Former distribution executive Ed Burleson works to bring together the GPO, its members and distributors
It wouldn’t be a stretch to say that the relationship between group purchasing organizations and med/surg distributors – particularly non-acute-care distributors – has been complicated. At one time, distributors saw GPOs as competitors, and a threat to margins. GPOs, meanwhile, saw the non-acute-care market as untapped opportunity.
Today, the two recognize that they can work together for their mutual benefit and that of their physician (and other non-acute-care) customers.
Probably very few understand that better than Ed Burleson, who in January 2013 was named vice president of distribution sales for Provista LLC. Prior to joining Provista, he spent 20 years with PSS World Medical, the non-hospital distributor acquired earlier this year by McKesson in a transaction valued at more than $2 billion. His last position with PSS was senior director of GPO relations and director of national accounts.
Provista is VHA’s wholly-owned supply chain company serving the non-acute-care market, as well as education and corporate customers. The company also serves for-profit acute-care facilities and companies.
Industry has evolved
“I spent 20 wonderful years with PSS,” says Burleson. “In my early years, we were educated on how to compete against GPOs. The industry has evolved since then. GPOs have become more knowledgeable about the non-acute market and have done a better job contracting for the specific needs of this segment.
“Over the last five years, I have seen a strong willingness both by distribution and Provista to partner and help each other grow. The economy is also a driving force, with a shrinking market and stronger focus on pricing transparency. Our goal is to continue to educate the distributor rep on the value of our programs and how that translates as value for their customers.”
Some Provista distribution contracts are national in scope, while others are regional. “The decision process is driven through that distributor’s ability to service and meet the need of the Provista customer,” says Burleson. Certain sectors of the market may require unique service models; that also drives distributor selection.
Burleson sees challenges and opportunities in the GPO/distributor relationship in the years ahead. “Our challenges are to develop distribution programs that bring value to our distributors and membership while driving growth.” Distributor reps will drive the business, he says, adding, “We have to do a better job than our competitors to show why we are their preferred partner.”
Small, independent distributors will continue to be an important part of the market, despite the consolidation that has occurred in the industry, including the acquisition of PSS World Medical by McKesson, says Burleson.
Since 2007, Provista has had a contract in place with National Distribution & Contracting Inc. (NDC), a Nashville, Tenn.-based member services organization of more than 300 independent medical, physical therapy, rehabilitation & dental product distributors.
Independents that gain access to GPO contracts through organizations such as NDC have an opportunity to be competitive and grow their business, he says.
“It’s an exciting time to be at Provista,” says Burleson. “We have the leadership and vision to do some special things in the market. At Provista, we understand our market, our competitors, and most important, the power of distribution. I’m thrilled to be a part of this organization as we put our stamp on the industry.”
Sidebar: Non-hospital providers prepare for healthcare reform
Ambulatory surgery centers and cancer centers are confident they can adapt to industry changes brought about by reform. Physician practices and home health agencies are less so.
Earlier this year, Provista surveyed administrators, directors and office managers in a variety of non-hospital settings, and found that nearly 70 percent are actively reducing costs in reaction to changes brought about by reform. Respondents cited declining reimbursement as their primary challenge, and said they are taking a variety of steps to adapt, including forming partnerships and collaborative care models, and diversifying services. While many providers are holding off purchasing in some categories, investments in computers and software remain strong.
Ambulatory surgery centers
- Seventy-two percent of respondents are confident in their ability to adapt to healthcare reform but cite declining reimbursement rates (72 percent), operating costs (66 percent) and increased regulations (38 percent) when making business decisions.
- To prepare for healthcare reform, a majority of respondents are cutting costs (76 percent), expanding and diversifying services (39 percent) and considering a joint venture with a hospital (13 percent).
- Forty-five percent of respondents expect their capital equipment purchases to remain the same, and 73 percent report physician-preference purchases will stay the same.
- Major purchases over the next 12 months include operating room equipment (49 percent), computers and software (37 percent), and monitoring equipment (23 percent).
- Sixty-six percent are confident in their ability to adapt to reform, but cite declining reimbursement rates (88 percent), drug costs (60 percent) and general operating costs (42 percent) as key challenges.
- The majority of respondents are cutting costs (71 percent), expanding and diversifying services (42 percent), and considering a joint venture with a hospital (23 percent) as a means to meet the economic challenges of healthcare reform.
- Major purchases over the next 12 months include computers and/or software (50 percent), furniture (35 percent) and exam tables (25 percent).
- Forty percent have a high level of confidence in their ability to adapt to a new healthcare landscape, while
- 40 percent are somewhat confident.
- To prepare for healthcare reform, the majority of physician practices are cutting costs (56 percent), expanding services/diversifying (41percent), or joining/already in an ACO (29 percent).
- Key areas for purchasing over the next 12 months include computer and/or software (58 percent), malpractice insurance (30 percent) and furniture (28 percent).
Home health agencies
- Forty-six percent have a high level of confidence in their ability to adapt to reform, while 42 percent are somewhat confident. The majority cited declining reimbursement rates (79 percent) and operating costs (60 percent) as key challenges.
- Seventy-four percent of respondents said their organization will prepare for health reform by cutting costs, 58 percent said they will expand services/diversify into other areas, and 16 percent said they will participate in ACOs.
- Sixty-one percent said their future home health purchases include computer and/or software, and 25 percent said telehealth monitoring systems.