Two ‘Yeses’ and a 'No'
Edition: April 2003 - Vol 11 Number 04
Author: Mark Thill
Thirty or so years ago, Hue Thomas sat at the one and only desk with the one and only telephone at Marks Surgical Supply in Macon, Ga. The Macon office had only opened up in June 1970, following the acquisition of Augusta, Ga.-based Marks Surgical by Owens & Minor. Richmond, Va.-based Owens & Minor figured it could service the entire state of Georgia from centrally located Macon, and Thomas had been hired to open and run the office in Macon.
One evening, a customer called to praise the Marks delivery person who had shown up at the doctor’s office in a suit and tie. “I’ll pass it on,” said Thomas. And he looked in the mirror and did just that.
Thomas is retiring from Owens & Minor after 33 years in the medical business. He’s moving to Savannah, Ga., to assist his wife, Fran, a successful artist, in her newly opened art gallery. His long career in the healthcare industry reflects the evolution of Owens & Minor from a small regional business battling with hordes of competitors for scraps of physicians’ and hospitals’ business in cities throughout the Southeast, into the national hospital supply powerhouse it is today. And Thomas’s career also reflects the maturation of the medical/surgical industry itself.
Born and raised in Savannah, Ga., Thomas graduated from Georgia Tech and went to work for Shell Oil as a dealer representative. A friend convinced him that the oil business was a dead end, but that healthcare had a bright future. Barely knowing what a suture was, Thomas interviewed for and got a sales job with Ethicon in New Orleans.
Four years later, he joined the Nashville, Tenn.-based Eisele Co., which was owned by the company that made Old Spice cologne and aftershave. The company made glass syringes and thermometers, primarily for the retail drug market, but wanted to bring to the medical market a line of disposables. Thomas’s job was to set up a distribution network for Eisele in the Southeast. One of his customers was Marks Surgical Supply.
“Henry and Charles Marks kept asking me to come work for them,” recalls Thomas. “I told them I’d never work for a family-owned business.” No opportunities, he told them. Then, in March 1970, an opportunity presented itself when Owens & Minor bought Marks Surgical.
“Henry Marks and I were sitting in his warehouse at 5 p.m. one Friday afternoon. I still had to drive back to Atlanta [which was where he was living]. He told me about the merger, and that this would make a big difference for me, because now Marks would be part of this corporation.” Marks also told Thomas about his plans to open up an office in Macon.
“After that, on another Friday night, when I’m ready to drive home to Atlanta, Henry says, ‘Why don’t you go to work for us. You could be the manager in Macon.’
“He said he already had offered the job to two other fellows, but they didn’t take it, because it didn’t offer enough money,” says Thomas. But he did, reporting to Macon on June 15, 1970.
‘Local Guy’ Strategy
In 1970, Owens & Minor barely resembled the company it does today. It was primarily a pharmaceutical wholesaler, recalls Thomas. Medical and surgical product supply was a growing part of the business, but certainly not the dominant part.
Even the name of the company was different than it is today. The parent company was Owens, Minor & Boedeker, the name under which it operated in the pharmaceutical business. The medical/surgical part of the company went by several names. The Richmond office was called Powers & Anderson. But Owens & Minor retained the names of the local, family-owned businesses it acquired. Hence, Marks Surgical Supply remained Marks Surgical for years after the sale. So did Southern Surgical, White Surgical and others.
“We couldn’t compete with American Hospital Supply [now the Medical Products and Services group of Cardinal Health] playing by their rules,” says Thomas. So, while American was building a national identity, Powers & Anderson billed itself as the local guy.
In the early 1970s, the healthcare supply chain was still a little rough around the edges, recalls Thomas. Powers & Anderson sold to physicians’ offices, nursing homes, hospitals and veterinarians. “We went wherever we could get an order,” he says.
GPOs had little impact on the market. And most hospital purchasing departments merely rubber-stamped requisitions handed down from the departments. Distributors went with the flow.
“We called on the departments – the ORs, central supply, emergency rooms, labor and delivery,” recalls Thomas. “We’d gather requisitions, then go to purchasing for the purchase order.”
Back then, hospitals tended to buy a little bit from everybody. “We might have the needle-and-syringe business in one account, while Durr Fillauer or General Medical or American or someone else might have the tongue blade business,” he says.
Competition was so fierce that smart distributors would call on the hospitals first thing in the morning, to capture as many requisitions as possible. “And if your competitor caught on to it, you’d start coming the night before,” says Thomas. “You competed on price. But they weren’t buying simply on price. They were buying on personality and your ability to deliver. And we all shared the business.”
A Quick Study
Year one in Macon was stimulating for Thomas. “It was a real challenge,” he says. “There weren’t any rules.”
He would fill orders at night, then get in his station wagon – in suit and tie – and make his deliveries the next day. The phone in the office had no “hold” feature, so if someone called asking if Marks had a particular item, Thomas would tell him or her, “I’ll have someone check on it.” Then he’d turn around in his chair and take a look. During the day, the phone was answered by an answering service.
Although, at this point, Thomas knew something about sutures and sales, he knew very little about how to run a distribution company. But he caught on quickly.
“I had to learn how to manage myself and other people,” says Thomas. “I had to deal with inventory, receivables and payables.” He got a lot of help from the people at Marks in Augusta, who took him under their wing. They showed him how to price invoices and write up contracts.
And Henry Marks taught Thomas a lesson in management and sales that he would never forget: “Always give them ‘two yeses and a no.” In other words, find out more ways to say “yes” to your customers, teammates and suppliers, than “no.” “As long as you ‘yes’ more than ‘no,’ you’ll always win,” says Thomas.
Company Grows Up
The years that Thomas stayed in Macon (1970 through April 1976) were formative not only for him, but for Owens & Minor as a whole. “We began to understand that to stay well ahead of the game, we could not play in multiple markets,” he says. “If the business was going to change – and we knew it would – we either had to be in the physician business or hospital business or nursing home business, because we couldn’t successfully operate in all of them. The cost to service each of them is too different.”
So Owens & Minor decided to exit the non-hospital business. “It was a bold move, because most regional companies were trying to do it all,” recalls Thomas. “We didn’t slam the door on the physician business, we just didn’t look for any more [business in that area],” he says. “And we didn’t actively seek nursing home business either. We focused on hospitals.”
The company’s executives grew to understand that certain products or groups of products drove the dollars, such as IV fluids, sutures, dressings, urologicals, needles and syringes. “We knew that if we could focus on those segments of the market, we would have the ability to drive some real efficiencies for our business,” says Thomas. “If we could drive toward getting that business, the rest would follow. So we really worked to get it.” The company offered creative programs to capture the business, such as its PANDAC wound closure asset management program in 1968, which it still offers today.
Under the Radar
In 1976, Owens & Minor had its eye on Atlanta as a good spot to open a sales and distribution center. “We realized we had to go where the customers were,” says Thomas. In a coup of sorts, Marks Surgical flew into Atlanta under the radar and landed an IV fluid contract with Grady Memorial Hospital. At the time, the company was selling Cutter Labs IV fluids.
“Nobody knew we were there,” says Thomas. “Nobody knew who we were. We were just Marks Surgical in Macon and Augusta.”
The contract with Grady called for Marks to open a distribution center within 90 days. Once again, Thomas was called on to open up shop.
“I had one long-haired hippie boy in this big warehouse, full of IV fluids,” recalls Thomas. His wife, Fran, came in to answer the phone. Soon he had hired some sales reps, and office and warehouse staff. The second rep he hired – Newt Haralson – still works out of the Atlanta office today.
“We turned a profit the very first year,” recalls Thomas. “We out-serviced and out-hustled the others,” he says. “We had a bunch of young folks. Our competition took us for granted. They thought we weren’t for real.”
Thomas stayed in Atlanta from 1976 until November 1984, when he was asked to come to the corporate office in Richmond. He became division vice president and assistant general manager of the medical/surgical division, working for Henry Berling. At the time, Owens & Minor had opened up an operation in Texas, but still remained primarily a regional company serving the states of Mississippi, Louisiana, Georgia, Florida, Tennessee, South Carolina and Virginia. But the plan was to grow.
VHA Supply Company
“Gil Minor III, Henry Berling and Bobby Anderson were real visionaries,” says Thomas. “They could see better than most what subsequently happened, and they knew we had to grow by acquisition.” The company had already been doing some of that, having bought parts of Will Ross several years earlier (as well as Marks Surgical and others).
Then, in 1985 came what Thomas refers to as “the shot heard around the world.” That spring, American Hospital Supply announced its intention to merge with Hospital Corporation of America (HCA), the for-profit hospital company, to form a colossal supplier/ provider company. “I thought it was a fascinating idea, but probably not efficient,” says Thomas.
American and HCA’s announcement made non-HCA hospitals jittery. Even prior to 1985, many non-profits feared that the for-profits would run them out of business. Now, in 1985, the non-profits who did business with American were faced with the prospect of giving money to their competitor.
“We asked ourselves, ‘What do we do?’” says Thomas. “What is our customer going to do?
“What we banked on – and it turned out to be true – was that the community hospital in America was never going to go away. The large teaching institutions were never going to go away. And they would rally, if you will, to the charge. They would do things differently.”
So when the small but growing Texas-based purchasing group VHA put out its call for regional distribution agents (RDAs), Owens & Minor grabbed the opportunity. “That catapulted us into the future,” says Thomas.
VHA’s idea was unique. It set up the VHA Supply Co., which would be responsible for contracting for and distributing products to VHA members. The company would contract with a network of distributor/agents to distribute contract items to VHA members in specified geographies. Ultimately, the GPO awarded contracts to nine regional distribution agents, among them, Owens & Minor.
Many distributors turned up their noses at VHA’s offer. After all, the GPO was offering just cost-plus-seven. “We knew it would be a tight deal, but we were confident we could make it work,” says Thomas.
“But the long and short of it was this: We felt we would be better served being inside when they closed the door, rather than being outside trying to get over the fence. If we participated, we could affect the outcome as a participant.”
The Supply Company had its share of kinks when it started. For example, VHA wanted its RDAs to sport the “VHA Supply Co.” logo on its trucks. Owens & Minor ordered some metallic signs with the VHA Supply logo, which could be attached to its trucks when they delivered products to VHA hospitals, then taken off when they left.
“Conceptually, [the VHA Supply Co.] worked, once we got past the metallic signs on the truck,” says Thomas.
Big Hunk of Cheese
Along with the VHA contract came more expansion. Owens & Minor acquired companies such as National Healthcare on the West Coast, TransHealth in Minnesota, Koley’s in Omaha and Leon Stotter in New Jersey. Thomas spent much of his time during those years integrating these companies into Owens& Minor.
But the biggest acquisition was Stuart Medical in Greensburg, Pa., in 1994. Baxter (now Cardinal) had put a bid on the company, but backed off. Shortly thereafter, Owens & Minor put in its own bid, and bought the company.
The acquisition bolstered Owens & Minor’s presence in the Northeast and Mid-Atlantic states. But Stuart was “a big hunk of cheese to chew on,” says Thomas. “The absolutely wonderful teammates that are part of Owens & Minor dug through it, inch by inch, nail by nail. They put in an enormous amount of hours and effort to make the transition as smooth as possible.”
In fact, Owens & Minor pulled off the Stuart acquisition and went on to make others, such as that of Medex in Waunakee, Wis. Yet through all the acquisitions, the company managed to maintain its unique culture.
“You always benefit when you have different cultures coming together – with different people who look at the same world, but see it in slightly different colors,” Thomas says. “And you learn from each other.”
For example, at the time of the Stuart acquisition, Stuart was very centralized, whereas Owens & Minor was very decentralized. “They taught us a lot about some operational things they were doing,” says Thomas. “It was a good marriage. We all came together as one company.”
Thomas credits Gil Minor III for shaping the company’s culture. “He’s been very involved in every acquisition,” says Thomas. Due to Minor, Owens & Minor has a “sharing, learning culture.”
The More Things Change …
Hue Thomas and Owens & Minor have come a long way since the days of Marks Surgical. Back then, customers’ orders were hand-written, purchase orders to manufacturers were mailed and everything was on paper.
Back in the Marks Surgical days,the trick for reps was to learn their competitors’ routes, then beat them to their call points and grab the orders. Life was slow by today’s standards. A rep might take an order in South Georgia, then mail it in to Augusta or Macon.
“There was a lot of personal touch – personal dealings between distributors and their customers,” says Thomas. And the same was true with the distributor reps and manufacturers’ reps. “There were a lot more manufacturers covering our territory,” he says. “I knew every manufacturers’ rep who came to Macon. And they would call on us and show us their wares.
“But the more things change, the more they stay the same,” says Thomas. Today, Owens & Minor is a national company with automated order entry systems, activity-based-managed costing programs and Web-based decision support tools for its customers and suppliers.
“We have people in the hospitals performing logistics surveys, consulting with them on how to become more efficient. We have people in hospitals providing knowledge to the clinicians, bringing them information about product and product availability – some of the same things we did 33 or 34 years ago.
“We’re involved in helping hospitals become more efficient,helping them reduce the cost of logistics, helping them with materials management and inventory problems and issues that, 30 years ago, they didn’t think about. Nor did we.”
But the fundamental issue is the same today as it was 30 years ago: Service is paramount.
Looking back on his career, Thomas counts his lessings. “This has been a tremendous experience for me. I’m truly going to miss the wonderful people I’ve had the pleasure to work with. It’s a wonderful industry with wonderful people.
“The great news is that although there are challenges that face us, we’ve got so many bright teammates at Owens & Minor and the industry. The next 30 years will be a lot of fun.”
When in Savannah, visit Gallery 440.
The art gallery, located in a historic building, was recently opened by artist Fran Thomas with some help from her husband, Hue.
Since 1992, Fran Thomas has traveled to Italy – primarily Tuscany and Abruzzo – to paint landscapes. Fran has been interested in painting since she was a child, but worked as a graphic artist in the intervening years. She has been painting full-time for the past 18 years, focusing on Italian landscapes.
Gallery 440 is located at 440 Bull St. in Savannah.