Today’s US health systems face dramatic pressure from all sides. Provider CFO’s used to be able to offset losses on government payors through profits from commercial contracts. The mindset then shifted to getting costs in line to achieve breakeven on Medicare services.
Today, health system CFO’s must adjust cost structures to breakeven on Medicaid rates. In addition, the promised cost savings from consolidations, mergers and acquisitions have failed to materialize.[1] The bar keeps getting higher and the finish line is continually pushed further out.
This ongoing pressure on the top and bottom lines has changed the role and perspective of healthcare CFOs in all organizations. For-profit systems have always implemented tough procurement tactics with a hard look at any new expenditures. In this tough economic environment, not-for-profits now employ similar philosophies.
If you are an up-and-coming health tech company with a cool product that solves real problems, you need to find a way to loosen the purse strings on the tightened health IT budgets you face every day. CFO’s understand their health systems need to innovate and invest in new technology. You need to make it easy for them to make the investment in your product. The most effective way to do that in this tightly controlled environment is to present them with a compelling Return-on-Investment (ROI) story.
Healthcare CFO’s generally evaluate new purchases by setting an Internal Rate of Return (IRR) for new projects, as well as impose tighter controls on procurement activities to wring cost savings out of existing contracts. Investing real resources and funds in building out your ROI story is the most effective way to address this mindset. Combining a convincing ROI model with the right messaging to support your product sales team is fundamental to closing sales and ensuring the success of your business in today’s environment.
Four key leaders needed to build your story
How do you build out your ROI story? It involves leveraging the efforts of key leaders on your team from four key disciplines: Product Management, Services, Sales, and Finance.
1. Product Leader
At Get-to-Market Health, we have had the opportunity to work with an amazing set of companies in the health tech field who all have interesting product offerings that solve challenging problems for their client base. In the cases where we have helped build successful ROI stories, the process started with the Product Leader. He or she deeply understands the product and is able to articulate how, where and why your offering creates efficiency and/or helps drive net new revenue.
2. Services Leader
Having complete insight about how your health IT product is used and where it helps bend the cost curve or secure new revenue is key and is best explained by your Services team. Your folks overseeing a deployment have a front row seat to learn how your product performs better than other alternatives – status quo, manual solutions, or competitive products.
3. Sales Leader
The person responsible for selling your product plays an equally important role in building out your convincing ROI story. He or she lives with clients every day and understands where and how clients are realizing real benefits from your offering. The sales team needs to create a constant feedback loop with Product Management to create, refine and update your ROI story. The sales team is also on the front line to present the ROI messaging and to constantly assess how it is received and recommend ways to fine tune it to the market.
4. Finance Leader
An important last step in landing a powerful ROI, is building a sales tool that engages the client in personalizing your product’s ROI to their own setting and philosophy. Your finance leader speaks the same language as the CFO who will be using your ROI tool, so his or her input is critical. Your ROI tool should allow the client to fill in facts about their environment in a language their organization uses to define and ultimately defend the ROI they will realize with your product.
Having an obsessive point-of-view about defining and defending your ROI is completely appropriate for your Product, Implementation, Sales and Finance leaders. It is a team sport and must be part of your operational DNA. Given today’s health tech environment, you could make a fair argument that lacking a committed and collaborative approach to defining and communicating your ROI would be a disqualifying factor when considering candidates for any of these leadership positions.
One last point
You are never done refining your ROI story and improving your client-facing ROI tool. You need to view it as one of your products that needs continual enhancements and adjustments to adapt to changing market conditions.
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If you have feedback, questions or best practices you would like to share; we would love to hear from you. Share your experience in the comments below, or contact us to learn more.
[1] Hospital mergers don’t really lower some costs, by Bob Herman, Axios newsletter, August 21, 2018
