In the last decade, we have seen a trend of healthcare provider consolidation, in addition to the trend of increasing regulation we spoke about in a previous post. In order to provide higher quality care at lower costs, hospitals are being acquired by major healthcare organizations and physicians are joining these larger organizations. The stricter regulations and slim profit margins make it harder for small healthcare or medical device organizations to flourish. Hospital acquisitions and mergers are on a rise, and the number of hospitals which belong to a larger healthcare system has gone up as well.

Previously, medical device companies focused on building relationships with individual physicians, but with the consolidation trend, they must begin to focus on marketing to group purchasing organizations (GPOs). In order to direct sales to GPOs, companies will have to prove the value of their devices both clinically and financially. Selling should be strategic, which facilitates proactive organizational account planning and team-based selling.

The future will also bring decreased margins and increased competition. Larger healthcare providers who purchase in bulk will demand lower prices, causing margins to fall. With independent hospitals joining larger systems, the customer pool will shrink, increasing competition between medical device companies. This may lead to hospitals demanding even more, such as better support or trial periods for devices.

Medical device companies can prepare for increased consolidation by developing relationships with large healthcare systems, creating products which provide clear financial and health outcomes and re-organizing their sales departments to focus on team-selling.

Massachusetts Medical Device Industry Council (MassMEDIC) is one example of consolidation. Do you have another example in mind?

Patrick Sirois

At Triode, we specialize in developing new products and services for complex industries like medical devices and transportation. We work with you closely to help define product strategy, with an emphasis on reducing the risks associated with innovating in these sophisticated and often regulated consumer-oriented environments.