Summon the Power
Edition: July 2012 - Vol 20 Number 07
Everybody in this industry has challenges. It’s how you handle them that makes the difference. And IMCO President Debra Bullock believes her organization is excelling on that score.
“We did our best [over the past year] to address the challenges we face,” said Bullock, addressing IMCO members at the organization’s 2012 National Convention, “Summon the Power,” in ChampionsGate, Fla. “In the process, we found not only traditional solutions, but each challenge brought with it the opportunity to think and resolve in new and creative ways that are more appropriate to the current business climate.”
“We’re nimble, we’re sticklers about core values, and we have a high degree of respect,” said Bullock, speaking with Repertoire after the conference. “In this industry’s game of musical chairs, IMCO is being sought out by trading partners, more than ever before. Offering the tools, unity and support that our members, vendors and customers need, we all assuredly will have a nice chair when the music stops.”
IMCO has undertaken a number of initiatives to position itself and its members for the future, said Bullock. For example, the organization upgraded the image of its IMCO private brand with a brighter and more colorful theme for marketing materials and product packaging. “We’re using our ‘map-less’ logo to remove any perceived geographic boundaries and to honor our Canadian partners and initiatives,” she said.
In addition, IMCO has increased SKUs and reduced costs of its private label line. “We are constantly evaluating different products and categories that our advisory boards suggest,” Bullock said. “We know our distributors and their customers want choices. Our brand is as competitive as others, and we continue to maintain a quality level.”
The first annual “450 Winner” for private-label sales was American Medical Supplies and Equipment, followed by Sentry Medical and Center Medical. “It has been a great contest that has shown results and achieved its goal by having more members sell the IMCO brand,” said Bullock.
Equipment sales over the past year were up 30 percent, she reported. “We have seen large increases with many of our key equipment vendors in all markets. We feel this is due to many factors, including our ‘Sales Training for Success’ classes, constant updates to the members on promotions, new products, success stories, etc.” She also attributed the increase in part to the annual Winners Circle contest, and “the partnership we have with all of our equipment vendors, making sure we are in constant contact with them to relay information, create sales tips, address any issues, and pass on leads.”
IMCO’s relationship with South Glastonbury, Conn.-based Med/Surg Information Services International (MSISI) will help IMCO members stay competitive in the marketplace and maintain equal access to agreements, said Bullock. “Their contract administration, sales tracings and rebate reconciliation are amazing,” she said. “You can imagine the challenge of data acquisition, translation and aggregation, let alone validation of so many disparate ERP systems. With MSISI, our vendors and national customers can enjoy the pleasure of doing business with their IMCO partners easily.”
“We’re all working harder and longer, but we must stop and think creatively about the future,” Bullock told attendees. “To think creatively, we must be able to look afresh at what we normally take for granted. In this business climate, we can’t afford to take anything for granted.”
Changing physician market
Given the changes taking place among their physician customers, distributors will have to reframe how they go to market. That was the consensus of a panel of industry experts who led a discussion on market trends at the IMCO conference.
Multiple trends are converging, said panel member E.V. Clarke, CEO, EV3 Solutions LLC, a healthcare supply chain consulting firm, speaking with Repertoire after the conference. He was joined on the panel by David York, Grove Medical, Greenville, S.C.; and Jim Macholz, Atlantic Medical Solutions, Charlotte, N.C. Not only are hospitals acquiring physician practices, but physicians are joining forces to form ever-larger practices, he said. Meanwhile, medical school graduates appear to be more interested in becoming employees than in starting their own practices.
“The whole model of how physicians manage their business is going to change relative to them being part of a hospital or large practice,” said Clarke. Distributors have a twofold task: Understanding what the hospital or IDN perceives as value for those physician practices that are part of a hospital system; and continuing to provide excellent service to non-hospital sites. And the opportunity to serve non-hospital sites will only increase, as a growing number of what Clarke calls “precision markets” emerge, such as diagnostics, orthopedics and urgent care.
“These traditional care functions are leaving the hospital and going into the ambulatory setting,” he said. “They represent an advantage to small distributors, who are nimble and have the ability to address the issues of a precision market more than the big nationals. Assuming they can change the way they do business and respond to changes in the marketplace, the growth curve is positive.”
Distributors need to consider one more element to improve their business, in Clarke’s opinion: an understanding of customer profitability. Doing so is both an opportunity and a challenge. “We’re behind other industries,” he said. “We don’t have good information on what it costs to serve the customer. So, a highly inefficient customer may look profitable from a revenue and gross profit margin standpoint, but not if you apply a cost-to-serve model. Very often, you find they are unprofitable. Margin pressure in today’s market requires understanding the profitability of all customers.”
Another hot industry topic – self-distribution – was a subject of discussion during the industry panel. In fact, self-distribution represents less than 10 percent of the market, said Clarke. “Of all the supply chains regarded as best-in-class in the world, how many have a buy-and-hold inventory strategy? None that I’m aware of. So it is difficult to understand how hospitals, beyond a few with unique scale, will be able to extract material economic value to make this move worthwhile.” Chances are, most won’t, opting instead to take advantage of other supply management programs with their distributors.
Several of the IDNs that have attempted self-distribution find that servicing their newly acquired physician offices is expensive and difficult. “Once they get into it, they know the economics are completely different [than servicing acute-care facilities],” said Clarke. That could spell more opportunity for distributors.
Hot topic: Career fair for docs
A topic discussed at the convention: The American Medical Association was set to hold its first-ever group practice career fair to help physicians and medical student leaders connect with potential employers. The event was to take place in conjunction with the AMA Annual Meeting in Chicago in June. At press time, 10 large medical groups had registered as exhibitors. They included Advocate Medical Group, Oak Brook, Ill.; Geisinger Health System, northeastern and central Pennsylvania; Permanente Medical Group, Oakland, Calif.; and Scott & White Healthcare, Temple, Texas.
2009 data from the AMA shows the following:
• Sixty-one percent of physicians are self-employed and have a full or part ownership interest in their practice.
• Ownership is much more common among older physicians. While nearly 70 percent of physicians age 55 and older are self-employed and one-quarter are employees, less than 50 percent of physicians under age 40 are self-employed, and a near equal number are employees.
• Fourteen percent of patient care physicians are employed in non-institutional, or office-based, settings, and 21.2 percent in institutional settings. Office-based practice is split about evenly between single specialty and multispecialty practices.
• A physician’s age has a great impact on the size of the practice in which he or she works. For example, while only 13.6 percent of physicians under 40 are in solo practice, 23.1 percent of mid-career physicians and 36.2 percent of physicians over age 54 are in solo practice. More than twice as many physicians over the age of 54 are in solo practice vs. institutional employees.