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Sales Efforts Directed To PhysiciansNational Survey of Healthcare Providers

Physicians still direct the vast majority of healthcare in the marketplace - as many as 80% of patients enter the doors of hospitals at the direction of physicians. The movement toward a consumer-driven market notwithstanding, many hospitals, health systems and large specialty practices have turned to physician sales or referral development programs to grow their business. Unfortunately, motivating physicians to change referral patterns is a daunting task under the best of circumstances and the lack of industry “best practices” complicates the situation even further. In October 2005, Strategic Health Care Marketing teamed with Corporate Health Group to conduct a National Survey. The desire was to gain insight into healthcare provider’s physician sales efforts. The survey (a mix of open and closed ended questions) was conducted online and respondents were directed to a URL hosting the survey questionnaire. The timing must have been right - strong interest and responses from a total of 180 physician sales stakeholders - generated results that frame the current environment for sales. Not surprisingly, a majority of the participating organizations are large, not-for-profit healthcare systems located in urban settings.

A summary of the survey is provided for your review and of course, there are some editorial comments inserted along the way. Those have been noted! A survey of this scope provides detailed management and benchmarking data for physician sales managers and healthcare executives. As you look through the results, see where your program can benefit, but remember, there are many right ways to do this. Each organization has its own personality, its own medical staff needs and its own direction for future success!

1

2

Program OverviewPhysician sales programs are by no means a new concept in healthcare as evidenced by the large number of programs with lengthy track records. However, renewed interest in physician marketing has produced a new crop of programs over the past couple of years. While one-half of respondents indicated their programs have been up and running for five or more years, nearly 40 percent are new to the scene and have been in operation for less than two years.

14%

8%

17%

8%4%

50%

< 1 yr.1 yr.2 yrs.3 yrs.4 yrs.5 or more yrs.

17%

38%

18%

7%

6%

13%

<$100K$100-$300K$301-$500K$501K-$800K>$800KDon't know

Physician Sales Annual Budget

Program Tenure

Given the size of the institutions participating in the survey, it’s not surprising to find several large physician sales programs as well. While annual sales budgets in the range of $100K-$300K are most common (38 percent), several programs reported budgets exceeding $500K (13 percent) with nearly one-half or six percent of those in excess of $800K.

CHG NOTE: As always, consider budget details to be “personalized” to the organization. Some organizations use this category to include many social events for the medical staff, while others see it as purely for sales.

14%

8%

17%

8%4%

50%

< 1 yr.1 yr.2 yrs.3 yrs.4 yrs.5 or more yrs.

17%

38%

18%

7%

6%

13%

<$100K$100-$300K$301-$500K$501K-$800K>$800KDon't know

Physician Sales Annual Budget

Program Tenure

3

While reporting structures vary widely from one organization to another, the vast majority of physician sales programs have the attention of senior leadership and often report to either the CEO or other senior leaders. Recognizing the focus on new business growth, many programs are now part of the marketing or business development groups within their respective organizations.

Sales ManagementProgram managers are for the most part seasoned sales executives with nearly 60 percent reporting seven or more years of experience. While much of this experience is within healthcare, over 35 percent of sales managers have migrated into their current positions from the outside. More often than not, physician sales managers are non-clinicians(56 percent), although nearly one-third have some clinical background. Direct supervision of the sales staff is generally provided by the head of the physician sales program, which is most often a director-level position.

36%

16%12%

7%

9%

3%4%13%

Leadership

VP

Director

VP/Sr. Position

DirectorMarketing/PR/Communications/PlanningVP/Sr. Position Business/Corporate Dev

VP/Director Medical Affairs

Other

32%

56%

70%

36%

8%

0%

10%

20%

30%

40%

50%

60%

70%

Clinical Non-clinical Sales w/ihealthcare

Sales outsidehealthcare

No salesexperience

Sales Management

Program Reporting

Marketing/PR/Communications/Planning36%

16%12%

7%

9%

3%4%13%

Leadership

VP

Director

VP/Sr. Position

DirectorMarketing/PR/Communications/PlanningVP/Sr. Position Business/Corporate Dev

VP/Director Medical Affairs

Other

32%

56%

70%

36%

8%

0%

10%

20%

30%

40%

50%

60%

70%

Clinical Non-clinical Sales w/ihealthcare

Sales outsidehealthcare

No salesexperience

Sales Management

Program Reporting

Marketing/PR/Communications/Planning

4

Sales StaffEven with the renewed interest in physician relationship strategies, most physician sales programs still operate with limited staff resources; in fact, 40 percent report having only one dedicated sales representative while one out of ten do not employ any full-time field staff. Another 39 percent of organizations employ two to four individuals while a small handful represent larger programs with five or more staff members supporting the physician sales process (12 percent).

CHG NOTE: Programs with small numbers of staff need to be mindful of the need for sales to network with others who are doing sales.

With limited FTE’s allocated, program leadership needs to be certain they keep the sales staff field-focused, with no less than 60% of their time in one-to-one visits with targeted physicians.

Fortunately, many organizations not only have solid management teams, but individual representatives with extensive physician sales experience as well. The current mix of sales representatives provides a nearly equal split among more tenured individuals with seven plus years of experience, those with mid-level experience (4-6 yrs.) and a group of newcomers with one to three years of sales experience.

32%

33%

35%

1-3 yrs.

4-6 yrs.

7 or more yrs.

Sales Staff Experience

10%

21%

11%

6%

6%6%

0123456 or more

Sales FTEs

40%

32%

33%

35%

1-3 yrs.

4-6 yrs.

7 or more yrs.

Sales Staff Experience

10%

21%

11%

6%

6%6%

0123456 or more

Sales FTEs

40%

5

Program OperationTraditional programs geared toward meeting with physicians already admitting or referring patients to identify problems and report on fixes are on the decline. The survey demonstrates that a new generation of programs are focused on growing revenue as well as retention of old business. Over one-half (51 percent) of programs reported their efforts are equally focused on growth and retention of revenue while one-third concentrate almost entirely on generating new revenue. Even with a dedicated focus on new business, most programs report success retaining existing customers and dealing with physician complaints while struggling to achieve their growth objectives.

CHG NOTE: Individual organizations are encouraged to look closely at their pool of targeted physicians to discern if they are calling on enough physicians who represent growth potential- or if the targets are primarily staff who already admit all they can to the facility.

Program Focus

0% 20% 40% 60% 80% 100%

Retaining existing customers

Adding new customers

Selling new services

Increasing patient volume

Increasing revenue

Increasing volume of current MD base

Increasing physician satisfaction

MD complaints/issue management

Importance Effectiveness

6

Territory AssignmentWhile programs have debated for years the best method of assigning territories to sales representatives, geographic-based assignment is still the most common approach (45 percent). Organizations continue to prefer the “single point of contact” model afforded by geographic-based territories, although nearly 20 percent of programs now use some form of product or service line assignment. Larger organizations occasionally assign representatives to promote individual hospitals within the system.

Time AllocationWith resource limitations still common in many organizations, staff responsibilities go well beyond the basic sales function and include items such as customer service and other marketing activities. It is our firm belief that many programs are still focused on meeting with physicians to catch problems and report on fixes – in other words - “find it and fix it.” While this approach has been successful in the past, today’s competitive healthcare market requires a dedicated sales effort focused primarily on new business growth with minimal distractions.

45%

10%

18%

5%

9%5%8%1%

Geographic areas

Hospital specific

Product/service line

Primary care vs specialist

Primary market vssecondaryCombination of two ormore aboveNo division

Other

41%

27%

17%

13%4%

Selling services

Customer service

Marketing

Salesmanagement/reportingClinical

Territory Assignments

Time Allocation

45%

10%

18%

5%

9%5%8%1%

Geographic areas

Hospital specific

Product/service line

Primary care vs specialist

Primary market vssecondaryCombination of two ormore aboveNo division

Other

41%

27%

17%

13%4%

Selling services

Customer service

Marketing

Salesmanagement/reportingClinical

Territory Assignments

Time Allocation

7

Staff CompensationCompensation varies widely from one organization to another for both physician sales managers and field staff. Compensation for sales representatives covers a wide range although $40K-$65K is most common with approximately three-quarters earning an annual base salary in this range. The compensation range for sales managers is even wider and more varied; 22 percent of managers earn between $50K-67K per year although over 15 percent top out at over $90K.

Given that the effectiveness of any sales program is directly tied to the productivity of the individual representatives, organizations often provide incentives to motivate performance. Historically, many organizations have been reluctant to establish incentive programs due to an inability to track metrics upon which to base rewards. Currently 45 percent of organizations offer some type of “pay for performance” or variable compensation that is based on an array of factors e.g. number of physician appointments, retention of current business, increasing overall patient volume and in some cases growing new sources of revenue. Programs adopting a pay-for-performance approach commonly feature fixed bonus opportunities ranging between 6 percent and 10 percent of base salary.

0% 5% 10% 15% 20% 25% 30%

$28-$37K

$38-$47K

$48-$57K

$58-$67K

$68-$77K

$78-$87K

$88-$97K

$98K+

Sales Mgr Field Staff

9%

39%

14%

14%

17%

8%

<5%6-10%11-15%16-20%21-30%>30%

Staff Compensation

Variable Compensation

0% 5% 10% 15% 20% 25% 30%

$28-$37K

$38-$47K

$48-$57K

$58-$67K

$68-$77K

$78-$87K

$88-$97K

$98K+

Sales Mgr Field Staff

9%

39%

14%

14%

17%

8%

<5%6-10%11-15%16-20%21-30%>30%

Staff Compensation

Variable Compensation

8

Staff TrainingThere are conflicting schools of thought as to which employment background best prepares sales representatives to perform well: prior sales experience or prior clinical experience. While experience in both areas is ideal, candidates with this highly specialized background are rare. Hiring individuals with the right talents is only the first step in ensuring the success of the sales force. Organizations must also provide content and skills training to ensure that sales representatives have the tools to do their jobs well.

The majority of programs offer basic training on such items as computer skills(67 percent), organizational policies (62 percent) and customer service (61 percent); however, less than half provide traditional sales training (e.g. consultative selling, account and territory management).

CHG NOTE: Experience has told us that to be effective in this role, the representatives need to (1) understand the products and services, (2) understand how the services are accessed by referring physicians, and (3) have outstanding sales skills. It appears that most facilities have followed their traditional internal training processes and may need to offer more sales training.

0% 10% 20% 30% 40% 50% 60% 70%

Computer skills

Organizational policies

Customer service

Technical/product skills

Presentaton skills

Consultative sellings

Account management

Time management

Territory management

Other

Staff Training

9

Program EvaluationCompetitive markets, diminishing resources and a growing focus on how marketing initiatives contribute to the bottom line make it imperative for physician sales programs to accurately quantify and communicate their worth to their institutions. To support their measurement efforts, many programs have turned to automated tracking systems (62 percent) with the majority purchased off-the shelf from vendors. Most are conventional “contact management systems” that are used to track program activity and generate management reports, but for the most part do not interface to the organization’s internal data systems.

0% 20% 40% 60% 80% 100%

Track staff activity

Customized reporting

Track staff results

Interface to hospitalsystems

Sales Automation

10

The FutureOur thanks to the leadership at Strategic Health Care Marketing for partnering with us on this survey. It represents an objective look at today’s physician sales environment. As well, surveys are valuable in providing a framework and data, which often supports our intuitive thinking about healthcare sales.

The survey leaves us with some questions …

Why do many programs operate with only a limited number of sales staff?

Why do so few programs formally measure ROI on physician sales efforts?

Why do less than half of programs provide traditional sales training to staff?

Are sales efforts diluted due to multiple staff responsibilities?

Why is there great uncertainty about the impact of variable compensation programs on staff performance?

Physician sales is about matching the needs of referring physicians with the benefits our organizations have to offer. It is direct, measurable and affords us a mechanism for cutting through the marketplace clutter.

What one or two things can you do with your sales effort to ensure it is sustained and produces the kind of results you know it is capable of offering?

If you would like more information on physician sales efforts and/or if you are interested in newsletters, articles and news about physician relations, please visit our websitewww.corporatehealthgroup.com

1.888.334.2500 • www.corporatehealthgroup.com

Physician Relation/SalesPhysician RetentionPhysician Recruitment

• Strategic design

• Needs assessment

• Physicianbusiness planning

• Job descriptions

• Performance standards and compensation

• Hands-onrecruitment support

• Staff development

• Database trackingand support

• Measurement models

• Training: classroomand field

Referrals are essential nutrients to growing any business – especially in this competitive healthcare industry. And, a key supplier of those nutrients is the physician. But how do you reach this valued resource - effectively? That’s where Corporate Health Group can help. We specialize in customized program development for sales and service and physician recruitment. We help you build and maintain relationships with the medical staff you work with frequently and those you want to work with more often.

A Distinct PerspectiveFrom a community hospital to a large academic medical center, every need is distinct. So is the way we work. We help you take a step back. See things from a different perspective. Get inside the referring physician’s head. Uncover strategies and solutions that work for you.

Let’s say you have a limited budget. Where should you focus? On the doctors who already give you business? The ones who don’t or the ones who could give you more? We work with you to uncover the answers - and help you put them into action.

Speaking Their LanguagePhysicians have messages coming at them from all directions. How can you get them to send referrals your way? How can your message stand out in the forest? And what about your physicians relations staff? How are they trained? What’s their skill set? How can you track their effectiveness?

Get the answers you need to grow healthier relationships. Contact us today for a complimentary one hour consultation.

How do you grow healthy physician relationships?

“No vision ever grows great until it is focused, dedicated and disciplined.” -Anonymous

experience. insight. impact.

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