customer excellence. According to the study, these four questions focus on the areas sales and marketing teams can create strategies around to move the needle.

1. What problems can we solve or at least help solve for our customers? Every company has a portfolio of products, but a hospital administrator who’s trying to find a smaller number of partners to work with more closely wants you to be very clear about what problems you’re solving. Are you going to help reduce hospital-acquired infections? Lower readmission rates for heart failure patients? Improve productivity or efficiency in a certain department like the OR or the cath lab? Reduce medication errors? Having clarity about what problems you’re solving is critical.


2. What’s the optimal solution for that problem in terms of not just the products but also the services you provide? Sometimes the optimal solution can involve capabilities that might be outside of a med tech sweet spot, but that doesn’t mean that that can’t be part of the solution. Med techs are going to need to be more proactive in reaching out, finding both product and service extensions to make their solution really come to light. A lot of that is going to involve healthcare IT platforms and partnerships, as so much is moving towards a need for better metrics and monitoring of outcomes. So just having a good product isn’t good enough if you can’t help monitor and measure its outcomes.

For example, earlier this summer, Hill-Rom partnered with Ecolab to offer a hand hygiene compliance solution to help reduce HAIs. The solution combines Ecolab hand-hygiene products with Hill-Rom’s real-time locating solution (RTLS) to continuously monitor care settings, reminding healthcare workers to wash their hands, as well as providing hospital administrators with data to help drive improved compliance. This complements Hill-Rom’s broader range of clinical workflow solutions (e.g., asset tracking, staff locating).

Following Medtronic’s 2013 acquisition of Cardiocom, (providing remote monitoring of patients for heart failure and other chronic disease states across care settings), Medtronic acquired Corventis in June this year. The deal gave Medtronic access to a water-resistant, adhesive monitor that can be worn up to 30 days to detect irregular heartbeats. Via a handheld transmitter, data is routed to a Medtronic monitoring center, which is staffed 24/7 with cardiographic technicians who can notify physicians during emergent events. Ultimately, Medtronic is positioning itself to be a broader solution player that helping to deal with problems outside of the hospital, which is expected to be attractive to ACOs and more integrated systems as they take on more accountability and care a lot more about things like readmissions for heart failure patients.

3. How much value can you actually bring to your customers with that solution, and how do you quantify it? Increasingly, the threshold for success is much higher than “how does this solution actually help me?” So just saying that your product or solution is going to help reduce hospital-acquired infections isn’t good enough. You have to be able to show, the specific types of infections that the solution will address, the frequency by which those infections will be reduced, and the cost of those infections. Being very clear about the value that the med tech company is bringing to the customers has become much more critical to hospital customers and administrators, to support the strong economic argument which is needed to justify any sort of significant change or any solution that’s priced at a premium.

4. What’s the best way to communicate and deliver on that value proposition? What types of documentation or evidence and tools can help the med tech company focus and clarify the value proposition to the right stakeholders? In many instances, the stakeholders who might benefit from a solution can be in multiple departments and have very different needs and kind of perspectives. For example, helping reduce medication errors can help administrators reduce cost associated with those hospital-acquired infections (HAIs), it can help the risk management people within the administration, and obviously it can help the clinicians as well. (Not to mention the patients!) So many stakeholders will benefit, but actually being able to put together kind of a clear set of documentation and tools that appropriately focus the right message to each of those stakeholder groups in their terms is something med tech should be thinking about.

Make sure that the value of your solution is clearly articulated. With additional administrators participating, the bar is set higher.

So how do we take what we’ve learned and communicate that effectively? By answering the four questions with four strategies.

1. Developing a deep understanding of customer needs, which is just Marketing 101. The problem is that a lot of med techs have historically spent less time understanding customers’ needs than in trying to figure out ways to incrementally improve products or to add additional features and functions, often independent of understanding how those might fit to customers’ needs. Understand, too, that hospitals don’t all have the same needs. In fact, there’s such huge variation that one of the things that we find a lot of our med tech clients asking for these days is what is the right way to think about the universe of hospitals out there so that you’re not giving the same solution or the same messaging to a small-rural hospital as you are to a Mayo Clinic.

A lot of med techs have historically spent less time understanding customers’ needs than in trying to figure out ways to incrementally improve products or to add additional features and functions, often independent of understanding how those might fit customers’ needs.

2. Providing optimal solutions and integrated portfolios. This necessarily includes services that help make those products come to life more. But you don’t have to have all of the components yourself as a med tech. You might partner with a healthcare IT company or partner with a service-focused company to help provide that, but you’re quarterbacking that delivery, pulling it together, and making it into an integrated solution that can actually address that need to reduce HAIs, reduce readmission rates or whatever the problem is that you’re targeting.

That’s where the Cardiocoms, or Hand Hygience Compliance Solutions come into play. You’re seeing companies that are starting to branch out their portfolios in new ways. We are also seeing med tech clients saying, “What can we provide in services? Are there things that we can do in procurement or inventory management or in clinical decision support systems and analytics? Which companies are doing these things today? How can we partner with them or potentially acquire to offer that broader functionality? That’s why the big growth engine is going to be health IT, data and analytics.

We’re talking about senior centralized decision-makers who want compelling arguments backed up by economic models.

The spending, in fact, is pivoting from developing IT systems to integrating those systems and doing analytics with the data. I think the challenge for the med techs will be to leverage the data and help the hospitals convert that into something that can actually result in improved efficiency or outcomes.

3. Making sure that that the value of your solution is clearly articulated. This might sound obvious and easy, but it’s shocking how rarely we see med tech companies get it right. They historically have not had the need to do so because clinicians have been very happy to adopt the latest and greatest technology. But clinicians don’t ask “Well, how exactly is this helping in terms of reducing our costs or improving outcomes in nonclinical ways?” With the additional administrators participating in the decision, the bar is set higher.

Example: one L.E.K. client had a prefilled syringe solution that would help hospitals in a lot of ways. Prefilled syringe solutions are good at reducing medication errors, the labor that’s involved in preparing the syringes, and some types of waste. But the benefits accrue to different stakeholders, and a lot of these benefits are just very difficult to quantify. That made it difficult for the company to get the pharmacy directors to purchase prefilled syringes, because the pharmacy directors really just care about their budget. It required a robust effort to identify all the points in the workflow where medication errors can occur, what the rate of medications errors is, what types of errors could be addressed by prefilled syringes, how much direct and indirect costs those errors tend to incur, and then turn this into a clear economic model that shows the sum of those benefits. That’s the type of exercise that med techs are going to have to do more consistently to show in economic terms at the end of the day why a hospital should adopt their solutions versus either staying with the status quo or going with someone else’s.

4. Communicating the value proposition with the appropriate set of tools and documentation, and knowing which people to share that with. For example, who are the right influencers? Is the hospital part of an IDN? Is the decision being made at an even more centralized location? The right target is often not as clear as it used to be. The call point in the past was the orthopedic surgeon, who was in the OR, but now there’s more centralized decision-making, and obviously the IDNs are consolidating and buying up other hospitals. So it’s becoming harder to define an account and the decision-makers within that account. And once you can answer those questions, then you have to decide who the right people are within the med tech organization to call on those decision-makers. Often we’re talking about senior centralized decision-makers who want to see very compelling arguments backed up by economic models and clear value propositions.

It’s not surprising that it’s hard to flip the switch and change all the relationships that have been built up over the last few decades among the sales organizations and suddenly say, “Okay, now go talk to different people with a different set of needs.” How do they evolve from the past state to the new world where these four steps are just going to have to be like clockwork?

In the next several years we expect that hospitals are going to increasingly look for some kind of risk-sharing and gain-sharing arrangements with their suppliers, and if you’re unable to clearly understand the economic value that you’re bringing to your customers, you will not be in a position to offer any sort of risk-sharing or gain-sharing option. There’s a strong latent need from hospitals for those types of arrangements, but frankly, hospitals don’t know much about what that involves other than wanting to shift some of the risk away from themselves. And the suppliers haven’t been able to figure out a way to offer it that actually works so that it’s a two-way win. So the first ones who can do that will have a major advantage in the marketplace.

Scott Nelson is a self-described medtech enthusiast, ambitious doer, and self-directed learner. He founded Medsider in 2010 with one simple goal: Help ambitious doers learn from proven medtech and medical device thought leaders. His work with Medsider has been featured in publications like Forbes, Mass Device, MedCity News, and MD+DI. Scott has worked for some of the largest medical device companies in the world including Covidien, Boston Scientific, C.R. Bard, and ConMed. He also serves as an Advisor to the Medical Devices Group with over 200,000 members worldwide. He can be reached at


Jonas Funk is a Managing Director in L.E.K. Consulting’s Chicago office. He has 17 years of experience at L.E.K. and has directed hundreds of consulting engagements, primarily focused on growth strategy and mergers and acquisitions support in the medtech and life sciences industries. Jonas has served in the L.E.K. Chicago and San Francisco offices. In addition, he co-founded the Tokyo office and has assisted dozens of clients in developing their Asian strategies. He holds a Bachelor of Arts in Economics from Carleton College, and his work in economics has been published in leading academic journals and national newspapers. He can be reached at

The full L.E.K. Hospital survey can be seen here.



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