Supply Chain Perspective

Over a career beginning at American Hospital Supply, to his current position at Presence Health, Rick Salzer has gained perspective on the healthcare supply chain

Back when Rick Salzer was selling corporate programs for American Hospital Supply, and then Baxter Healthcare, in the 1980s, he represented a broad variety of products spanning a number of the big company’s divisions. “Corporate programs were pretty new in healthcare at the time,” says Salzer, system vice president, Presence Health, Chicago. There were plenty of internal challenges to address, not the least of which was getting the different divisions to collaborate for the overall good of the corporation. But part of the sale was getting hospitals to understand how their supply chain could be strategic.

“I don’t think anybody even used the term ‘supply chain’ back then,” he says. The purchasing folks were often in the basement, next to the morgue. And in many hospitals, the CEO barely knew their materials manager. “I remember being in the car with the CEO of a major health system,” he recalls. “I introduced him to his materials management director. They had never met.”
Things have changed since then. First, Salzer has jumped to the other side of the desk, having spent time with Premier health alliance, St. Louis-based ROi, Resurrection Health Care in Chicago, and now, Presence Health (the product of the November 2011 merger of Resurrection and Mokena, Ill.-based Provena Health). And second, today’s CEOs and CFOs not only know their materials management team, but they expect them to help their institutions fulfill their mission of delivering high-quality, cost-effective patient care.

Hooked on healthcare
Salzer was born in Ottawa, Ill., about 85 miles southwest of Chicago; and was raised in nearby Serena. He went to the University of Illinois. “I wanted to be a lawyer, but quickly realized business was a better fit,” he says. He graduated with a major in marketing and business administration.

“I was recruited on campus by American Hospital Supply,” he says. “The recruiter got me with the line, ‘You could go work for a company that makes sugared water (Pepsi) or tractors (Caterpillar), or you could work for a company that makes products that help people.’ I was hooked.”

He started his career at American in 1981 as a sales rep in East Texas. He moved around, and up, serving as sales manager in Phoenix, district manager in Omaha, region manager in Buffalo, corporate account executive in Cincinnati and then director of marketing and vice president of corporate marketing at Baxter’s headquarters in Deerfield, Ill. (Baxter acquired American in 1985.) In 1998, at age 40, two years after Baxter had spun off hospital supply company Allegiance, Salzer – having completed an MBA from Northwestern University – he decided to pursue a different kind of challenge.

He found it in two small companies. One of the firms, Versus Technologies, developed radiofrequency and infrared technologies for asset management. The second, Metro Technologies, located in suburban Chicago – a small technology firm owned by, among others, a couple of fellow Northwestern business school grads – built software applications for small- and medium-sized businesses.

“Working for small companies is way different than working for a Fortune 100 company,” he says. “More of the decisions you make have a very direct impact on what’s going to happen to the company right away.” Small companies have certain vulnerabilities as well. In the case of Metro Technologies, its largest client – the jet-engine division of Rolls-Royce – decided, after Sept. 11, 2001, to cancel its orders with Metro. Salzer left soon thereafter. And though the company hung on for a few years later, it ultimately closed its doors.

Healthcare supply chain
In 2002, Salzer joined Premier health alliance. As regional vice president, he managed IDNs, executive relationships and the field force. “My job was to help [Premier members] maximize the value of their asset,” that is, ownership in Premier.
Five years later, he rejoined distribution, becoming vice president of health systems for Fisher Scientific. “It was a different part of healthcare – lab – and a chance to work with the biggest customers in that part of the industry – GPOs and national and regional reference labs,” he says.

Then, in 2009, he joined fellow Baxter alumnus Vance Moore at Resource Optimization and Innovation (ROi), the supply chain arm of Mercy Health, the St. Louis-based health system. Out of a 100,000-square-foot consolidated service center in Springfield, Mo., ROi offers a variety of supply chain services, including med/surg and pharmaceutical distribution, contracting, custom packs, pharmaceutical repackaging, private label products and supply chain consulting. As chief solutions officer at ROi, Salzer was charged with commercializing the work ROi had done with Mercy, that is, taking its offerings to other IDNs with a common interest and desire to collaborate, he explains.

“The notion was, if we can do [these things], what if we could scale it up and find other participants?” he says. “It was less about sales than trying to figure out if there was a good fit. It’s not a model that works for everybody – probably 10 to 20 percent of the IDNs around the country.”

In December 2010, Salzer accepted the position of vice president of supply chain for Resurrection Health Care. “Working for a provider offered a new kind of challenge,” he says. It also was a chance to get off the road, and to apply some of the supply chain lessons he had learned over the prior three decades in a provider setting. When Resurrection and Provena merged in November 2011 to form Presence Health, he was named system vice president.

Presence Health
Almost immediately, he began investigating GPO affiliations. In April 2012, Presence entered into an agreement with Premier. (Resurrection had been a Premier member, while Provena had been a member of HealthTrust Purchasing Group.) The IDN also joined the Catholic Contracting Group, a strategic alliance of Premier IDNs around the country.

“Even with 12 hospitals and membership in Premier, we understood that we didn’t have the critical mass to get the most competitive deals,” he says. “Joining CCG allows us to work with a group that shared similar values and a desire to do innovative things to help control our supply and purchased-service contract spend.” CCG also has the mass to attract the attention of suppliers.

“So far our expectations have been met,” he says. “It’s a very tight group that makes fact-based decisions, moves together and implements quickly. In comparing CCG to our other available aggregation opportunities, we made the right decision from a cultural and financial standpoint.”

Looking at the year ahead, Salzer has several things he wants to accomplish at Presence Health:

• Complete the integration of the Provena and Resurrection contract portfolios. “We’re almost there, but have a few categories to complete,” he says.
• Work on product utilization. “It’s a big opportunity.”
• Get a better handle on inventory and the IDN’s cost to move products around the system, including new points of care that Presence is adding.
• “Finally and most important, work more closely with our physician partners, either through our [accountable care organization] or narrow network, within a bundled payment framework, or through other arrangements we have with physicians, to work on the quality of care and the cost of the care we provide.”

Having sold corporate programs with American, Baxter and Allegiance, Salzer takes a hard look at them today. “We are open to corporate agreements, and are in discussions with a few companies right now,” he says. “However, we are only going to have a few of these types of agreements. We think that each division of the corporations we would contract with, and the products they sell, would have to be acceptable to us from a quality, cost, service and contract standpoint. That’s tough for a lot of companies to do.”

And while he empathizes with the distributor reps who call on Presence, his expectations of them are high. “I like it when they are well-informed about us, about the dynamics of the local market, about what’s going on in healthcare nationally, and about their own company and contracts,” he says. “If their mindset is centered around helping us create a solution that benefits our patients and our staff – and meets our financial challenges – then there is the basis for an interesting discussion.
“With the reality of healthcare reform, we aren’t interested in paying more for products that don’t provide any additional value, either through a better patient outcome that can be documented, or through reduced utilization.”