The Medical Mart Derby

Three companies are in a race to build the country’s first permanent exhibition center for medical products. But they need capital, exhibitors … and you.

The race is on to get a permanent medical mart built and functioning. After years of talking and a couple of failed attempts over the past couple of decades, this time, developers in Cleveland, Nashville and New York City feel the time is right to finally do this thing.

Medical marts are a win/win for suppliers and providers, they say. For suppliers, the marts – with permanent showrooms and space for temporary trade show exhibits and conference facilities – would eliminate the expense of lugging equipment to dozens or even scores of trade shows every year, and would provide a venue for manufacturers to train providers and perhaps their own sales teams on how to use their technology. For buyers, they would provide a convenient location in which their teams could view competing technologies, sparing them the cost and time of traveling to different locations around the country, according to developers. And for professional associations, which regularly hold continuing education events, the marts would provide conference room space and a ready supply of exhibitors, both from the permanent showroom floor as well as temporary space that other vendors could rent for the duration of the event.

In the past 20 years, efforts to launch medical marts in Baltimore and Birmingham failed, according to those with whom the Journal of Healthcare Contracting spoke. In Baltimore, it was a case of a real estate deal gone bad, says Byron Morton, vice president of leasing, MMPI, Chicago. And organizers in Birmingham simply couldn’t get the program off the ground when they tried to launch it in 1992, he adds.

The entrants
Today’s entrants hope to meet with more success. Whether one, two or all three will succeed remains to be seen. The entrants are:

  • In Cleveland: MMPI (formerly Merchandise Mart Properties Inc.), which is working with Cuyahoga County in Ohio to build a convention center and medical mart.
  • In New York: World Product Centre Marketing, New York, which is planning a 60-story building in West Midtown Manhattan to house 27 stories of technology showrooms, plus education facilities, a consumer health exhibit and more.
  • In Nashville: Market Center Management Co., Dallas, which is hoping to open the Nashville (Tenn.) Medical Trade Center as early as next year.

Of the three, the Cleveland project has been in the works the longest. In fact, the idea reportedly was floated more than 20 years ago. But it picked up steam in the summer of 2005, when Chris Kennedy, president of MMPI, began talking in earnest with city and county officials about it. MMPI operates permanent showrooms for retailers of consumer and business products in Chicago; High Point, N.C.; Washington, D.C.; New York; Los Angeles; and Baltimore. The Cleveland facility would be its first medical mart.

Two years ago, Cuyahoga County brought the idea closer to reality by passing a quarter-of-a-penny tax increase, which would fund the project, says Morton. Over 20 years, the initiative would raise the $425 million needed to replace Cleveland’s existing, dated convention center with a 125,000-square-foot showroom, 300,000-square-foot space to house temporary medical exhibits (for association conventions) and a conference center comprising approximately 160,000 square feet. In April 2009, Cuyahoga County and MMPI signed a development and management agreement.

The Cleveland proposal has a number of factors in its favor, says Morton. First, it’s Cleveland, home of The Cleveland Clinic, University Hospitals, Case Western Reserve University School of Medicine and other medical institutions, he says. In fact, Cleveland Clinic CEO Toby Cosgrove, M.D., is a proponent of the plan. That kind of medical leadership in and around the city would attract professional societies and trade associations to hold their conferences at the Cleveland mart, says Morton. It would also be an attraction for manufacturers of medical products and equipment, he adds.

Second, if the mart’s operators are able to convince high-profile, clinical professional societies to hold their conferences at the mart, they will have also have succeeded in attracting teams of hospital decision-makers looking to buy medical technology, says Morton. “The decision-makers and influencers in hospital capital purchases range from the executive to a medical equipment planner who’s been engaged in designing the facility, to the architect and engineers.” The medical mart “will attract those decision-makers and influencers as they attend [conferences] to gain certified medical education.”

Third, with a funding mechanism already in place, the Cleveland project just isn’t as risky financially as other projects, especially the New York World Product Centre, says Morton. “The fact of the matter is, a real estate deal is much less expensive to do in Cleveland than New York City.”

World Product Centre
If Cleveland’s main draw is Cleveland, New York’s entrant is characteristically New York. That is, big.

The World Product Centre would be housed in a yet-to-be-built, 60-story building at 11th Avenue and West 34th Street in West Midtown Manhattan. The brainchild of New York developer Israel Green, the Centre would accommodate somewhere around 1,000 permanent and temporary vendors in 27 floors. Groundbreaking is expected in late fall 2009 or early spring 2010.

At press time, developers were considering developing various “Centers of Excellence,” including a healthcare architecture and design center, radiology training center and a healthcare innovation center. Indeed, seven of the 11 healthcare companies that have signed license agreements with WPC are portfolio companies under the healthcare-focused private equity partnership Roundtable Healthcare Partners. Also planned is space for companies to give presentations to Wall Street analysts, says World Product Centre Marketing President John Strong, former president and CEO of Consorta and before that, chief operating officer of Premier Purchasing Partners.

The World Product Centre would also include five floors, or roughly 125,000 square feet, for education. At press time, developers were in discussions with a nonprofit organization to operate a 20,000-square-foot minimally invasive surgery training center and a robotics training institute. The building would include a couple of floors for consumer health education, as well as 14 floors of offices and 160 conference rooms in which professional associations and societies could hold their conferences.

Hewlett-Packard will provide the “technology backbone” for the World Product Centre. Hand-held fobs will translate presentations into six languages for visitors, who will be able to participate in interactive presentations during those times when exhibits are unmanned. Live connections to procedures in healthcare facilities using a particular piece of equipment can be accommodated. And visitors to showroom exhibits will be able to talk live with company VIPs who are not onsite via Cisco’s TelePresence videoconferencing technology.

Although the WPC’s developers hope and expect to attract manufacturers and providers from around the country and the globe, they are clearly positioning the Centre as a huge regional draw. Indeed, the company’s marketing materials point out that 40 percent of U.S. teaching hospital beds are located within a half-day’s drive of Midtown Manhattan.

At press time, in addition to the Roundtable portfolio companies, Cardinal Health, Zimmer Inc. and Encompass Group had signed on as charter partners.

The latest entrant in the medical mart sweepstakes is the Nashville Medical Trade Center, a 1.5-million-square-foot facility housing permanent manufacturer showrooms, temporary trade show space, and conference facilities to accommodate medical trade events. The developer is Dallas-based Market Center Management Company, which, together with its owner Crow Holdings, owns or manages market centers in such industries as home furnishings, gifts, lighting, textiles and others.

As with the other two projects, location is a key to the Nashville project, says Bill Winsor, president and CEO of Market Center Management Company. “With over 350 companies in the Nashville Health Care Council, that’s a significant base of trading and service companies already there,” he says.

What’s more, Nashville is within 500 miles of 30 major cities, and the weather is good year-round, points out Bob Zandee, who was hired as a consultant to the project. Zandee is a healthcare industry veteran who, for the past 15 years, has specialized in mergers and acquisitions, start-ups, product placement and development and corporate overview.

Market Center Management had actually investigated developing a medical mart in the early 1980s, says Winsor. But the environment today is much more conducive to such a project. “The cost of evaluating products, with travel and accommodations, are weighing more heavily on the procurement process than in the past. You put those factors together with putting [medical technologies] in one place, in a controlled environment with efficiencies, and it makes a lot more sense now than it did.” What’s more, given the complexity of some of today’s medical technology as well as information-technology offerings, vendors find it all but impossible to set up their technology properly on temporary trade show floors, he adds.

Overseas manufacturers will also be attracted to the permanent showroom, says Winsor. As it is, many overseas companies find it difficult to enter the U.S. market. Exhibiting at various trade shows across the country is an expensive proposition for them.

“It’s like everything else – it’s timing,” says Zandee. “It’s not just the economy; healthcare in general has to cut back on costs. You talk to vendors. It used to be they went to five shows a year. Now it’s 50. They just can’t keep that up. Same with the provider side.”

Zandee predicts that two of the biggest draws for the Nashville mart will be suppliers of construction-related products and services, and IT vendors. Construction “is always going on in healthcare,” he says. A permanent mart would give the hospital construction committees a chance to travel as a group to one place to look over various options. Information technology will also be a big area, he predicts. In the showroom, IT vendors could simulate how their products would work in a real-life environment, something that is difficult to pull off in an exhibit at a trade show that they had to put together in just a day or two.

Zandee foresees another use for the facility, that is, as a venue in which manufacturers can bring together their own sales reps (or those of their distributors) as well as providers themselves for product training. In addition, as do the Cleveland and New York projects, the Nashville developers hope to attract professional associations – whose members need continuing education in order to maintain their professional license – to hold their annual conferences there. “We’ll have terrific conference facilities, and the exhibits will be built in,” says Zandee.

Critical mass
Developers face the proverbial chicken-and-egg paradox. Providers won’t come unless there are enough exhibits to make it worth their while, and manufacturers won’t take space unless the mart draws a critical mass of interested buyers.

By locating their marts in medically significant cities or regions, developers are trying to address manufacturers’ need for a healthy customer base. But they are also busy trying to attract manufacturers. “Buyers have to feel as if they’ve surveyed the market,” says Winsor. “If you’re creating just one more stop for them, you’re not creating a solution – just another cost.”

Which raises the question: Can this country support three marts? If not, is the race on to see who can get their mart up and running first?

“I think there can only be one of these in the country,” says Strong. “But I don’t think the person who gets the shovel in the ground first wins. I think it will be the one that develops the best content and reasons for people to come, the richest healthcare environment.”

Winsor agrees that the United States can probably support no more than one medical mart. “We’ve been managing marts for over 50 years, and on different continents,” he says. “The critical mass factor is so important, the scale of the project is vital to its success.”

Morton is blunt in his assessment. “We’ve always said the first one to market wins. Our plan has us opening a portion of our facility for conferences and continuing medical education in the fall of 2010. So we anticipate we’ll be the first to market with momentum in terms of attracting medical professionals.

None of the players appear to be interested in replacing today’s professional and trade shows with a permanent showroom. “On the other hand, I will tell you that half the manufacturers we talk to are evaluating their trade show expenditures,” says Strong. “Attendance has been down, and they don’t feel they’re talking to decision-makers. It has become a big part of their marketing budget, and they’re having to take a look at it.”

For marts to take hold, however, sellers and buyers might have to depart from traditional ways of thinking. A permanent center to showcase new technologies, combined with conference and education facilities “is a concept that can be used in a changing environment,” says Strong. As the federal government continues to scrutinize the relationship between buyers and sellers for evidence of anti-kickback violations, it will be more difficult to hold conferences in places like Las Vegas. “That will not be as accepted a way of doing business as it was in the past,” he says. “