Purchasing with a POP
Edition: September 2012 - Vol 20 Number 09
Early in 2010, urologist Marc Benevides of Associated Urologists of North Carolina took note of the large supply-related expenses his growing practice was incurring. The group, based in Cary, N.C., had merged with four other groups, bringing together 16 physicians who serve patients in eight locations. So those physicians, with 14 others, pooled their resources and formed POP Medical.
“Their supply costs were going up, but their reimbursement was declining, so they were looking in every corner to reduce overhead and costs,” explains POP Medical COO Tim Furman. “That’s how we came into being – to drive value into what they purchase every day.”
Currently with 40 doctor-investors and an additional 300-plus members, POP Medical is not a group purchasing organization, explains Furman. Rather, it is a stand-alone medical distribution company.
With the help of one of its founding members, who has developed relationships with suppliers around the world, POP has been able to secure private-label agreements for approximately 35 SKUs, explains Furman. In addition, POP negotiates directly with manufacturers, leveraging the volume of its physician members. To round out its product offerings, POP relies on wholesalers.
“We drive traffic through an efficient e-commerce model,” says Furman, who set up a similar program in the office supply industry prior to joining POP Medical. Practice owners can restrict their staff’s access to the system, or pre-authorize the type and amount of purchases they make. Reports allow them to monitor and manage the amount of money they spend. POP Medical relies on third-party carriers to physically distribute products to members’ offices. “We don’t own trucks or a big warehouse, although it may come to that some day,” he says.
It is a system without distributor sales reps. In fact, on its website, the company sells the fact that it can help members reduce costs by avoiding support for “an extensive network of sales, marketing and management staff” of national supply houses.
“I definitely understand the value of representatives,” says Furman, who himself has sales experience, though not in the medical industry. “But we’ve been able to grow without their service.” To date, POP Medical’s product line isn’t complex, so obtaining product education from manufacturers or others hasn’t been a problem. “It has yet to be determined whether we will need [distributor reps] down the road,” he says.
“The critical things are to keep overhead low, build an efficient model around technology, and make the supply chain more efficient by eliminating the middleman,” he says. “I think there are some inefficiencies that can be improved on.”