twenty years of repertoire: the 2000s
Edition: April 2013 - Vol 21 Number 04
The 2000s: A Sales Odyssey
Some changes occur overnight, others take years, if not decades, to unfold. And many times, changes that appear imminent never materialize. Healthcare – and healthcare distribution – has had its share of all these, as evidenced by stories reported by Repertoire throughout the 2000s.
Baseball’s recipe for success
Small-market baseball teams are kind of like small, independent distributors. In 2005, just before spring training commenced, Repertoire interviewed one Major League Baseball executive about his organization’s secret for success. “As an organization, we understand who we are and who we aren’t,” said Minnesota Twins President Dave St. Peter. “We will never be an organization in the mix for high-priced free agents. We will be a team that needs to mind the store, stay focused on the fundamentals and develop players in our minor leagues, then give them an opportunity to compete in the major leagues. It’s our job to make sure those players are ready to seize that opportunity when they come up to the big leagues. If they aren’t, it will show up in the win-loss column.’”
‘Don’t demean your profession’
In early 2005, Repertoire interviewed Marvin Caligor, who, late in his career, was acting as a consultant to Henry Schein Medical. During the interview, he told a story about an event that occurred years before, when a pharmaceutical rep called on Caligor at the East Harlem drugstore and surgical supply house his father had founded in 1921. From Repertoire: “As the two were talking, a doctor came into the store to make a purchase. The sales rep said to Caligor, within earshot of the doctor, ‘Take care of him first.’ To the doctor he said, ‘I’m just a salesman.’ Well, Caligor did take care of the doc. But after the doctor left the store, he turned to the pharmaceutical rep and said, ‘If you’re ‘only a salesman,’ what am I to that doctor? Don’t demean your profession.’”
Separating price from cost
Repertoire contributing editor Sheila Dunn shared with readers many thoughts about the physician office lab – and other things. In July 2005, she offered valuable insights into how reps should deal with the customer demanding a lower price. “How do you command a higher price for a product the customer views as a commodity now that your competitors have offered a lower price?” Dunn asked. “A good salesperson knows how to separate price from cost. Price is simply a number, whereas cost includes factors like availability, terms, warranty, delivery, service, return goods policy and freight charges. Often these options give just what a customer needs to buy your product vs. a competitor’s. Finally, instead of debating price, factor in what your value-added services would cost if purchased separately. Got the idea? There is a whole lot more to a decision to buy than just the product or the price.”
Physician: Heal thyself
“Family physicians are so busy taking care of sick patients, they may be overlooking the health of their own practices,” wrote Repertoire in January 2006. “Inflexible reimbursement rates, costly overhead and a limited number of hours for seeing patients all pose a threat to the family practice…. Still, there is much that family practitioners can do to meet these challenges and entice patients to visit their offices instead of the quickly emerging ‘quick clinics’ that appear to be taking hold in stores Target or Wal-Mart.” Their challenge continues today.
The impending collapse of primary care medicine?
The future for internists, as for family physicians, looked grim in 2006. “[I]nternal medicine is a profession in crisis,” wrote Repertoire in April 2006, reporting on a study by the American College of Physicians titled “The Impending Collapse of Primary Care Medicine and Its Implications for the State of the Nation’s Health Care.” “Primary care, the backbone of the nation’s health care system, is at grave risk of collapse due to a dysfunctional financing and delivery system,” read the study. “Immediate and comprehensive reforms are required to replace systems that undermine and undervalue the relationship between patients and their personal physicians. If these reforms do not take place, within a few years, there will not be enough primary care physicians to take care of an aging population with increasing incidences of chronic diseases. The consequences of failing to act will be higher costs, greater inefficiency, lower quality, more uninsured persons, and growing patient and physician dissatisfaction.”
A good deal all around
In July 2006, Owens & Minor came across a deal it couldn’t refuse – acquiring McKesson Medical-Surgical’s acute-care business for $170 million. “An opportunity like this doesn’t come around very frequently,” said company CEO Craig Smith. Repertoire reported that with the acquisition, Owens & Minor stood to pick up greater market share, 100 seasoned sales reps to add to its existing force of about 250, and an anticipated $800 million in sales. Meanwhile, McKesson Medical-Surgical stood to gain a sharper focus on what it perceived to be the high-margin, high-profit, non-acute-care med/surg market.
Sales reps’ key role
It’s often said that customers buy the sales rep, not the product. In December 2006, Repertoire reported that numbers prove it. According to research by the Dayton, Ohio-based HR Chally Group, the salesperson accounts for 39 percent of the typical customer’s buying decision – more than price, quality or breadth of product, or service line.
The ship slowly turns toward prevention
In the latter part of the decade, the Centers for Medicare & Medicaid Services began to make efforts to change the course of the vast ship known as the U.S. healthcare system, shifting the emphasis away from performing more procedures, to practicing more preventive medicine. In its final physician payment rule for 2007, CMS significantly increased the work component for the RVUs (relative value units) for face-to-face visits, called “evaluation and management” services, or E&M, Repertoire reported in January 2007. The rule rewarded physicians for time spent discussing with their patients not only their health status, but steps to be taken to maintain or improve it.
Schools of sales
More than half of college students go into some kind of sales position after graduation, Howard Stevens, CEO and chairman of the HR Chally Group, told Repertoire in March 2007. Yet just a handful of the country’s 4,000-plus colleges offer formal training in sales. That has to change, said Stevens, who at the time was chairman of the advisory board for the Ohio State University Sales Centre, part of the 11-college University Sales Center Alliance. Kids with majors in history, engineering or something else fall into sales, woefully unprepared for the profession, he said. Wrote Repertoire: “Few people outside the field view sales as a true profession. How many kids actually dream about becoming salespeople when they grow up, asks Stevens. The negative perception of sales is deeply rooted in American business culture, he adds. Only a handful of CEOs of Fortune 500 companies have extensive experience in sales.”
Convenience in store
Six years ago, retail clinics were just beginning to spring up around the country. “They have cute names, like The Little Clinic and The Corner Care Clinic; and names that say it all, like MinuteClinic, MediMin, QuickCare, Curaquick and Take Care Health System,” reported Repertoire in the magazine’s first article on the topic in July 2007. “For somewhere between $40 and $75, you can go in one of these little clinics (often located in a drug store or retail store), get your sore throat or skin rash checked out by a nurse practitioner or physician assistant, maybe get a prescription, and get out of there – all in about 15 minutes. Try doing that at your primary care doc’s office, or worse, at the local emergency room.” Few would argue that retail clinics are continuing to reshape primary care medicine in 2013.
For-real healthcare reform?
In October 2007, healthcare reform appeared to be closer to reality. “For the past 10 or 15 years, since the Clinton healthcare plan was deep-sixed, healthcare reform has been off the table on Capitol Hill and the campaign trail,” Repertoire reported. “Talk about broad-scale revision of the healthcare delivery system had been hushed. But something has changed. Today’s presidential candidates and lawmakers are sounding the alarm about rising healthcare costs and the growing number of uninsured people in this country.” Speaking with Repertoire, Democratic Senator Ron Wyden of Oregon spoke about his proposed “Healthy Americans Act,” which would deconstruct employer-based healthcare coverage (“a system that is disappearing faster than a Popsicle on a summer sidewalk,” said Wyden) and put decision-making on healthcare coverage in the hands of individuals.
Ask the owner of a med/surg distributor where she wants to see new growth, and most will say “existing customers,” wrote Repertoire in November 2007. In his research for the HIDA Distributor Financial Performance Survey, Texas Christian University Professor Bill Cron asked distributors how much (in terms of annual sales) their company grew in the prior year, and what percentage came from new customers. “Here’s the disconcerting news,” Repertoire reported. “Growth from new customers far outstrips that from existing ones. What’s wrong with that? In a word, churn.”
Vendor credentialing boiling point
In January 2008, Repertoire reported that disagreements about vendor credentialing were about to reach the boiling point. “In the past year or two, distributors, manufacturers and manufacturers’ reps have grown increasingly concerned about the proliferation of requirements that providers are demanding vendors meet in order to call on them,” reported Repertoire. “There are 5,000 hospitals, and 5,000 different vendor credentialing requirements,” said John Tara, director of corporate strategic marketing for Boston Scientific, speaking at the Fall 2007 Conference of the Healthcare Manufacturers Management Council. “You can be looking at tens of thousands of credentialing requests processed each year,” said Tara, who worked on proposed vendor credentialing guidelines drawn up by Strategic Marketplace Initiative. “Then you have renewals. So there’s redundancy, risk management, compliance issues, and the cost of the system.” Things may be looking up in 2013.
The mouth: No longer off limits
“For years, maybe forever, the mouth has been off-limits to primary care physicians,” Repertoire reported in July 2008. “That’s the dentist’s bailiwick, they figured. But many physicians and dentists now believe that what’s going on in the mouth can be both a cause and effect of what’s going on elsewhere in the body. To use medical parlance, oral health cannot be separated from systemic health. And that word is filtering through the ranks of primary care physicians. Whether that will translate into selling opportunities for Repertoire readers is anyone’s guess.” Question: Five years later, has it?
In September 2008, Repertoire reported on a phenomenon that continues to preoccupy supply chain executives four and a half years later. “Industry veterans will recall the healthcare landscape of 10 to 15 years ago, when hospitals were acquiring physician practices at a rapid pace,” the magazine reported. Those efforts fizzled, partly because hospitals didn’t know how to manage doctors’ practices, and partly because hospitals became discouraged at the lack of productivity of their newly acquired practices. “But today, hospitals and health systems are back in the game, and they believe that this time around, their physician-practice integration strategies will work. If they do, Repertoire readers who sell equipment and supplies to physicians’ offices may notice some changes in who’s making the buying decisions.” The following month, Repertoire wrote a follow-up to the story. “I think it’s different from the last trend,” said Caroline Steinberg, vice president of trends analysis for the American Hospital Association, speaking about hospitals’ acquisition of physician practices. “Last time, it was all about managed care and setting up integrated delivery models to accept capitation. Now, we see trends on the physician side – declining reimbursement, more trouble making ends meet, rising malpractice costs, and a lot of physicians who want … to be employed. They don’t want to run their own practices.” In 2013, it looks like they still don’t.
The post-dot-com sales rep
Dis-in-ter-med-i-a-tion. Seven syllables that struck terror in the hearts of distributors during the dot-com era of the 1990s. Turns out those fears were unfounded, reported Repertoire in December 2008: “The thought was, that as buyers migrated to the Internet to shop for and buy supplies and equipment, they’d have no need for traditional med/surg distributors – or traditional med/surg distributor sales reps. Yet here you are, in late 2008, calling on doctors, hospitals and long-term-care facilities, filling customers’ needs, earning a living. ‘Relationships are stronger than ever,’ says Chris Walter, an account manager for McKesson Medical-Surgical in the Florida Panhandle. But the Internet has made everybody more efficient.’ In fact, the Internet appears to have met the expectations of the 1990s optimists by transforming the role of the sales rep from order-taker to consultative seller and problem-solver.”
Healthcare reform…closer still in 2009
The country was deep into recession when Repertoire’s January 2009 issue came out. And it was precisely that recession that would lead to healthcare reform, the publishers speculated. “As one reads about the many unemployed workers who are left without health insurance – particularly those whose companies have shut down and terminated their health plans (thus leaving workers ineligible for COBRA) – it’s clear that the call for healthcare reform will be louder than ever this year. It already is. The key words are ‘portability,’ ‘universal access’ and ‘affordability.’ Can we have all three? That is the question this country has faced – or failed to face – for years, if not decades. But today’s economic situation is forcing the issue.”
The doctor isn’t in
In February 2009, Repertoire reported more grim news about the impending shortage of primary care physicians. “How bad is it?” the magazine asked. In December 2008, the American College of Physicians reported that
1) from 1997 to 2005, the number of U.S. medical graduates entering family medicine residencies dropped by 50 percent;
2) in 2007, only 23 percent of third-year internal medicine residents planned to practice general internal medicine;
3) a 2007 study of fourth-year medical students’ career decision-making revealed that only 2 percent of students intended to pursue careers in general internal medicine;
4) approximately 21 percent of physicians who were board-certified in the early 1990s have left internal medicine, compared with a 5-percent departure rate for internal medicine subspecialists, and
5) a 2008 study predicted that the United States would experience a shortage of 35,000 to 44,000 adult primary care physicians by 2025. “Going into this project we generally knew about the shortage of physicians,” Lou Goodman, Ph.D., president of The Physicians’ Foundation, was quoted as saying about a study the organization conducted. “What we didn’t know is how much worse it could get over the next few years. The bottom line is that the person you’ve known as your family doctor could be getting ready to disappear – and there might not be a replacement.”
Close but no SGR
“Ten years ago, the government had what it thought was a great idea – tie the rate of doctors’ Medicare Part B reimbursement to the performance of the economy at large,” reported Repertoire in April 2010. “If the economy does well, doctors will do well. If the economy does poorly, doctors won’t get a raise. The formula, called the Sustainable Growth Rate, or SGR, was an attempt to keep a lid on utilization of services. But SGR is based on a few faulty assumptions, according to those with whom Repertoire spoke.” And the feds are still trying to figure out how to fix it in 2013.
New entrant: RPCs
From hospital to IDN to RPC, or regional purchasing coalition. Repertoire tracked the progress of RPCs in May 2010, reporting on a study conducted by its sister publication, The Journal of Healthcare Contracting. That study showed that of 226 supply chain executives, department heads and contracting specialists who responded to a survey, 40 percent were part of a regional purchasing coalition. And 89 percent believed they would be part of an RPC within five years.
As seen on TV
When telemedicine ads start appearing on ESPN, Fox and CNN, you know the technology has made it, reported Repertoire in July 2010. “I’ve been doing this 20 years, and every year, it’s ‘This is the year,’” said Steve Normandin, president of AMD Global Telemedicine, Chelmsford, Mass. “But the industry has made more progress in the last 18 months than in the previous 18 years. You have a new generation of doctors who are much more exposed to technology. All the technology we’re using, 20 years ago was bleeding edge. Now we’re using Skype with our kids.”
The Boomers are coming
More than 75 million Baby Boomers are or will be knocking on their doctors’ doors soon, with their 65-year-old aches, pains and chronic conditions, reported Repertoire in August 2010. And doctors had better be prepared. It’s not just a matter of staffing up, but also of making their offices accessible to all those old-timers. “But an office makeover is not an easy thing to do,” Repertoire reported. “The needs of the elderly are disparate, and the cost to transform an office can be steep – sometimes out of reach. That’s particularly true for small practices, if one is considering changing exam room sizes, parking lot arrangements, etc. However, practices that neglect to make changes in anticipation of tomorrow’s patient population risk losing a significant portion of their patient base.”
Community health centers: A growth market
Community health centers represent a growth market with excellent potential in the coming years, Dave McKinley, president, Henry Schein Medical, told Repertoire in September 2010. At the time, with more government funding, centers were expected to double the number of patients served, from 20 million to 40 million.
The end of the world as we know it?
“The year is 2020. Every physician in America is employed by an IDN. Corporate materials management executives have standardized products across the entire ‘continuum of care,’ and have successfully snuffed out what they used to refer to as ‘relationship-based selling’ in the physician market. Oh yeah – they’ve cut out their distributors, opened their own distribution centers, and negotiate directly with manufacturers. Many former physician reps and their bosses, having burnt through their unemployment checks, now lure timeshare prospects to Orlando for a weekend of sun and spiels.” Don’t believe this doomsday scenario, said Jim Niekamp, 95 Percent Share Marketing, speaking with Repertoire in April 2011, following MDSI’s Distributor Insights meeting in Atlanta. Not all physicians will become employees of IDNs; physician distributors will learn to work with corporate supply chain executives; and relationship selling will never go out of fashion, even in the most buttoned-down, protocol-driven IDN.
Brad Stevens: Good for the whole 40
Butler coach draws parallels between basketball and sales
March Madness is already in the rearview mirror. But Repertoire celebrated March Madness in 2011 by publishing an interview with Brad Stevens, who at the time was in his fourth year coaching the Butler University Bulldogs in Indianapolis, who had made it to the NCAA Finals in 2010.
A graduate of DePauw University in Greencastle, Ind., Stevens spent a year as a marketing associate at Eli Lilly and Co., for whom he developed incentive programs for sales reps. His comments about coaching and about basketball still hold value for medical products sales managers as well as field reps.
Stevens was – and still is – known throughout the NCAA as a deliberate, thoughtful, competitive coach, Repertoire reported. It has been said that when he brings the Bulldogs onto the court, they are one of best-prepared teams in the country.
“Everybody has access to data, to film,” he said. “Coaches are all poring over this data, figuring out how to best prepare their team. But it’s not what [the coach] knows; it’s what the team knows.”
Stevens has a methodical approach to what he does. Just prior to the 2010 NCAA championship game, he was quoted in Sports Illustrated as saying, “Win the next game; win the next possession. That’s our focus. It’s boring. It’s also the way championships are won.”
“It’s a lot easier to say than to do,” he told Repertoire. “It’s one of the hardest things to do in any walk of life – focus and maximize on the present. The past affects us, and the future intrigues us. We’re not always able to keep our attention to the present. That’s human nature.”
While Stevens tries to stay focused on the here-and-now, part of his job involves looking ahead. It’s called recruiting. Finding the right players can be tricky. “It’s a very inexact science,” he said. “Sometimes it goes exactly the way you thought it would, sometimes it’s just the opposite. The hard part about recruiting 15-to-17-year-olds is projecting them out to 21-year-olds. But you try to do your research – what kind of teammate they’ll be, did they do well in the classroom, are they a good fit for the school?”
And once those recruits come to Indianapolis, they’re watched and nurtured. “The sign of progress is that you’re good every day. That consistency is the transition from being a decent player to a very good player.”
Stevens on sales
Stevens had a brief brush with sales at Eli Lilly, and he took away some lessons from the experience, he told Repertoire. “I just told one of our freshman that there are three things a player has to be. He has to be physically and mentally tough, he has to be reliable, and he has to be productive. I told him, when you have two of those things, you’ll probably play. But when you have all three, you’ll be a great player.”
And that’s not that different from sales, he said. “Certainly physical toughness isn’t an issue in the corporate world, but you do have to be mentally tough. You have to be able to handle a ‘no’ in sales and move on to the next call. You have to be able to handle those moments when you think you’ve made a big sale, and you haven’t. And you have to be consistent in doing your job every day.”