After a 36-year career in the healthcare supply chain, Bud Bowen looks forward to the next 36.
Bud Bowen first learned about the hospital business not from hospitals, but from a company that sold medical products to them. “It was a tremendously valuable experience,” says Bowen of his years spent with American Hospital Supply Corp. (now Cardinal Health). “Not only did I learn medical products distribution, but I learned about the hospital business and the needs of the customer as well, from [the perspective of] purchasing and procurement.”
At press time, Bowen was preparing to retire as president and CEO of Amerinet effective March 31, following a 36-year career in healthcare supply chain management. He recounted his years with American, Haricomp and Amerinet, as well as his great Alaskan adventure of 1969, in a recent conversation with The Journal of Healthcare Contracting.
Born 60 years ago in Waltham, Mass., Bowen received a degree in economics from Merrimack College in North Andover, Mass. After a short stint with Lexington, Mass.-based Raytheon Corp., where his father had worked as an engineer, Bowen and a college friend embarked on an adventure to Alaska. Driving cross country, the two ended up in Fairbanks. That was in June. By September, Bowen was on his way back East. “I hadn’t earned my fortune in Alaska,” he says. “They were just getting ready to open up the oil pipeline, but they needed people to operate heavy equipment, not people with new degrees in economics.”
Upon his return, he answered an ad for an entry-level position with a company he had never heard of — American Hospital Supply Corp., whose regional office was in Waltham. The company needed someone to run its Tel-American program for its Northeastern customers. Tel-American was the precursor to today’s electronic order entry systems, explains Bowen. Much like today’s electronic systems, it automated the procurement of frequently ordered commodity products for hospital purchasing professionals.
American would punch in product information on 80-column cards, which most customers stored in sleeves by the products in their warehouses and storerooms. When customers needed to re-order, they gathered up the cards, put them in a stack, and transmitted them through the telephone wires. At its end, American would create a duplicate of the cards and pick the order.
With Tel-American, American Hospital Supply learned two key things. First, automation meant convenience for its customers. It made it even easier for them to do business with American. Second, it brought incredible efficiencies to the distributor, particularly when compared to the traditional way of placing orders – over the phone with a customer service rep. Just two people in Waltham (Bowen and an assistant) were able to process 35 to 40 percent of all the business generated in the region – a region which had 10 to 15 customer service reps and 25 to 30 field sales reps. “It was a dramatic example of how, if you automate something, even in a crude way, you could dramatically increase efficiency,” says Bowen.
After working at American for four years, Bowen got the opportunity to jump to the buyer’s side, something he had wanted to do ever since visiting customers when he was with American. He became director of purchasing and materials management for New England Management Corp., a Vermont-based owner and operator of nursing homes. Approximately five years later, in 1978, he got his first position in acute-care group purchasing.
Haricomp was the group purchasing organization of the Hospital Association of Rhode Island. (At the time, most GPOs were adjuncts of metropolitan or state hospital associations, Bowen points out.) As it did for several associations on the East Coast, a company called the Hospital Bureau operated Haricomp’s purchasing program on an outsourced basis. By 1978, however, the Rhode Island group was ready to bring in-house the management of its GPO. Bowen was hired to do the job.
In contrast to the environment in privately owned corporations, the hospital association group purchasing process was very committee-driven, says Bowen. “All the decision-making was done by members. Getting 15 food service directors to agree on green beans was a real education for me.”
Like the other Hospital Bureau GPOs, Haricomp operated on the principle of pre-commitment. Members were polled about product usage and prices, then asked to sign commitment forms, in which they agreed to use the vendor of choice so long as the GPO’s price was better than or equal to what they already had been paying.
Changes in the industry
In the early 1980s, the sleepy group purchasing industry was beginning to change, recalls Bowen. Haricomp was no exception.
With just 17 hospitals in Rhode Island, the GPO was dwarfed by its neighbors in Massachusetts (which had approximately 170 hospitals) and Connecticut (with around 100). The neighboring GPOs generated a lot of contracts and a lot of administrative fees to support their staffs and operations, says Bowen. Haricomp looked around and figured it could service some of those facilities just as well, or better than their own state GPOs. So the Rhode Island association began marketing its services to them. Nor was Haricomp the only state association to begin moving beyond its traditional geographical boundaries.
“The competition caused quite an uproar,” says Bowen. Most GPO directors were used to the status quo, in which GPOs co-existed without infringing on each other’s territories. Some directors believed that this new form of competition would cause the industry major problems, he says. In fact, competition worked to everyone’s advantage, he believes. It provided more options to hospitals, and it made the GPOs themselves tougher and more competitive.
Something else was happening to group purchasing. Voluntary Hospitals of America (now VHA Inc.) – founded in 1977 by executives of non-profit hospitals around the country – decided to begin a national GPO to help support its activities. It was a huge turning point in the group purchasing industry.
“I remember getting word from Rhode Island Hospital that while they would still participate in our GPO, they would move a large part of their contract purchases to VHA,” recalls Bowen. “And we said, ‘What’s VHA?’ But that was 40 percent of the state’s volume.” And it was gone overnight.
In the summer of 1985, another huge event rocked the healthcare supply chain. HCA (the Nashville, Tenn.-based for-profit hospital company) and American Hospital Supply announced their intention to merge. (The deal fell apart later that year, when Baxter bested HCA’s bid for American and merged with the company.) In light of all these events, executives from Haricomp, Health Services Corporation of America (now MedAssets), the Hospital Council of Western Pennsylvania and Intermountain Healthcare began discussions about joining forces to form a national group purchasing organization. They resolved to do whatever it took to avoid the mistakes of past efforts.
“We said that if we were going to do this, we would have to be totally committed,” recalls Bowen. That meant that each of the four founding GPOs would close their own operations and join forces to create a new one. They did so in 1986, when they formed AmeriNet (now Amerinet). (HSCA dropped out of the group four years later.) Bowen moved to St. Louis to help lead the organization, which grew rapidly. It generated $50 million in sales volume in its first year, but climbed to more than $600 million in Year three.
Amerinet has much to be proud of in its almost 20-year history, says Bowen. “We’ve demonstrated a lot of innovation,” he says. For example, in 1987, the company introduced its Elite contracting program, which accommodated a second, more favorable tier of pricing for members who were willing to commit to certain vendors.
Ten years later, Amerinet introduced its Options program, which allowed integrated delivery networks to customize Amerinet contracts for their own organizations. The program was unique for its time, says Bowen. Some GPOs were digging in their heels and telling their IDN members to either use the GPO’s contracts or drop out. “But we said, we ought to face the fact that if a big IDN can move its business from Brand A to Brand B, it probably can get a better price than us,” he says. “That wasn’t something for us to be ashamed of. We’re in the business of helping our customers, not fighting them.”
Later, the GPO introduced Amerinet Clinical Advantage, which is a program that uses a collaborative process to help facilities win clinicians’ support for programs to reduce costs for high-dollar implants. “It’s yielding great results for hospitals,” says Bowen.
HSCA’s departure in 1990 was a strain for the organization, he admits. But perhaps Amerinet’s biggest challenge came 10 years later, with the dot-com craze. “Everyone was jumping off the cliff to get into e-commerce and start their own dot-com,” he says. “It was a trying time, because we had always stuck to a very clear vision of what we wanted to do. We weren’t ever going to do anything we weren’t good at, or that didn’t yield value to our member customers.” That’s why Amerinet resisted the urge to either start a dot-com or acquire one.
Consistency – that is, the ability to stick close to the organization’s mission and core values – is something Bowen is particularly proud of. But even more so, he’s proud of the reputation that the organization has established over the years. “We’ve always operated at a high level of integrity and fairness. We feel it’s as important to treat suppliers as well as customers with the same amount of respect that we would want to be treated with.”
Others have noticed. “Bud is honest and straightforward,” says Derwood Dunbar, president and CEO of the Mid-Atlantic Group Network of Shared Services Inc. (MAGNET), a GPO focusing on capital equipment, which Bowen helped found while he was at Haricomp. “He did what he said he was going to do. He is a scrupulous businessman and an all-around good guy.”
Adds Bill Wooldridge, CEO of United Service Alliance, Louisville, Ky. (and founder of MedEcon Services, now Managed Health Care Associates Inc., Florham Park, N.J.), “Bud is an extremely high-quality individual. He has great values, great trustfulness.”
Todd Ebert, who succeeds Bowen as Amerinet’s president, adds that suppliers will remember Bowen as a hard but trustworthy negotiator. “He’s a man of his word,” says Ebert, who met Bowen in 1990 when Ebert worked for Intermountain. The people who have worked for Bowen would agree, adds Ebert. “What has always struck me is that he’s very concerned about the individuals in the organization.”
Bowen leaves an industry very different than the one he joined 30 years ago. Then, hospitals had a strong sense of pride and ownership in their GPOs and in what they accomplished together, he says. They felt a common sense of mission, that they were all working together to reduce costs and help their hospitals deliver better patient care.
Today, with the landscape dominated by national GPOs, contracting professionals lack that sense of pride and ownership. “Their GPO is in a corporate office a thousand miles away,” he says. “To them, the GPO is just another vendor.”
That said, GPOs are as vital today as they ever were, and certainly involved in many more things than they were 30 years ago, says Bowen. “In order to compete, [the GPO] has to expand its footprint with its customers, offer them more than just a binder of contracts. You have to get more involved in supply chain management efficiency, helping your customers with their e-business efficiency, standardization, clinical products. You have to do more consultative work.”
That said, pricing is still king, he says. And it always will be. “You can have the greatest consulting services in the world, but if your prices aren’t any good, you won’t succeed.”
Bowen would like to stay involved in the industry in some way, doing something he enjoys and over which he feels he can exert a positive influence. “I don’t intend to go looking for it,” he says. “And if the phone never rings, that’s OK too.” Chances are, it will.