Located in the South, Hospital A is one of three member hospitals of a health system alliance. Motivated by more than filling excess testing capacity, Hospital A became interested in developing a statewide reference laboratory and turning its laboratory into a profit center for the organization.
Hospital A decided to start an outreach program in 2001. Like many other hospitals venturing into outreach, it promoted someone into the newly created role of outreach manager and began soliciting business. At the end of FY2001, the outreach program had generated $10,000 in new net revenue. Without a professional salesperson and by basically learning on the fly, the program showed modest revenue increases over the next two years. At the end of 2004, its net revenue was $335,000. Dissatisfied with these results, Hospital A sought out an outside firm specializing in outreach laboratory sales and marketing.
Early in 2004, the hospital contracted with Chi to perform a complete outreach analysis which included an in-depth market opportunity assessment and an operational readiness and compliance review. Chi assigned a team of specialists that worked both on- and off-site to complete the analysis. After several months, the team presented its findings, concluding that to profitably expand the outreach program throughout the state in this highly competitive market, the laboratory needed to create its own identity and the hospital needed to view the laboratory as a profit center and be willing to invest in resources to grow the business.
Hospital A hired Chi in October 2004 to analyze and redesign the laboratory’s central processing operation, develop a sales plan and strategic options, and manage the outreach sales and marketing program. In January 2005, the laboratory re-launched its outreach program.
Six years later, the program’s development and success is evident:
- The staff includes two salespeople, one service representative, and sales management.
- To date, the program has generated over $30 million in net new sales.
- Contribution margin is at 67 percent.
- Test volume in FY2011 will be over 750,000 tests, more than double the FY2005 statistics.
- The program will have processed over 200,000 requisitions in FY2011, double the number of requisitions in FY2005.
- Billing functions were moved to an outside vendor in 2005, and the adoption of Atlas Laboratoryworks in April 2007 competitively positioned outreach for growth and improved customer service.
- A robust territory management strategy has been implemented, including the utilization of Salesforce in FY2011 for tracking and reporting for over 500 clients.