80% of respondents believe that contracts are a “significant” revenue driver, and two-thirds report that at least 70% of company revenue now comes through contracts
Notably, the importance of contracts was anticipated to be even greater among the biggest companies. According to the survey, 73% of those with more than $1 billion in annual revenue estimate that 90% or more of their revenues will come through contracts within three years.
The 2024 survey titled “How Medical Device Companies are Managing Complex Contracts” was designed to understand the importance of contracts and contract management with health systems – especially independent delivery networks (IDNs) and group purchasing organizations (GPOs) – in MedTech. The survey included responses from more than 150 MedTech professionals director-level or higher from companies with a wide range of annual revenue.
Key findings include:
- Two-thirds (68%) of medical device companies get 70% or more of their annual revenues through contracts with health systems, IDNs, or purchasing networks.
- All (100%) believe they leave additional revenue on the table because of difficulty managing contracts.
- All (100%) respondents also agreed that on-contract opportunities close much faster than off-contract opportunities.
- The difference in average estimated time to close was about 40%; that is, on-contract opportunities were estimated to close 40% faster than off-contract opportunities.
- 99% of respondents use email as a means of communicating contract info to other teams; 90% use meetings; and 73% rely on individual contact (calls/texts). (Answers are non-exclusive).
- 96% reported using spreadsheets to manage contracts; ERP systems were the next most popular at 73%. (Answers are non-exclusive).
- 97% say they will likely hire more staff to manage contracts; and 80% are planning to investigate software to address the issue. (Answers are non-exclusive).
“The U.S. healthcare system is very stressed with a lot of consolidation, and it’s challenging to keep a pulse on all of the different changes so you don’t always understand who you are negotiating with any given week,” explained Alex McLachlan, Intellijoint Surgical’s Director of Commercial. “Today, about 80% of our orthopedic surgeons are employed by a hospital. The byproduct of that is decisions are happening at a corporate or administrative level, so you might win over a surgeon, but the final decision maker is someone else.”
AcuityMD Vice President of Strategic Growth Tom Middleton concluded: “The de facto response to contract management issues has been to hire more people, but that is expensive and doesn’t solve the root of the problem. MedTech companies that leverage innovative technology can harness contract intelligence to help salespeople find and close more on-contract opportunities faster to drive revenue and growth, and maximize the value of their hard-won contracts.”
