State of Play - Consolidation and Medical Device Field Service
The landscape of healthcare is transforming rapidly, and smaller practices are seeing benefits in embracing consolidation and using that principle to boost their ability to provide and benefit from the strengths of a larger organization.
Consolidation is the process by which smaller practices join and merge with larger healthcare providers to ensure long term prosperity and survival. This is mainly driven by the need to negotiate better terms with healthcare adjacent service providers. Small healthcare practices lack buying power due to their size and scale to achieve value-based contracts with suppliers of the products and services they need to carry out their work, something which can be addressed by consolidating into a larger organization.
Naturally, the proliferation of this practice has implications for medical device field service providers. However, the best way to approach an issue is to better understand it, so let's dig down into consolidation and what it might mean for your business.
COVID-19
The global COVID-19 crisis has seen the process of consolidation accelerate when compared to the last two decades.
The financial difficulties being felt by many providers (especially smaller companies) as a direct result of lockdown restrictions and business closures has led to them embracing consolidation as a way to survive.
While there is a suggestion that consolidation has a negative effect on prices and the quality of care, there is little doubt that it places smaller practices in a far stronger position when it comes to negotiating terms with external vendors. Whether or not this translates into better value care for the end user - the patient - is a discussion for another day.
The question here is how can medical device field service providers better engage with consolidated practices and ensure contracts and services are profitable and valuable for both parties and feed into value-based care for the patient?
"Consolidation in the US health care sector has been on the rise over the past two decades," reports Harvard Business Review. "Starting with horizontal consolidation, it has spread to vertical mergers and acquisitions and megamergers of national players at multiple levels of the supply chain. Given the financial difficulty that many providers have suffered during the pandemic, this trend is likely to continue, reducing competition and increasing prices."
Consolidation
One of the biggest issues with negotiating updated terms with a freshly consolidated practice is this - while the healthcare provider in question enjoys reduced competition due to the smaller number of independent practices around, the opposite can be true for a field service provider.
If you are a manufacturer which provides medical device field service as part of the after-sale offering of your own product, you probably have less to worry about. However, non-manufacturer aligned providers may suddenly find themselves in competition with many other brands vying for the same contract. As multiple healthcare providers have merged into one, the individual field service operators which used to serve them will now be competing to do business with the new larger organization.
However, it's not all unwelcome news as securing a contact with the consolidated organization will likely mean more business, as a larger healthcare provider will have more equipment and therefore require an elevated level of service. You sales teams may just need to be a little more flexible and agile to successfully win the negotiation taking into consideration the other players now in the game.
The best strategy is to make sure your company is fully educated on the competition and know the ins and outs of their offerings. What sorts of prices are they charging for what level of service? Are they deploying innovative technologies such as augmented reality, self-service, digital portals, etc.? All these factors add to the value proposition and can be a key differentiator when making your case to a consolidated healthcare provider. Don't forget, their business has grown significantly, and they are looking for a field service partner which can handle the increased workload so they can pay that value forward to their patients.
Final Thoughts
There is no easy solution to the consolidation issue, but there is little we can do to stand in its way. It has been steadily growing for almost the entirety of the 21st century so far and has only been accelerated by the COVID-19 pandemic.
Healthcare adjacent brands such as medical device field service providers need to prepare to renegotiate contracts with a new organization engaging from a position of increased strength.
Consolidation is set to be a hot topic at Field Service Medical 2022, taking place February 28 - March 01 at the Rancho Bernardo Inn, San Diego, CA.
Download the agenda today for more information and insights.