October 2024 – The Journal of Healthcare Contracting
To better educate the industry on the value of distribution, HIDA is offering the perspectives of healthcare providers who use distributors to meet their needs for medical products. In this month’s column, the Health Industry Distributor’s Association (HIDA) interviewed Greg Goddard, Division Vice President of Supply Chain and Purchasing for ScionHealth in Louisville, Kentucky.
Tell us about your distribution model. Do you buy primarily through distribution?
ScionHealth is a national healthcare provider with 92 hospitals located from New Jersey to San Diego and all points in between. Self-distribution was not an option due to the distance between locations and the fact that we do not have location density that would support self-distribution. We selected our distributor based on the proximity of their warehouses to most of our locations. Over 80% of our locations are serviced by their private fleet, ensuring timely deliveries and quick turnarounds for issues that we face.
Why did you choose that model?
Buying direct is not a great option when you have dispersed locations. Most of our hospitals are smaller long-term facilities or rural community hospitals, so our volume would not warrant buying directly from most manufacturers. By leveraging a distribution partner, we can consolidate as much of our freight as possible onto a single delivery and take advantage of items being stocked based on combined usage across all sites and other distribution customers.
Partner selection is key in this process. Our RFP lasted months as we worked through specifics of stocking logic, freight fees, and delivery days to optimize our channel. We also wanted a distribution partner that saw ScionHealth as a strategic account and assigned appropriate resources to work with us during implementation and for ongoing support.
In what ways do you work with your distributor of the various aspects of procurement?
Our distributor is tied in both with our GPO and our systems to ensure pricing parity and leveraging contract compliance. Our GPO reports monthly on our contract compliance so that we can ensure that we are leveraging our distributor relationship to its fullest with our contracts in mind. We review substitutes with our distributor to ensure that we are not going against contracts and to establish the highest possible fill rates.
What advice would you give to other providers to help them maximize the value they get from their distributor?
My advice for providers is to select a distributor that will truly partner with you in optimizing both their net revenue and your total cost position. If you squeeze a distributor too much where you are not a profitable customer for them, they may not provide you with the best service possible. You should approach your distributor as a strategic partner. During times of crisis like a hurricane or a pandemic, you want them to be able to help you come up with viable solutions to sustain your supply chain.
Enter the distributor relationship with the mindset of a long-term strategic partner, instead of a short-term effort to get the best deal and moving on at contract renewal if someone else provides a slightly lower pricing model. The old adage, you get what you pay for, couldn’t be truer in this relationship.