by Contributing Editor Dianna Huff

“People have no clue when it comes to marketing to hospitals” says Donald E. L. Johnson, Chairman, The Business Word, Inc., publishers of Healthcare Strategic Management and other healthcare publications. “They don’t understand the politics, the language, nor the customs.”

Indeed, hospitals are a profoundly tough vertical for technology marketers more used to regular business marketplaces. If you’re marketing IT systems (also known as “clinical information systems or CIS) and/or software, it’s not enough to hit up the hospital CTO, offer the IT Director and engineers a white paper or two, get funding approval, and then yeah! the sale is done.

Rather, you’re marketing to a village . . . one whose inhabitants are risk adverse and who embrace change s-l-o-w-l-y. They have no time for “outsider” marketers and sales people who don’t understand them or their needs.

So how do you reach village members . . . and get their buy-in? In this special report, we interviewed industry consultants and experts to bring you four must-know strategies plus five tips (and one secret hint) for successful healthcare marketing and selling.

Quick vertical background

According to the Centers for Medicare and Medicaid Services (CMS), national health expenditures totaled $1.5 trillion in 2002 – with CMS predicting expenditures to reach $3.4 trillion in 2013. CMS reported there were 4,908 acute care community hospitals in 2001. Of these, approximately 85% were not-for-profit.

Hospitals generate revenue primarily via inpatient and outpatient services. However, other income streams, according to CMS, include skilled nursing, home health services, medical equipment sales, hospice, rural health clinics, physician office rental, gift shops and parking garages.

Private insurance is the single largest payer for hospital care, with expenditures totaling $152 billion in 2001, followed by Medicare ($135 billion), and Medicaid ($77 billion).

The term “acute care facility” refers to hospitals large or small. (Other types of healthcare services include long-term care facilities, clinics, nursing homes, skilled nursing facilities, assisted living, and independent living facilities.) This Report focuses on marketing to the acute care folks.

Top 5 business challenges affecting hospitals

If your technology can help hospitals cope with any of these five challenges -- then be sure to slant your marketing materials to reflect that fact loud and clear.

Challenge #1. Inefficiencies across the enterprise

Hospitals, according to the consultants and industry experts we interviewed, have been slow adopters of technology. Where for-profit companies have made the change to enterprise-wide IT and software systems (ie: computerized inventory ordering and work flow procedures), hospitals still do many things manually. It is not atypical for a hospital to have a rudimentary, paper-based inventory process that includes ordering something like “sticks” (needles) only when the last box on the shelf is almost empty.

Computer legacy systems from the 1970s and 80s are still in use and require multiple data entry for dozens of forms (which guarantees errors). Each department may have its own system that can’t talk to other systems, slowing processes still further. Notes on critical patient care are often made by hand and can be difficult to read and retrieve at a later date.

Adding to the inefficiencies are complex rules and regulations from the federal government, private insurance companies, and Medicare.

But while hospitals acknowledge they are inefficient, they have gone kicking and screaming to the technology table. That’s because hospitals are risk adverse. Remember, these people are in the business of making sick people well – they aren’t going to make hasty decisions that may put them on the hot seat in terms of “adverse patient outcomes.”

Challenge #2. Nursing shortage and illegal immigration

The nursing shortage is acute and affects both hospitals and healthcare consumers. The American Journal of Nursing (AJN) reported in August 2004 that hospital patients are more acutely ill than ever; however, fewer people are choosing nursing as a vocation and current nurses are leaving the profession in droves. According to a report from the Agency for Healthcare Quality and Research, patients in hospitals with low nurse staffing are at higher risk for "adverse outcomes" (in other words, mistakes). These adverse outcomes cost hospitals money – in fact, according to the AJN, “the costs related to such outcomes are so high that a hospital’s profits are not actually reduced when nurse staffing levels are increased to prevent them.”

According to Johnson, illegal immigration is also affecting hospitals’ bottom lines as emergency departments are being flooded with uninsured people who don’t or can’t pay their bills.

Challenge #3. Inability to meet Medicare/managed care pricing levels

The name of the game for hospitals, says Ed Koscic, a healthcare software consultant and Principle Ed Koscic & Associates, is reimbursement: it is the hospital’s goal to be reimbursed for every procedure. However, hospitals are facing strict pricing levels from Medicare/Medicaid and the huge managed care organizations.

Medicare and health insurance companies (ie. Blue Cross Blue Shield) dictate how much they will pay for procedures – even if the hospital’s costs are higher. An appendectomy, which may cost a hospital $25,000, is reimbursed at $20,000. Hence, hospitals work hard to “maximize” reimbursements (which can lead to them being slapped for Medicare fraud, another issue hospitals face).

Challenge #4. Intense consolidation and competition

Hospitals across the U.S. are in “acquisition” mode as large regional hospitals are buying smaller hospitals, clinics, and other facilities in an effort to increase profit margins. “Here in the Cleveland area,” reports Koscic, “the Cleveland Clinic is comprised of about 11 hospitals plus home healthcare systems and nursing homes. They employ over 40,000 people and perform 40-50 triple by-pass procedures a day! However, what this really means is that consumers have fewer choices. Are you going to drive 300 miles to find a non-affiliated hospital or just go to the nearest facility?”

Hospitals also directly compete with physician-owned ambulatory surgery centers, outpatient clinics, and specialty hospitals.

Challenge #5. CIS challenges and lack of standards

Hospitals face a number of challenges as they move forward with deploying CIS, according to the report, “The State of The CIS Vendor Marketplace” published by ACS Healthcare Solutions. Common challenges include “difficulty in developing an organizational definition of CIS, differing perceptions of CIS requirements and benefits, a variety of clinical settings, ever-changing technology, and getting physician buy-in.”

The other major difficulty in deploying CIS is the lack of standardization from both technical and clinical practice/medical science perspectives. According to ACS, industry standards influencers include: Accredited Standards Committee (ASC), Institute of Electrical & Electronic Engineers (IEEE), ANSI Healthcare Information Standards Board (HISB), Health Level Seven (HL7), and The Systematized Nomenclature of Medicine – College of American Pathologists (SNOWMED).

4 “must-knows” before you start a marketing and sales campaign

First you must understand how hospitals purchase products. Hospital CIS and software purchases are like any typical b-to-b “considered” purchase: the buying cycle is long and includes multiple influencers.

What is different, however, is that 85% of hospitals are non-profits. Anything that is going to be purchased first has to get onto the following fiscal year's budget – which is then approved by a hospital’s board of trustees. The sales cycle (or vetting process), therefore, can be as long as two or three years.

Must-know #1. Marketing and sales have to work together.

Every consultant and expert interviewed for this article agreed on this point: When marketing to hospitals, marketing and sales teams must work together. (Otherwise, “You are hosed,” said one sales guy who wanted to remain nameless.)

“Marketing needs to understand the difficulty sales people have in even getting their foot in the door . . . and that marketing’s #1 priority is to ‘warm up’ the sales call,” says Terri Langhans, former CEO of a national healthcare ad agency and marketing firm and author of the book 'The 7 Marketing Mistakes Every Business Makes and How to Fix Them'. “Sales has to work with marketing to develop the messages needed for each audience, which includes C-levels; specialized departments, ie: Radiology, Cardiology, and Cancer; physicians and nurses; and administrative support services, such as accounting.”

Sales also needs to give marketing the appropriate insider “lingo.” Says Don Mazzella, Principal of Information Strategies, a pharma and healthcare consulting firm, “Hospitals and their various departments all have their own tribal words. You need to learn the lingo – which can vary by department – otherwise, you won’t be taken seriously.”

And, marketing and sales need to develop a strategic plan that takes into account the sales process, the various constituencies, and the marketing activities needed for each phase in the sales cycle.

Must-know #2: Purchasing decisions are made by committee.

For the inexperienced, a typical hospital sale can go like this: Committee members A, B and C are all in favor of purchasing your product. They have done due diligence and understand what your product can offer the hospital in terms of cost savings, greater efficiencies, etc. They’ve consulted with their respective departments and have achieved buy-in. To you, the sale looks like it’s “in the bag.” The committee goes before the hospital CEO, who nixes the sale.

Your mistake? You forgot to vet the CEO or find the “champion” in the hospital who could do it for you.

Purchasing committees for CIS are generally comprised of the IT Director and/or CIO, the CFO, the CMO (Chief Medical Officer), physicians and nurses, and representatives from the various departments who will be using the software. You have to sell to this entire committee – and make sure everyone is on board.

Says Langhans, “Sales people need to find ‘the champion’ – the person who is going to champion your product or service to the members of the purchasing committee and the hospital administration. However, you need to be careful. You don’t want someone over-enthusiastic because people will think he or she is just a cheerleader. What you need is someone who has real power, who is well respected, politically astute, and who has the ear of key players.”

The other thing to keep in mind, says Koscic, is that you’re not just selling accounting software to the accounting department. Your software will need to integrate with clinical software – and that group will have their politics/issues/challenges, too.

Must-know #3 – Don’t overlook hospital buying groups.

In an effort to save money and garner better discounts, hospitals are now moving to buying groups or Group Purchasing Organizations (GPOs). The GPO negotiates contracts on behalf of 20, 50, or 100 hospitals in an effort to obtain lower costs on everything from consumables to medical equipment. Well-known buying groups include Premier Inc., Global Healthcare Exchange, and Novation. Companies such as Siemens, for example, sell to both hospitals and GPOs.

Must-know #4. The bottom line: It’s all about building relationships.

Hospitals are also incredibly political – and they don’t like to let in outsiders. Langhans says a good analogy is comparing a hospital to a castle surrounded by a moat – with the drawbridge in the “up” or closed position. The first step in getting the castle inhabitants to peek over the turret’s edge is with PR and marketing. The second step and most crucial step is building relationships. The more you get to know hospitals, the people inside them, and their cultures, the more effective you’ll be.

Relationship Building Secret Hint:

Hospitals are quite active in their respective communities. According to Beth Gandelman, Director of Marketing, Fertility Centers of New England, hospital CEOs are usually members of civic groups such as Rotary International; physicians and nurses are regularly called on to give educational talks (for example, an orthopedic surgeon will give a talk on back pain), and hospitals routinely sponsor community events, write informative articles for the media, and send out their own newsletters.

It pays for your marketing and sales people to gather this information and then to get out and meet these people on a non-salesy basis. You’re going to be much more effective in lowering that drawbridge if you serve on the same “Safe car seats for toddlers” campaign as the hospital CEO than you would trying to make a cold call.

5 tips for marketing to the "village"

According to our consultants and experts, hospitals are deluged with marketing material every day. Says Koscic, “Think about it – hospitals buy an incredible amount of stuff!” Most of this material is pitched into the trash. The reason, says Barbara Lehman, Chief Marketing Strategist for HMI Marketing and Advertising, is it’s “incredibly dull and doesn’t speak to a hospital’s real needs.”

However, you can get through using the following tips:

Tip #1: “Warm up” the sales call with a combination of advertising, PR, and DM

Before a sales person even steps foot in a hospital, marketing has to ensure the call is a “warm” call versus a cold call. What this means is that marketing has to be proactive in getting ads, articles, and press releases into the major healthcare journals (plus specialized technical journals for IT and other hospital professionals). According to Johnson, hospital CEOs will read articles while IT folk will read technical articles and ads.

Trade shows are also huge: A show like Healthcare Information and Management Systems Society (HIMSS) draws 18,000 attendees over four days. Savvy healthcare marketers ensure someone from their company is presenting at one of the over 200 educational sessions in addition to having a booth on the show floor. Says Langhans, “Trade shows are great for tactile, hands-on demonstrations.”

Tip #2: Ensure your direct mail is fresh, creative, and addresses real needs

With over 500 vendors in the Electronic Records Management space alone, marketers have to work hard to stand out.

Langhans once did a mail piece for a client that revolved around the issue of labs being prosecuted in federal court for Medicare fraud because they were performing “unnecessary” lab tests. However, they were just doing the tests the doctors had ordered. The lawsuits put labs in the awkward position of second-guessing and “policing” physicians.

Langhans designed the mailpiece to look like a lawsuit: it was written on “pleading paper,” inserted into a manila folder, and embossed with a legal looking seal. Says Langhans, “It looked like a lawsuit – and in fact, gave me a heart attack when I first saw it. However, we made sure the ad copy hit the point home fast. It read, ‘Now that you know what a lawsuit looks like, we’ll show you how to avoid one.’ We had a 40% increase in sales in 30 days. It was amazing.”

Lehman concurs and adds, “You really have to pay attention to the group to whom you’re marketing. If you’re marketing Electronic Record Management software, you have to keep in mind that you’re marketing to the Director of Medical Records as well as the C-level staff. You’ll want to stress quality control, privacy (huge issue), more efficient and accurate [insurance/Medicare] coding, HIPAA compliance, and decreased collection time. And of course, you’ll want to do this creatively and as succinctly as possible.”

Tip #3: Work with sales to develop stand-out presentations

Don’t forget, hospital purchasing committees are viewing more than one vendor. Instead of leaving sales to develop presentations on their own (which happens more than you think), work with your sales team to develop a professionally designed and written PowerPoint presentation that can easily be customized for each hospital presentation. (Be sure and view it together “live” once it’s complete to ensure it’s legible from across the room and that all the bugs are worked out.)

Also put together a “leave behind” kit with company press releases, brochure, white papers (have a two-page executive summary for the C-levels; longer ones for the technical people), article reprints, and testimonials. If your software lends itself to it, include an interactive CD “software tour” as well.

Tip #4: Create a Web site rich in content.

Like all other shoppers, reports Johnson, healthcare professionals surf the Web at all hours – “and they are trained to read and research. They look for the most detailed presentations they can find. They know puff when they see it, but they can be charmed just like anyone else.”

Make your site easy to navigate and create content designed to educate your audience – not just sell to it. (And don’t forget search engine optimization – you want to get found in online searches.)

Johnson recommends marketers send out quarterly mailings to drive prospects/customers to new information on Web sites, healthcare message boards, Webinar events, and even blogs. (We were pleasantly surprised at the number of healthcare blogs out there.)

Tip #5: Get to know industry consultants.

It is very difficult for hospitals to determine which software or system is right for them; hence, they are turning to consultants to help them make that decision. Get to know the key consultants in your space – they can make those important introductions (remember, it’s all about relationships), keep you updated on industry “gossip” and news, and give you suggestions on how to market your own product better.

Sums up Johnson, “In effect, a hospital is a mini-conglomerate, usually with centralized management combined with elements of bottom up empowerment. A vendor has to understand the culture of hospitals, how to learn the culture of an independent hospital and perhaps its parent company or GPO, and the culture of the professionals that buy its products and services.”

Useful links related to this article

ACS Healthcare Solutions http://www.superiorconsultant.com

American Journal of Nursing http://www.nursingworld.org/ajn/

Blah Blah Blah, Etc., Inc. http://www.blahblahblah.us

Centers for Medicare & Medicaid Services http://www.cms.hhs.gov/

Ed Koscic & Associates http://www.kconsulthealthcare.com

Fertility Centers of New England http://www.fertilitycenter.com

HMI Marketing and Advertising http://www.hmiresults.com

Information Strategies, Inc. http://www.hsafinder.com

The Business Word, Inc. http://www.businessword.com