Changing buying patterns force vendors to adopt new strategies

Sales reps must get access to key decision-makers

The rise of group purchasing, preferred vendor agreements andvendor-customer partnering has rendered obsolete many of the salestechniques used in the past to sell medical imaging equipment.Medical imaging vendors must retool their selling strategies inorder to keep abreast of changes wracking the health-care industry,according to participants at a conference sponsored last monthby Diagnostic Imaging magazine.

The San Francisco meeting for the second year brought togethermedical imaging vendors and equipment users to discuss strategiesfor coping with the changing health-care environment. A commontheme was industry consolidation and the increasing acceptanceof large, single-vendor purchasing contracts for medical imagingequipment.

The declining influence of radiologists and radiology administratorsin the capital equipment purchasing process has been well documentedin recent years. Despite this change, vendors have been slow toadapt their selling strategies, according to Thurman S. Clardy,president of Thurman S. Clardy and Associates of Brentwood, TN.

"The buying pattern for medical equipment is changing.The problem is that many sales organizations have not embracedthis change," Clardy said. "It is still business asusual, calling on the radiologist or the chief technologist. Manyrecognize that the CFO, the CEO or the corporate buyer or somestandards committee is the key decision maker. However, they can'tget access to these people."

Clardy's sentiment was echoed by Dr. James H. Thrall, radiologist-in-chiefof Massachusetts General Hospital in Boston. MGH merged with Brighamand Women's Hospital in 1993 to form a regional integrated deliverysystem to provide more efficient patient care. The formation ofthe system has created dramatic changes in the way the facilitiesbuy capital equipment, according to Thrall.

Purchasing procedures between the institutions are being standardized,with the goal of eliminating as much red tape as possible. Inaddition, the combined MGH/Brigham system is trying to eliminatethe multiplicity of vendors by forming stronger relationshipswith a small number of companies.

"We are going to deal with fewer vendors, but we are goingto try and form closer ties with selected vendors so that we don'thave to have as much process around the sale and we can both thenbenefit," Thrall said. "How do you really benefit froman economy of scale? You change the way you do business. You takecost out of the relationship."

Two other entities that have changed the way they purchaseequipment are Kaiser Foundation Hospitals of Berkeley, CA, andSunHealth Alliance of Charlotte, NC.

Kaiser's northern California region has set up a medical imagingpurchasing committee that represents radiologists in the purchasingprocess, according to Gailord J. Gordon, general manager of biomedicalengineering. The committee, which consists of seven chiefs ofradiology from Kaiser hospitals in the region, selects a vendorand establishes a partnership with that vendor that gives it preferredstatus in equipment purchases. The Kaiser region's current preferredvendor for MR, CT and x-ray equipment is GE Medical Systems (SCAN8/25/93). Buyer's remorse is reduced when the radiologist selectsthe equipment vendor, according to Gordon.

"On the committee our task is to select a vendor to establisha partnership and to track the equipment throughout its life-cyclecost," Gordon said. "When a vendor is selected, allradiologists support the contract because they are representedby their colleagues. This contract compliance ensures us a strongposition during contract negotiations."

At SunHealth, the hospital alliance has several strategiesthat include prenegotiated contracts in which terms, conditionsand discounts are set ahead of time. SunHealth also relies onbundled purchases, especially for nuclear medicine, ultrasoundand mammography equipment, according to David A. Natale, directorof technology assessment. Individual facilities within the alliancemay buy supplies on their own if they wish, but SunHealth is implementinga program to improve compliance with preferred vendors. SunHealthhas not yet extended that program to capital equipment, primarilyto do variances in service quality in certain regions within SunHealth'snetwork, he said.

"We'd be hard-pressed to force a hospital to buy froma vendor in a region where they have gotten poor service fromthat company, and there have been pockets where that's occurred,"Natale said.

Sales strategies. Rather than deal with individual radiologists,vendors must now negotiate large, bundled purchases with hospitalexecutives. These situations must be treated very differentlyunder the new purchasing paradigm. Gone is the emphasis on productbells and whistles and the latest technical specifications. Instead,vendors must emphasize cost-effectiveness, provide return-on-investmentdata and must try to get access to high-level decision-makers.

Other strategies include:

• Sending high-ranking executives such as a vice presidentof sales to negotiate with important accounts;

• Providing more applications training on an ongoing basisto help hospitals cope with high technologist turnover rates;

• Helping hospitals develop standardized procedures for usingimaging equipment that will lead to improved productivity;

• Providing sales representatives with analytical and financialskills rather than just product knowledge to help them understandtheir clients' businesses;

• Quantifying the characteristics that differentiate a pieceof equipment from those of its competitors; and

• Offering guaranteed uptime for equipment.

On the positive side, there is less room for emotional decisionsbased on personal preference or individual relationships thanthere was in the past, Thrall said.

Sole-source purchasing is shaking the roots of the medicalimaging industry, Clardy said, turning sales into a high-stakesgame of all-or-nothing. This game can have disturbing implicationsfor single-modality firms who are unable to meet all the needsof a hospital or network.

"Single-modality companies are going to have to partnerwith other companies, or they are going to have to have a productthat is dominant, whether it be a dominant market share or a highlevel of satisfaction among customers, to compete in this environment,"Clardy said. "They can compete, but they are going to haveto clearly differentiate their product in real value and realoutcomes."