The healthcare landscape is changing rapidly, and providers are evolving just as quickly. Due to increasing pressure from rising costs and more demanding healthcare laws, they are consolidating into larger, “organized providers,” while the ability to succeed as an independent physician is dwindling. The numbers do not lie – the majority of prescriptions are written by physicians affiliated with an organized provider group (such as a hospital system), and these proportions will only grow.

Organized providers are networks of healthcare providers which provide integrated and coordinated healthcare services to their patients. Together, they often take clinical and fiscal responsibility for the clinical outcomes and the health status of the population served.

IDNs, ACOs, and Medical Groups are all important types of organized providers. The largest entities by size and volume are generally IDNs and ACOs.

Integrated Delivery Networks (IDNs), also known as Integrated Healthcare Networks (IHNs), are groups of hospitals, physicians, insurers, and other healthcare entities working together to coordinate and broaden the spectrum of services offered to specific geographic area or market. They do not require any accreditation, and are viewed as the intersection of a corporation and a healthcare provider. 

Accountable Care Organizations (ACOs) are groups of doctors, hospitals, and other healthcare entities characterized by a payment and care delivery model that aims to link reimbursement rates to quality metrics and cost reductions for an assigned population of patients. While the providers in an ACO are affiliated and work together, they do not have to be owned by the same organization. When an ACO is successful and achieves its quality and cost metrics, the providers involved share in the savings that they achieve. Due to the corporate-like nature of IDNs and the payment models associated with ACOs, they are especially cost and quality conscious, making them the model integrated entities when it comes to organized providers.

New Challenges in Engaging Organized Providers

The important takeaway for pharmaceutical manufacturers is that as the business models of healthcare providers evolve, so will their needs. Physicians are also starting to see their incentives tied to metrics like quality measures and patient satisfaction. Providers are no longer simply interested in the clinical aspect of a product, but also the cost savings that a drug can offer. As prescribing power is taken away from individual prescribers and top-down control tightens in organized providers, C-suite stakeholders of these healthcare entities are going to be more interested in healthcare economics, comparative effectiveness research, and quality of care for entire patient populations as a whole, in addition to the traditional safety and efficacy metrics that sales reps are so used to pitching. These new needs will place greater demands on pharmaceutical manufacturers when it comes to proving the value of their drugs and services.
Additionally, a growing proportion of organized providers are becoming ‘no-see’ accounts, where healthcare providers affiliated with the system are not permitted to see sales representatives on the grounds. Restricted access to accounts limits representatives’ interactions with physicians to brief lunches and phone calls, reducing the potential impact that sales representatives can have. There is also a whole other segment of non prescribing stakeholders, like nurses and physician assistants, that have seen an increased role in decision making and need to be catered to. Even for those systems that do allow sales calls, many are exerting tighter control over individual physician prescribing behavior, taking away the prescribing power from healthcare providers and virtually eliminating the impact of traditional individual sales calls.

In general, greater coordination and integration within healthcare providers may make it more difficult to penetrate accounts utilizing traditional sales tactics and propose meaningful ways to help or partner with providers. Additionally, integrating across many groups gives these organized providers strength in numbers, and gives them more negotiating power when it comes to contracting. Outside of collaborating with other physicians, providers are also integrating with other stakeholders, like payers, employers, and GPOs to increase their reach and influence. An important thought to keep in mind is that as providers grow more sophisticated, manufacturers should leverage this growth in size and capabilities as an opportunity to partner with providers and help them achieve their goals. For example, Johnson & Johnson’s subsidiary Veridex partnered with Massachusetts General Hospital to develop and commercialize a next-generation circulating tumor cell technology for capturing, counting, and characterizing tumor cells found in patients’ blood. Given the fact that the Boston area is extremely academic and the local oncologists tend to experiment with innovative medicines and technologies, choosing to work on this technology with an integrated hospital system in Boston was a focused effort by J&J to be customer-centric and meet the hospital systems needs. In the end, not only did they work on a venture that would benefit both parties, but they established themselves as a partner to a continuously integrating system.

Successfully Engaging with Organized Providers

Many manufacturers have already started taking action in efforts to meet the needs of these new important entities, and with good reason: with the power of the individual prescriber declining, organized providers are the primary customers of tomorrow. Based on our experience, the successful pharmaceutical company will approach organized providers holistically across six key dimensions versus tactically addressing customers through organizational or process changes.  Keep in mind that this is not a recipe; each company’s portfolio, internal maturity/capabilities, and strategic bets will drive the most appropriate path forward.

Go-to-Market Model: Many pharmaceutical companies are designing and implementing a new go-to-market model specifically for organized providers. With a tailored approach and customer focus based on the account profile and geography, companies have been able to move to an account-based selling model, with account executives acting as the single point of contact and engaging with C-suite and D-suite level players within organized providers. Pharma has found that these stakeholders are much more responsive to this approach than being bombarded by several different sales representatives providing information in an uncoordinated fashion.  However, the internal implications around roles and responsibilities are not minor and may require extensive transformation.  For example, some companies have moved to a model with fewer, higher level sales roles that require intensive internal collaboration to bring the right people and content to the table with the customer.

Value Proposition: Manufacturers are not only improving the quality of compelling clinical value messages for individual healthcare providers, but are also shifting the focus to quality outcomes when engaging organized providers. In order to properly formulate an effective value proposition, manufacturers need to understand the needs of organized providers. Whether it is improved patient outcomes, more efficient processes, or enhanced quality of care, the value proposition needs to cater to the needs of the customer. Both EMD Serono and Merck have developed outcomes-based contracts with Cigna in the past. Other key considerations that have been influential in the past while developing a value prop include advancement of research topics, services like provider and patient education, provider decision-making processes, and gaps in data.

Capabilities: Pharma is taking an in-depth look at what capabilities they require to address the needs of their evolving customers. By identifying the gaps in their customer facing roles, they can develop competency maps and address the gaps with adequate training. However, the more drastic these gaps and changes are, the more important that visible leadership buy-in and commitment is. Without support from leadership, there is no accountability for reps and account managers to actively take part in developing these capabilities. When leadership is engaged and contributing to a change – that’s when evolution is catalyzed, and customers will notice the difference.

Performance Management: Managing the performance of the key accounts is important irrespective of the go-to-market model that a manufacturer decides to pursue. regardless of the go-to-market model is an important objective. Companies are re-visiting the definition of their KPIs and tracking of performance, and including qualitative Management by Objectives (MBO) metrics in incentive compensation. As the role of the individual physician in these systems decreases, pharmaceutical companies are moving away from pure sales metrics to softer, more relationship-driven and account-based metrics that establish the company as a long-term partner, rather than simply a provider of products. Management must make sure that they develop the right mix of both sales-driven and account-driven metrics, based on their strategic objectives. Additionally, pharma companies should be aware of potential misalignment and cultural consequences, as having one team with MBO metrics can be disruptive to other sales-oriented representatives in the same territory.

Processes, Tools & Systems: Companies are better enabling their sales forces by focusing on improving customer knowledge, account relationship management, and strategic account planning. They are utilizing new technologies to optimize their ability to track and improve these processes, along with negotiating and contracting, and field force interaction management. For example, AstraZeneca’s Medical Affairs team collaborated with Veeva to implement a new customer relationship management (CRM) system. Veeva has advanced customer insight functionality for Astra Zeneca, allowing for better brand team communication and analysis around corporate accounts (organized providers). Not only did the CRM system allow for annual cost savings of 30% and an increase in reporting efficiency by 89%, but it also enabled AstraZeneca MSLs to incorporate strategic objectives that are important to both their customers and the organization into their day-to-day activities. More effective, compliant collaboration processes across commercial-medical teams to address customer needs can be a competitive differentiator in the marketplace.

External Collaboration: Engaging in collaborations with organized providers can help manufacturers uncover key insights about their products and services that can help shape their value proposition, sales approach, and services. Leaders in the industry are also proactively identifying innovative ways to partner with not only organized providers but also stakeholders within the broader healthcare environment (e.g. payers, GPOs). In October 2013, Boehringer Ingelheim collaborated with Visible Health to update drawMD, a cardiology patient education iPad app. The app allows physicians to create visual images used to guide conversations about medical conditions and procedures with patients. By helping to improve patient-physician dialogue at the point of care, the app aims to support a more efficient and effective physician encounter for patients. Boehringer Ingelheim’s involvement with developing this patient education tool allows them to bring a new tool to their target cardiologists and establish themselves as innovative partners in the cardiology space.
As organized providers continue to grow, manufacturers must seize the opportunity to partner with them, and establish themselves as leaders in the healthcare space. In order for pharmaceutical manufacturers to find continued success in the space, the industry needs to rethink its entire business model, reconsidering the go-to-market value chain and the tactics that support it. The most proactive leaders in pharmaceuticals have already put motions in place to engage organized providers – have yours?
Special thanks to Amelie Dubois, Kyle Berkowitz, Preethi Bapna, and Rohan Maru for their contributions in delivering this blog post.