Independents believe they have a good story to tell the supply chain executive whose IDN has just purchased a physician practice
Distributors get understandably nervous when their physician-practice customers are acquired by a hospital or hospital system. After all, hospital supply chain executives don’t know them, nor are those executives always aware of the cost to serve non-hospital customers. Challenging as the situation is, independent distributors believe they can retain the business of newly acquired physician practices, provided they demonstrate their unique – and quantifiable – value to hospital supply chain executives.
“Distributors who have been successful in retaining business have proactively worked with the [hospital] system; met with the appropriate stakeholders, that is, decision-makers; and delivered solutions to meet their unique needs,” says Dave Rose, vice president, business development and corporate programs, National Distribution & Contracting, Nashville, Tenn. NDC is a member service organization providing distribution, logistics, marketing and other services to more than 300 independent medical, physical therapy, rehabilitation and dental product distributors.
“In large part, our distributors have been successful in retaining business, but not without selling their unique value proposition and how it translates into measurable and sustainable value for the hospital system,” he says. “Those who have been successful have also taken the initiative to understand and implement GPO contracts, assist with contract compliance and product formularies for their customers. They have become an anchor tenant at the facility and positioned themselves as a partner who can solve problems and provide solutions.”
Rose began his career in the healthcare industry with C.R. Bard, Inc., holding various sales positions in the Bard Urological Division. He was also the Southeast region manager of extended care for General Medical Corp. (now McKesson Medical-Surgical) and vice president of sales and marketing for Chester Labs, a manufacturer of personal care products in Cincinnati, Ohio.
Steps to take
Physician-office distributors understand that the “status quo” is no more, says Rose. “It goes without saying that decision-makers will be different, and new relationships/partnerships will be forged. [Independent distributors] will need to deliver easy-to-implement, cost-effective, supply solutions to meet the needs of the new business relationship.” Distributors must realize the new customer will demand a more collaborative and transparent relationship.
Successful distributors welcome these changes as opportunity, and they give IDN/hospital supply chain executives compelling reasons to do business with them, says Rose. “Customers need to have confidence they are in better hands with you than without you.”
One way to start is to demonstrate that independent distributors can react quickly and decisively to customer requests, he says. What’s more, independents have a great story tell about their ability to serve providers across the care continuum.
“What a perfect time to sell the benefits of partnering with a regional distributor,” he continues. “What a wonderful window of opportunity that allows independents to tell their story of relentless service, and to say, ‘I’m the company who, unbeknownst to you, has been a viable supply solution for years.’ What a great platform to increase your company’s visibility and expand relationships beyond your day-to-day customers.”
Tough questions
Non-hospital distributors can expect some tough questions about pricing from hospital/IDN supply chain executives. They must be ready with answers, says Rose. “It is our responsibility, as distributors, to educate the customer about the cost variances to serve different market segments. We need to explain, and more important, demonstrate, the different costs associated with serving a physician clinic vs. the hospital. It is not unusual for the independent distributor to drive 15 miles to drop off emergency equipment or supplies, in low unit of measure, to a physician office for a community event, such as a school sports program.
“Distributors will hear the need to reduce overall cost – not necessarily at the product level, but to improve efficiency and savings across the entire operation,” he continues. “They will hear that the customer will want to be an active participant in the process, who wants visibility and some control of the supply chain decisions and process. Large providers who buy physician practices will need the distributor to leverage GPO contracts and support contract compliance.” Distributors will need to be prepared to help their customer navigate GPO contracts, compliance and reporting issues.
What’s more, non-hospital distributors will need to leverage technology to provide cost-effective solutions that will give the IDN/supply chain team real-time visibility to both process and price, says Rose. “[Distributors] can expect to assist with common ordering platforms that allow customer input and control. The independent will position itself as a partner/consultant who can assist the hospital/IDN with product formularies and offer suggestions for reducing overall cost.”
Viable option
“Change and uncertainty always bring opportunity for those who are flexible and creative,” says Rose. “The independent distributor is a viable option for hospital systems to serve their newly acquired physicians. Today, nearly half of the alternate site market is being serviced by the independent distributor.
“The benefits of working with a local company are obvious and numerous. They can adapt quickly to change, make decisions and do more in far less time than larger companies.
“Customers will always want choice. The independent that is currently serving the physician market is very well positioned to help the hospital/IDN with their alternate care supply chain needs. Existing customers can be a tremendous advocate for independent distributors by making introductions and providing referrals. The hospital/IDN customer needs their help, and expertise, beyond the hospital walls.”
Selling points
Here’s what independents believe they have to sell supply chain executives whose hospital or IDN has just acquired some physician practices:
- Ability to understand and implement GPO contracts.
- Ability to serve providers across the care continuum.
- Ability to react quickly and decisively to customer requests.
- Ability to service customers on a moment’s notice.
- Ability to assist the hospital/IDN with product formularies.