Hi, my name is Craig Ackerman. I’m with the Alexander Group and lead up our health care practice. Today, I’m going to share with you our latest research into commercial models, as well as industry trends that are affecting those selling into the healthcare markets. The good news is 2023 has started off better than 2022. We have not had a huge spike in respiratory viruses, so that’s great from a human capacity. It’s also great from a business capacity. So we’re starting in a much stronger position compared to 2022. As you can see within hospitals, the operating margins are up, operating revenue is up, operating room minutes are up. Hospitals are starting off the year healthier than they did last year. So that is good news for those selling into the healthcare system in Q1 of 2022. Basically the winter time, the Omicron surge really had a huge impact on hospitals, especially in the January, February time frame. We’ve had a strong start. However, there are still concerns that remain. Probably the biggest concern that comes up in our research are nurse staffing shortages. This is really a proxy for all healthcare. We talk about nurse staffing shortages, but there’s shortages of all types of healthcare workers, even physicians.
A lot of it has to do with the travel phenomenon. So this is a headwind we will continue to face. It’s also something the hospitals and those selling into the healthcare system, whether it be hospitals, physician offices, ASCs, or clinics of other categories are going to continue to have to adapt to. So we’re going to have to help our customers overcome some of the challenges they’re facing within staffing shortages. Another headwind that we are facing are insurance and payment concerns. So there’s a few data points we’ve been watching. This data point was from our recent research where majority of hospital executives or 45% of hospital executives are concerned, have moderate to severe concern about insurance and payment issues on behalf of patients. Gallup also ran a recent poll that showed 38% of Americans postponed medical treatment in 2022 due to cost. So the economy is catching up a little bit with the healthcare system. Saw this and also in 2008 where economic headwinds also had an impact on people seeking out procedures, especially truly elective procedures, out of fear of losing their jobs, or they just couldn’t afford the deductible or the co-pay. And in the last 15 or so years, we all know deductibles and co-pays have continued to rise.
There’s now a stronger connection between healthcare and the economy than there was in the past. As far as what our commercial leaders asking their sellers to do, they’re asking their sellers to return to client sites and interact with customers in person. When we look at all the data that we’ve collected, we see that sales leaders and commercial leaders want most of their sellers spending 90% of their time out in the field with their customers. What we’re seeing, though, on the flip side is there are still reluctant sellers who are trying to do too much from their house and in a remote environment. We need to continue managing this and encouraging our sellers to get out into the field. And we also know that physicians want to have about 70% of their interactions with sellers in person. If you’re selling into executives or healthcare administrators, that number is closer to 40%. So there’s also dependency on what you’re selling, who you’re selling to. But our core sellers want to make sure they’re getting back out into the field because our customers do want to see our core sellers. As far as another set of good news, we’re seeing great forecast heading into 2023.
So most are forecasting above 5% growth this year. The most common forecast number is 5 to 10%, which is actually above the 2022 actual growth numbers. That’s great news for the industry. We’re seeing healthy and consistently returning growth. As a result, healthcare executives and commercial leaders are planning to increase their marketing investments. Very few are planning to decrease and most are in the increase category. We can’t forget about digital even though our customers want our reps in person. We still have to build out our omnichannel digital capabilities because our customers want more virtual support than they did prior to the pandemic, and we expect that level to build going forward. So it’s not that we can’t forget about virtual as we exit the pandemic and move into a more normalized environment, but we still need to have the capability to support our customers where, how and when they want to be supported. The sales increase is really healthy. It’s one of the largest items for most organizations selling into the healthcare market. The planned sales expense is up around 9%, which is really healthy.
And almost all are planning on increases or very few are planning on decreases. That’s great news, especially for our industry. 2023 is a little tougher because of inflation. While we did have pretty growth numbers in 2022, we were also fighting inflation, which was impacting most organizations’ bottom lines. It’s great to see that investment is coming back and organizations are definitely more optimistic in 2023 than they were in 2022. Just given the fact that Q1 is shaping up to be a pretty good quarter for most and definitely shaped up to be a much better quarter for the healthcare system if you use hospitals as a proxy. If you look at over the summer time, last summer was really slow as well. So many people took vacations. I jokingly coined it the great Vacation. While people are going to take vacations this summer, it’s probably going to be more of a normal vacation pattern than we’ve seen. We definitely saw last year that almost the whole country and possibly the whole world took vacations because it was our first normal summer in a long time. It asks a lot about compensation for sellers. It’s relatively within historical norms. So even though we’re facing inflation, the broader economy does not look like from a compensation perspective for sellers that there are any more expectations for pay increases than there have been in the past.
Historically, somewhere in the 1 to 3% range is the average. So you can see that almost 70% are below that or 3% and below. Not a lot of upward pressure on compensation for sellers within the healthcare industry this year. On the price increase front, 2022 was pretty good. We on average saw 5-5.5% price increases, but this is against 7.4% inflation. So our price increases aren’t keeping up with inflation in 2023, the projections are 3.3% price increases, but inflation is projected to run 4%. I think the latest numbers were around 5%, so might be a bit optimistic here, but hopefully throughout 2023, we’re definitely on the way to lower inflation numbers, but price increases aren’t keeping up. We are hearing anecdotally in the marketplace that there’s a lot of pushback on price increases this year. Last year, price increases were pretty common and most were accepting of price increases. This year we don’t expect it to be as common. and we’re also expecting more pushback on price increases. Thank you for your time today. If you have any questions, please contact us or visit www.alexandergroup.com.
