Management of Pathology Practices
Posted 13 December 2004
We Don’t Need Any Sales Representation, Do We?
By Bernie Ness, B J Ness Consulting Group, LLC
The marketplace for anatomic pathology has become extremely competitive. I remember the negative response from the president of DIANON when I proposed the idea to venture into AP. His comment was “AP was too low tech and not profitable enough for him to consider.” At that time there was no national competitor in AP. The big commercial labs were not interested in AP. They did not understand nor care about that segment of the business. Very few, if any, pathology groups had sales and marketing programs. Now the list of competitors in AP expands each month with new entrants. They all see the huge financial potential for success from the outpatient segment. My $64,000 question to you is where do you think they will get their share of the market? The answer is from your practice!
Long gone are the days when pathologists sat behind the “paraffin curtain” in their hospital waiting for biopsies and paps to appear. The high volume specialists (urology, GI, GYN, and dermatology) have all moved their procedures out of the hospital to their offices, surgery centers or endoscopy centers. Those prized specimens no longer are mandated by hospital regulations to come to your pathology laboratory. When these specialists invest their own money into centers they want to be competitive in the marketplace. Commercial and private laboratories are soliciting them and providing them with the tools they need to become successful. These other laboratories all have experienced sales professionals representing them. You have heard the old saying “out of sight, out of mind”. Are you in the sight line of the specialists when they move? Most of you are not. Providing the same old, tired, 1970’s, kind of pathology service to a group that has invested millions in a new state of the art center will just not cut it anymore.
The overwhelming problem observed over the past 10 years of consulting with pathology practices is that no one is responsible for sales and marketing activities. Or, it is relegated to the business manager of the group. This is understandable. Pathologists are trained to read cases and make diagnoses. Nowhere in the medical school were there courses on sales and marketing management. Besides, pathologists only make money “pushing glass” by reporting CPT 88305. Your business manager may be a great financial and operational person, but, I have not met a single one that knows anything about sales and marketing to clinicians.
Due to these reasons, sales and marketing functions rarely if ever get done. Every day that your practice is not out there making contact with your clients/prospects the competition is making contact. You will eventually lose all of your major clientele to the commercial laboratories. You will only get the “scraps” of business they will toss you. I have seen several client specimen referral reports from hospital-based pathology groups. The entire medical staff is listed, but the referral volumes are anemic. For all intents and purposes, the clients are all gone to the competition. How do I know this? After 10 years of pathology I know when a specialist practice is referring all the work they can to the pathology group. Getting less than 10% of the potential volume is a peacekeeping gesture.
Can your practice afford to put a sales and marketing program into place? The better question is if your practice can afford not to put the program into action. With reimbursements shrinking, expenses growing, and biopsy procedures leaving the hospital each year, you will need to find a way to supplement these market factors to continue to survive and enjoy your standard of living.
The first thing you need to do is to look at this whole issue as an investment in your future. Almost every pathology group views sales and marketing as expenses. Since the group has never had to fund sales and marketing before, they are extremely reluctant to put up the money required for success. A $100,000 investment can generate $1,000,000 in new recurring revenues. It will also reduce attrition of your current clients.
The groups also want the investment to be risk free. I do not know of any business opportunities that do not involve risk. You need to manage risk for your success. If you do not have the expertise or experience in this area you may have to outsource it to professionals to reduce your risk. This is similar to outsourcing your billing, legal, and financial functions. Many groups tried to go it alone without any professional help to save money. They ended up spending twice as much for less than one half the results. If you are not doing the functions now, what makes you think you will have the time and expertise and experience to do them in the future? Sales and marketing functions are daily tasks.
A pathologist once told me an old Scottish proverb. “When your business is good you need marketing and sales activities. When your business is not so good, it is imperative to do marketing and sales functions.”
Bernie Ness is the President and CEO of B. J. Ness Consulting Group, whose goal is to provide the finest in innovative and cost effective solutions to management, sales, and marketing problems in the medical laboratory industry. You can contact him at [email protected], toll free at 800-280-3785, website www.bjnessconsulting.com.