McKesson Medical-Surgical: Market-ready

Editor’s note: The demand for expertise in the non-acute-care supply chain has never been greater, particularly as IDNs continue to acquire physician practices. Two years after McKesson Medical-Surgical’s acquisition of PSS World Medical, McKesson Medical-Surgical President Stanton McComb is confident that the company is well-positioned to provide that expertise. Scott Adams, vice president of corporate accounts for MDSI (publisher of the Journal of Healthcare Contracting) recently asked McComb about the company and the evolving healthcare market. Here is an edited version of that conversation.

Scott Adams: You were named president of McKesson Medical-Surgical, after serving as president of McKesson Automation, a provider of hospital pharmacy automation products and services. What are the two or three most important – or surprising – things you have learned about the med-surg distribution market in the four years you’ve been at Medical-Surgical?

Stanton McComb: I am most surprised by the complexity of our industry — which, quite frankly, affords us the opportunity to do more for our customers, by helping them succeed in a rather daunting environment.

Adams: McKesson completed its acquisition of PSS in February 2013. When will you consider the integration process to be completed? What are the challenges facing your company as you go through that process? What is your vision for your company when the integration is complete?

McComb: We are more than two-thirds of the way through our integration, and we are on schedule to complete it by spring of 2016. We faced the challenge of adapting pre-existing practices and aspects of company culture that had worked well in the past for PSS or McKesson, respectively, but needed to be evolved and made consistent for our continued success. Becoming one team has been good and healthy, but reconciling and harmonizing long-held practices has not been an easy. So, I’m proud of what we have accomplished as a team.

We have a strong vision for the future of our company. As the industry leader, we can offer our customers more efficiency, more innovative products and services, and more value by operating on a single distribution network platform and using the same systems. Together, we can offer more than either historical company could have on its own.

Adams: In 2006, McKesson sold its acute-care business to Owens & Minor. More recently, we saw Cardinal exiting the non-hospital market. What do these two events say about the compatibility of acute- and non-acute-care businesses in one distribution company?

McComb: We believe the recent Cardinal announcement validates the alternate site strategy we have been pursuing since 2006 and the value our dedicated delivery model provides to customers outside the hospital. The physician office market requires a different model than acute care, and we have focused on providing the excellence and value that have earned us a leading ambulatory market position. Applying the deep knowledge and relationships we have with healthcare providers and manufacturers, we can provide value through distribution excellence, a high-touch service model and unparalleled product choices.

Adams: In the eight years since McKesson divested its acute-care business, the industry has continued to see consolidation among providers. Particularly, we see hospital systems and IDNs acquiring physician practices. Had McKesson foreseen these developments eight years ago, do you think the company would have made the same decision? Why or why not?

McComb: While we exited acute care, we never stopped serving health systems. We have great relationships with many hospitals and health systems, where we provide value to the unique needs of their ambulatory sites across the continuum of care.

Adams: Population health and accountable care organizations emphasize collaboration between acute- and non-acute providers. What impact are they having on McKesson Medical-Surgical? What impact do you foresee in the future?

McComb: While these organizations strive to achieve more of a continuum of care as patients are treated in different sites, the fact remains that provision of care changes from primary to acute and to post-acute sites. McKesson’s breadth of experience in serving large and small customers in both ambulatory and post-acute segments allows us to partner with these organizations and efficiently serve their broader needs, while also providing the more tailored services that each segment requires to achieve the best outcome for patients. Our access to the full McKesson technology and solutions portfolio will continue to give us an advantage in this area.

Adams: If it is true that consolidation among providers is continuing, how does the field sales rep maintain his or her significance in these accounts?

McComb: Though there is significant change underway, we are 100 percent committed to our sales teams. They are a clear strategic advantage for us. Our sales teams have always helped our customers and our business through times of significant change. Our reps are constantly seeking to better understand our customers. They add value by helping customers solve their challenges and better serve their patients. That’s something customers will always appreciate.

Customer and market segments

Adams: What are the market segments that you see growing in the next five years? What is the role your sales team will have in driving growth in these segments?

McComb: The healthcare industry’s ongoing efforts to lower the cost of care should continue to drive growth to care environments outside of the acute segment and even into the home. Large physician practices, health systems and home care providers should benefit from this. Strong relationships between our sales teams and their customers will be key to our ongoing success.

Adams: Recently, we reported on what some in the industry are referring to as physician “supergroups,” that is, groups of 20, 25 and all the way up to 150 doctors. Do you see this segment of your business growing? If so, how are you preparing to serve these supergroups?

McComb: Consolidation is occurring not just vertically, but also horizontally. Large physician practices are already an important customer base for McKesson. The greater complexity and distribution volume of these customers makes McKesson’s overall value proposition even more appealing to these customers, many of whom do not have the more systematized capabilities of larger systems that have been around longer. We are collaborating with other McKesson business units, like McKesson Specialty, McKesson Business Performance Services and McKesson Pharmaceutical, to bring superior and differentiated value to these larger players.

Adams: Please describe McKesson’s involvement with surgery centers. What are the unique needs of the surgery center, and how do those needs compare or contrast with those of the physician office?

McComb: We have a leading position in the ambulatory surgery center market. As reimbursement models shift, we think surgery centers will experience growth and we are excited to be well-positioned to grow in this market. Our customized solutions work well for surgery centers, which need orders delivered just-in-time. We have developed good relationships in this segment that help us understand its unique needs, and a strong service model and solutions to meet these needs. For example, we have just launched a solution to improve efficiency for ophthalmology surgery centers, called McKesson Implant Manager. This automated inventory management system saves time and money for customers by eliminating the burden of manually managing and tracking their intraocular lens inventory.

Adams: Do you see consolidation among your long-term-care customers? If so, what are the unique needs of large long-term-care customers?

McComb: The number of short-term stay patients and the levels of patient acuity have been increasing in recent years, and, along with the shift in reimbursement, this is creating challenges for long-term-care providers. It is driving accelerated consolidation and growth in scale. Fortunately, we have been tracking this change for years, and we are prepared with the scale and the tools to help our customers adapt and win in a changing environment.

Adams: At one time, it seemed that IDN materials management executives were asking for one distributor to service both acute- and non-acute-care sites. How would you describe the climate today?

McComb: Some health systems still seek one distributor across all their care facilities. However, the reality is that no distributor today effectively services all the medical-surgical, Rx and laboratory needs for every setting, from the hospital to a patient’s home. The service requirements are just very different. Instead, we see the more sophisticated health systems are opting for distribution solutions specifically designed to support their unique needs across the care continuum.

Adams: Among those IDNs who have settled on two prime distributors – one for acute care, one for non-acute care – do you find that materials executives are asking McKesson to work with or collaborate with your acute-care counterpart? If so, how?

McComb: We do not see this as the norm. More often, the health system serves as a conduit of information to ensure they can standardize products across their network and leverage their volume for better pricing.

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