HIDA Executive Briefing • March 2015 | 4

STREAMLINING HEALTHCARE

Best Of Both Worlds: Providers Work With Distributors To Create Customized Logistics Models Without The Capital Investment Of Self-DistributionHealthcare distribution models are quickly evolving to meet changing provider structures and needs. That was the one of the key takeaways from HIDA’s IDN-Acute Care Market Conference, January 20-21 in Coral Gables, Florida.

Three case study presentations showcased how providers are working with their distributors in unique ways to adapt to the challenges of their health systems:

• Christopher Johnson, Supply Chain Operations Manager with Tufts Medical in Boston, MA, described advances in his hospital’s model with regional distributor Claflin Company. The two organizations have partnered for many years on a stockless/logical-unit-of-measure model that they continually refine to meet the hospital’s changing demands. “Our distributor is not a ‘vendor’ in our hospital – it’s a true partnership,” said Johnson.

• Carl Tietjen, Associate Vice President, Purchasing & Supply Chain, University of Rochester, Rochester, NY, described how his team looked closely at self-distribution in order to have a warehouse nearby from which they could manage inventory. But they decided it would be even better if they could get the same benefits without the capital investment – which is exactly what the winning distributor, Medline, proposed. Medline built and operates a local warehouse enabling the University of Rochester to pursue its supply chain initiatives without the costs of owning and running its own facility. “I do think I have the best of both worlds,” said Tietjen. One of Tietjen’s future goals is to consider moving high-cost, physician preference items (PPI) through the Medline distribution channel to gain better financial controls.

• Chris Parrish, VP Pharmacy, Lab & Supply Chain for Aultman Hospital in Canton, OH, explained how his organization collaborated with distributor Seneca Medical to support a regional purchasing network. Working together, the partners have increased visibility and improved pricing parity across the network, reducing costs and improving efficiency for all the healthcare organizations participating in the network.

More than 100 manufacturer, distributor, and provider executives attended the conference. Among other key themes covered during the two-day meeting:

• Distributors are moving quickly to help healthcare systems better manage their PPI spend. Many panelists agreed PPI is a target-rich environment, ripe for controls. For example, Cardinal Health’s recent acquisition of Wavemark allows the distributor to offer an integrated technology solution to manage key inventory, reported Steve Inacker, Cardinal’s President of Hospital Sales and Services. Frank Martin, Vice President of Enterprise Sales for Owens & Minor, said his company is expanding its services to hospital leaders as they work to reduce the inefficiencies in the PPI supply chain.

Johnson

Parrish

Inacker

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Tietjen

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HIDA Executive Briefing • March 2015 | 5

• The acute and non-acute markets are quickly blurring. Cindy Juhas, President of Hospital Associates, which specializes in equipment sales and set-ups, said, “There is no ‘acute’ any more -- it’s all one thing now, one continuum. We as distributors know that there is no distinction between acute and non-acute but the manufacturers still have different pricing, different reps, and different divisions serving the market. The IDNs usually have the same buyers across acute and non-acute and they don’t understand the distinction.”

• All players in the supply chain need to work together to improve contracting efficiency. A number of speakers pointed to inefficient practices like late contract notification that cause pricing errors and rework across the supply chain. Bill Abrams, President of Medline’s distribution division noted that many of these problems can be prevented by starting and finishing contract negotiations earlier in order to give all parties time to load accurate pricing.

• Specialty distributors offer unique advantages to healthcare customers. The conference featured a panel of executives from widely diverse niche distributors, including Hospital Associates (equipment), Veritiv (environmental services), Alpha Source (biomedical equipment parts and service), and Suture Express (surgical products). Specialty distributors go deep in their product category, the panelists explained. “Often we have greater availability of replacement parts than the manufacturers themselves do,” said Norine Carlson-Weber, CEO of Alpha Source.

• Providers value distribution support to ensure product availability. Panelists noted that the Ebola crisis was one example of an unexpected spike in product demand. “When there are industry shortages, I have a partner who is working with me to find solutions…and often they are better connected than I am to identify other options,” explained Tietjen.

HIDA’s IDN-Acute Care Market Conference is one in an annual four-conference series of events focused on specific healthcare market segments. The next program in the series is the Extended Care Market Conference, May 19-20 in Chicago, IL. For details, go to www.hida.org.

STREAMLINING HEALTHCARE

Juhas

Abrams

Carlson-Weber

More than 100 manufacturer, distributor, and provider executives attended HIDA’s IDN-Acute Care Market Conference.