How Can Startups Sell Into Hospitals?

Hospitals account for almost a third of the $3 trillion healthcare spend in the US. Consequently, partnering with a health system can be invaluable for a digital health startup. But, Go-To-Market in digital health is very hard. Long sales cycles, multiple decision makers, and complex deployment processes are only some of the challenges.

We discussed how to cross this abyss at a recent Storm healthcare event. Successful GTM in Digital health requires:

• Understanding the risk aversion inherent in the industry
• Learning about all the decision makers and their incentives
• Ensuring your team has healthcare expertise
• Providing the right value proposition, especially ease of use
• Looking beyond local customers
• Thinking about scale early

Understand Risk Aversion

Risk is deeply rooted in healthcare and it is often binary. Things either work or don’t work and the outcome can have a dramatic impact on patients’ lives. Therefore, it is natural for healthcare workers to preserve what works, even if it is inefficient. Existing practices are tried and tested over decades and over thousands, if not millions, of patient interactions. Moving away from that status quo is not a light decision and entrepreneurs need to understand that the bar for a new technology or solution is, therefore, higher than in other industries.

In such an environment, startups should focus on transformation and not disruption. Highly valued startup norms such as ‘failing fast’ is unacceptable in healthcare. Therefore, provider systems will want to pilot enough before agreeing to deploy solutions on a much larger scale. As a startup, preserve what works and only reinvent what does not.

Learn about All Decision Makers and their Incentives

A successful go to market strategy should account for the needs and goals of various stakeholders within a provider

Clinical: Clinicians such as doctors and nurses are crucial to the success of any digital health solution. Physicians want to interact with patients. Reducing mundane work while freeing up time for medical issues can lead to increased physician satisfaction and adoption. Secondly, focus on the clinical impact of solutions. Academic partners can offer credibility especially for early stage startups who do not have many customers. A key ally is often a department chief who can be your champion at the highest levels of decision making.

Business: Healthcare is a low margin business. With a complex payer and patient mix, providers have had to become financially astute. Besides offering clinical support, entrepreneurs should also understand the impact on the bottom line. Will this move the needle for them? Can I increase revenue or decrease cost? If the service line is losing money, will the hospital be incentivized to invest more there? What are the metrics that matter? These questions will help startups understand the viability of their business model even if the clinical impact is clear. For example, it is important to think through how the slots freed up by removing unnecessary visits might be filled by more clinically urgent or acute cases that reduce patient wait times and disease progression.

Business and clinical considerations also impact physician recruiting and brand management, issues that providers obviously care a lot about. The best physicians can have an enormous influence not only in their departments but also across the hospital. Therefore, startups should be mindful of secondary decision makers.

Operations: Hospitals workflows have to work consistently and constantly 24/7/365. Service lines, facilities, and the supply chain are heavily focused on minimizing risk so that existing processes work as expected. Changes to such workflows can easily take a long time to roll out and variance in outcomes is what operations teams worry about. Startups should plan for this timeline and ensure that results and outcomes are consistently produced.

Technology: Ultimately, a lot of technology solutions have to work with hospital IT departments, which are often stretched thin. Minimizing impact to IT and planning for concerns around security, deployment, and uptime are crucial to winning IT support. It is also important to understand where IT has invested before. EMR, Inventory management, communication, security infrastructure and other systems are often very expensive and take a lot of effort to deploy. The EMR system alone can be close to 1x revenue and internal teams carefully researched, trialed, got board approval, painstakingly deployed and trained staff to use these systems. Highlighting problems and deficiencies in these massive investments will naturally lead to some resistance. When a decision maker responds with “our EMR does that”, appreciate that viewpoint and work around it rather than dismiss it.

One way to address this concern is deep integration into existing systems. This step can set startups apart since it is not trivial and most partners don’t do it. However, don’t stop with just the EMR. For adoption at scale, a startup’s product should be part of as many workflows as possible from the ER to the call center. The goal is to avoid variance in information and outcomes for workers and patients.

Legal: All interactions with health systems are usually covered by contracts. It is vital to understand what exactly is covered both at the pilot stage and at scale, not just by the provider-startup contract, but also by the payer contract with the provider. Reimbursement from the payer removes a significant barrier for adoption into a hospital. Digital health might be covered, but any sort of renegotiation can complicate matters. Privacy and obtaining patient consent are also issues that legal teams tend to focus on.

Think about Team Composition

While there is no one blueprint for a successful team, having someone with deep healthcare experience will be very helpful. The conversation in healthcare is different as seen above. The terminology, incentive structure, decision makers and risk characteristics make healthcare unique. Pure technology teams can succeed, but the road will be more difficult.

Find the Right Value Proposition

Technology can address a number of challenges in healthcare. Managing scale (data, interactions) and cost (usage, errors) are often the biggest targets. While these are important for adoption, the one that often does not get as much attention is ease of use. Motivating healthcare workers and patients to use a product can be incredibly value accretive. This sounds obvious, but many solutions focus on the destination and not the journey. Physicians and nurses want to spend time with their patients. That is why they joined the profession. Anything that detracts from actual engagement takes away from the joy of service. Another system to manage or a new data source to absorb can be incredibly taxing even though it is helping. Startups that emphasize ease of use, respect the physician timeline, reduce grunt work while enhancing intelligent patient interaction will be successful.

Look to Other Locations

Most digital health startups are founded in the tech centers of the bay area, Boston, and New York. These locations also have a number of prominent health systems. Therefore, it is natural for startups to focus on them. Unfortunately, this creates a situation where the competition for these systems’ attention is fierce while those in more rural parts of the country are ignored. Entrepreneurs should try to work with hospitals in the midwest, southeast, and other areas. Often, it is possible to show bigger economic impact and a greater clinical difference in these areas. There is less competition for a decision maker’s time and smaller systems, especially, will appreciate the opportunity to adopt cutting edge technology early.

Secondly, smaller systems will also have a faster decision-making process and shorter sales cycles. This can help early stage companies establish credibility when they eventually move to larger but slow moving clients.

Think about Scale Early

Inside large systems, the team responsible for adopting a solution across the organization might be different from the one piloting the solution. While an innovation center, individual department or even a physician can pilot a product, a system-wide rollout will need support from physicians, nurses, operations, pharmacies, administration, IT etc. Startups should try to ensure that those people are present at the table even at the earliest stages of the discussion. This will not only provide an opportunity to sell to those groups but also enable the entrepreneur to understand what milestones are required to scale. Focusing on those in parallel will speed up the rollout.

Navigating the Process

As with any enterprise sale, having an internal champion, who is passionate about the problem, is key to partnering with a health system. The more clinical the product, the more you need the support of a physician champion. This person can tell you how the decision-making process works, whom do you need to win over, where the road blocks are and can sell your vision. Ideally, your champion should be senior enough to communicate with all the decision makers (up to the board) but also have the ability to actually experience the product.

In meetings, it is important to remember that healthcare is fragmented even on the inside. So, pay attention to what each decision maker is asking? If the questions are superficial, then the process is probably not going well and more education is needed from the startup and the champion. If the questions are nuanced and focused on how their service line is impacted, then the decision makers are likely thinking about deployment and outcomes. This is a good sign. The goal of the initial meetings is to stay in the game. The timeline between meetings can easily be a month, even if things are going well, and an entrepreneur needs to quickly figure out where the scarce resources are best deployed.

Roleplay

As discussed above, the number of decision makers inside a hospital can be numerous. If your startup is successful in getting their attention, the next meeting could easily have dozens of people with fancy titles, all with different motivations and questions. Research their backgrounds, roleplay interactions and plan to address the skeptics. This is general advice for any startup, but the concerns are amplified in healthcare.

The Go To Market in healthcare is a complicated and drawn out process. It is often a methodical march to get to the numerous business opportunities inside health systems. The important thing to realize is that passionate healthcare advocates inside hospitals want entrepreneurs to succeed and the right partnership can be incredibly supportive in achieving a startup’s vision.