Changing Sales Models: Key Account Management and Building an  Institutional Sales Strategy  for the Changing Healthcare Market 


                By:  Jim Langley                                                                            

Chair, Healthcare /Life Sciences Practice


Significant change continues to accelerate in the Life Sciences market - as the underlying structure of the market continues to evolve. Past newsletters have focused on two critical underlying areas of structural: (1) Changing Payment Systems as the evolution from Fee-for-Service (FFS) Payment systems to fixed payment (or bundled) payment systems on an episode-of-care or overall patient level - and linked to "value"/outcomes - has been "advanced" by various components of the Affordable Care Act and is now accelerating in the commercial insurance market as well, and (2) Provider consolidation where the Healthcare market continues to consolidate and integrate on a hospital system and integrated delivery network (hospitals/MD practices/other sites-of-service)


This issue focuses on the impact of provider consolidation and the growth in size/complexity of institutions and other healthcare purchasing "aggregation points" on Sales Strategy - in particular allocated sales investment towards a Key Account Management model.


Changing Healthcare Market

Structural Change: by any measure, the underlying structure of the healthcare market - and the resulting impact on new product decision processes - is changing. Examples include:

  • > 50% of physicians in the US are now employed by an "institution", i.e., not in private practice
  • About 15% of Medicare Fee-for-Service beneficiaries (not patients enrolled in Medicare Advantage plans) are covered under ACO's. HHS has stated a goal of 30% by end of 2016 and 50% by end of 2018
  • According to IMS Health, there are now more than 1,000 Integrated Delivery Networks (IDN's) in the US and this is growing at > 30% per year

Impact on Customer Decision-Making - Shift to the Economic Buyer:structural change is accelerating the changing nature of product choice processes. Product selection is moving from individual physicians to Healthcare Executives on an institutional level, and decision-making criteria increasingly include economic and business considerations. This shift of leverage to the economic buyer is accelerating and now affects virtually all product categories.   In essence, the market trend is increasingly toward:

  • More sophisticated Purchasing Processes and Systems
  • Centralization of product purchasing decision-making and moving decision-making away from individual physicians
  • Clinical and business-based decision criteria - moving toward preferential pricing, better services, and ability to demonstrate value

Key Implications: to survive these challenges, manufacturers must make significant changes to their value propositions, go-to-market strategies, and clinical and marketing tool development. From a sales process perspective, this requires new sales models - specifically allocating more of your sales budget toward an "institutional" call point and sales model.

Rise of the Key Account Management (KAM) Model

The most common "institutional sales model" seen in the Life Sciences Market is a "Key Account Management Model". Fundamentals to consider with this model include:


Role of Key Account Manager:

  • Target Customer: institutional decision-maker(s) and aggregation points in the system. Note that this can be a range of "institutions" including hospital/hospital system administration, integrated delivery systems, payors, and large multi-group physician practices
  • Typical call points by customer: the KAM role must be able to target higher level decision-makers on an institutional level including:


Vice -President level  

Medical Director 

Committee Chairs  

Key Department heads (e.g., purchasing, cath lab)


  •  Sales Process: consultative sell/solution-selling sales process. This is a relationship selling process where the KAM must establish long term relationships with key institutional decision-makers and help them solve current and future problems


Account Manager Skills/Profile: the skill set required for effective Account Management is greatly different from traditional physician sales force models. Critical skills include:

  • Must have selling skills: this remains a fundamental skill in the KAM world (as in the MD selling world)
  • Broader business, financial, and economic analysis skill sets including business planning skills
  • Must understand broader system-level trends including payment system reform, provider consolidation, and other critical healthcare trends
  • Clinical and disease-level understanding - and how this flows thru the system on a patient, episode-of-care, and a population health level
  • Must understand institution incentives, systems, and important SOP's - and influencers on these
  • Solution selling/problem solving skills
  • Local system knowledge: must understand their local or regional healthcare delivery and payor models
  • Ability to lead/influence internal multi-functional teams/resources to achieve customer goals

In essence, this role is a "B2B" role where the KAM must understand their customer's business and optimize your product's access to and impact in that environment.


Incentive Compensation Considerations:Effective incentive compensation strategies in an Account Management model are also rapidly evolving and show wide variation in the market. But some key considerations include:

  • Linking Compensation to Product Sales while Building Trust: this is harder than it seems. While the Company goal is driving product sales remember that the KAM role should be building long term relationships and helping the customer solve problems over time. The KAM will lose credibility if they are primarily incented on product sales and, by way of example, are pushing end-of-quarter "purchases" on the customer. Companies should carefully structure product sale incentive and look at longer time periods
  • Management by Objectives (MBO's): structuring a certain % of compensation based on Customer-specific MBO's can help align KAM and customer-incentives. An additional benefit of this approach is developing and framing specific customer problems, plans, and goals that can really drive understanding of customers across your organization
  • Customer Satisfaction: a portion of compensation tied to specific customer satisfaction ranking scales can also effectively align KAM with customer goals and give the customer a "vote" in the process



Overall, the changing healthcare market is moving product selection from local physicians and facilities to larger institutional aggregation points - including hospital systems, IDN's, GPO's, payors, and governmental entities.   It is incumbent upon Life Science executives to understand this trend and allocate an increasing share of their sales investment to an "institutional sell model".   A surprising number of companies do not appreciate this shifting landscape and, as a result, are in jeopardy of getting shut out of a growing segment of the market - putting the success of their product and companies at risk. If well executed, a Key Account Management model can effectively target the emerging institutional decision-maker, build long term relationships, and achieve market share - as well as assisting today's Life Sciences company improve product design and marketing support programs to meet the needs of this new buyer.