Supply Distribution Doesn't Have to Be So Complicated
If one thing is certain in healthcare in America, it’s that there is no such thing as “a price.” It’s a conundrum. Take the medical supply chain: The level of understanding that providers have about contract pricing or who has control over price varies widely, and the finer details of what happens behind the scenes can be elusive even for the industry’s most savvy customers.
In the meantime, every supply chain manager has a savings goal that never goes away, with fixed reimbursements adding even more pressure. Suture Express experts Jason Pedaci, chief commercial officer; Charlie Galvin and Shannon Honn, Key Accounts managers; and Steve Boyer, vice president of Operations; took time to answer a few key questions about the ins and outs of medical supply distribution to help providers be better informed and, by way of that, competitive in a market where the need to reduce costs is paramount and persistent. Here is some of the insight they had to offer:
Exactly how does a medical supply distributor decide what to stock?
To maintain adequate customer service levels, distributors rely on statistical modeling to determine what SKU and inventory level for that SKU should be stocked in a distribution center, taking into consideration both current and forecasted demand, as well as the time it takes to receive products from the manufacturer. For Suture Express, because we operate out of a national service center and specialize in suture, wound closure, endo and mesh items, we’re able to aggregate our customer demand and stock a full portfolio of our suppliers’ products that’s available on a daily basis to our entire customer base for order and next-day delivery.
What can customers expect during their first conversation with a distributor?
How a conversation may go depends on who we’re talking to, their level of knowledge and how much they want to know. Some customers are transactional — they come to us saying, “You’ve got what I need. I want to buy it.” And some are looking for a more consultative approach — “I’m getting killed on suture pricing. How can you help us?” The number-one misnomer among the majority of customers we talk to is that the distributor determines the contract price when, in fact, the only control on price we have is the markup.
What is a GPO?
A GPO is an organization that aggregates the spend of all its members in order to obtain better pricing from manufacturers for those members. Suture Express holds national agreements with all of the major GPOs. The largest right now, according to Becker’s Hospital CFO Report, are 1) Vizient, 2) Premier, 3) HealthTrust and 4) Intalere.1 Almost all hospitals and larger surgery centers have some sort of GPO contract in place or, at minimum, they’re rostered with a GPO, which entitles them to the lowest-discount or access-level tier, often called a “bucket contract.” It’s when you get to a standalone surgery center or the non-acute space like a doctor’s office that it’s less likely a customer has a GPO contract.
What's Involved in Bringing a New Customer Onboard?
When we’re bringing a new customer on board, we’ll evaluate their usage against what we have in stock. A lot of times they’ll say, “Here’s my usage — when can you flip the switch?” Especially if it’s a surgery center customer, we can tell them they can start ordering today because we’ve already got what they need on hand. For larger hospitals, we adjust our inventory levels initially and/or change as we monitor a customer’s purchase patterns over time.
How Is This Different Than Any Other Supplier?
One difference is in account setup — that is, loading the pricing and then getting customers up and ordering. We can have a customer up and running in 24 to 48 hours, compared to two weeks to 30 days that can be required by the large big-box distributors. We also have tools at our disposal and internal processes that make it possible for us to turn things around for customers — a lot of this has to do with being small, focused and nimble. Our goal is not to back-burner a customer for two weeks. We’re excited to bring new customers on board and, for that reason, things are going to happen really quickly.
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To learn more about what Suture Express may be able to do for you, visit us at sutureexpress.com or call 877-790-1873.
1 “4 of the largest GPOs,” Becker’s Hospital CFO Report, February 6, 2017