4ac827a7a73f92b6bb6064fdb9627a26.ppt
- Количество слайдов: 43
Med-Surg Distribution Is it the ugly stepsister or Is it Cinderella or Is it one and the same? WSHMMA April 28, 2006
Medical-Surgical Distribution Overview About 25% of the dollars purchased by Materials Management flows through Medical-Surgical Distribution
Medical-Surgical Distribution Economics • Purchasing costs related to supply channel • Hospitals typically buy med-surg • products from one or two distributors – average cost $1. 31/line Hospitals typically buy direct from 442 med-surg manufacturers – average cost $5. 43/line Source: HIDA Hospital Procurement Study, April 2005
Medical-Surgical Distribution Economics • Distributors need to generate a minimum gross margin of 10. 5 – 11% • Distributors average about 7– 10% for SGA • Distributors operating margin is about 1 -3% • Distributors net after tax profit is about 1– 3%
Medical-Surgical Distribution Economics… Source of gross margin • 65% sell side (provider) • cost/plus • activity based • private label • self-manufactured • non-contracted
Medical-Surgical Distribution Economics… Source of gross margin… • 35% buy side (manufacturer) • • • payment terms (e. g. , 2% if pay within 15 days) tracing fees (e. g. , 1%) forward buys buying through secondary sources annual growth/efficiency rebates (3. 5% small mfg; 1% large mfg) – EDI, full truck loads • distributor/manufacturer relationship products – selling cost (upwards of 15 -20%) – BVP, Focus, Max Impact
Medical-Surgical Distribution Economics… • 80% of the volume a distributor sells is driven by 20 product categories Product Category % of Total Sales Wound Staples & Endosurgery 10. 0% Kits, Packs & Trays Standard 2. 4% Kits, Packs & Trays-Custom 9. 4% Solutions 2. 3% Parenteral 9. 3% Urological 2. 1% Woven & Nonwoven Goods 6. 2% Wound Care 1. 6% Wound Sutures 5. 7% Patient Restraints & Supports 1. 3% Respiratory 4. 5% Metal/Plastic/Paper Products 1. 3% Needles & Syringes 4. 3% Enteral Feeding & Medical Nutritionals 1. 3% Gloves 4. 1% Hazardous Waste Control 1. 3% Adhesives, Bandages, Dressings, & Sponges 3. 5% Incontinence Products 1. 3% Electromedical 2. 8% Antimicrobials, Disinfectants, & Scrubs 1. 3% Surgical Instruments & Devices 2. 6% Catheters, Diagnostic & Therapeutic 1. 2% Sterilization Supplies & Products 2. 6% Soaps/Shampoos/Powders 1. 0% Source: HPISA Data 2005
Medical-Surgical Distribution Economics… • Only approximately 10 manufacturers provide funding to the distributors for these 20 product categories. 3 M Bard Baxter BD Cardinal De. Royal Hospira J&J Kimberly Clark Tyco/Kendall
Medical-Surgical Distribution Economics… • 2005 Distributor Financial Performance Survey • Tracks physician/alternate site; hospital; • long-term care Median revenue growth – 2003 10% – 2004 7% – 2005 projected to rise Source: HIDA Educational Foundation
HIDA The Distributor of the Future • Industry thought leaders demanding • integrated relationship • focus on across-the-board cost reductions with greater transparency • data sharing • assistance in product standardization • general expertise in procurement, products, logistics Source: HIDA-The Distributor of the Future
HIDA The Distributor of the Future… • Key conclusions • Customers place high value on • distributor’s role Shift from price-focus to cost-focus – point of diminishing returns on price concessions – drive cost reduction in areas such as standardization, clinical labor savings – fee-for-service trend in its earliest stages Source: HIDA-The Distributor of the Future
HIDA The Distributor of the Future… • Key conclusions… • New distributor-customer relationship evolving – focus on problem solving not negotiating – distributors need to define themselves in terms of customers not the manufacturer – new clinical services for customers Source: HIDA-The Distributor of the Future
HIDA The Distributor of the Future… • Key conclusions… • Role of acute care sales rep is changing 1. not about pushing product 2. is about helping 1. standardization 2. overall cost reduction 3. go-between for materials and clinical 4. representing hospital with manufacturer 5. bird dogging GPO contract compliance 3. continued smooth functioning of daily activity 4. new compensation model required Source: HIDA-The Distributor of the Future
HIDA The Distributor of the Future… • Key conclusions… • IDN independence: driving change – shift away from centralized decision making is refragmenting the industry to its local/regional roots – new levels of scrutiny – increased service demand – look to distributor as supply chain advocate both internal and external – IDN participation providing benefits that use to come from GPO Source: HIDA-The Distributor of the Future
HIDA The Distributor of the Future… • Key conclusions… • Customers view distributors as essential to the standardization process – clinical preference items Source: HIDA-The Distributor of the Future
HIDA The Distributor of the Future… • Strategies for Success • Customer • segmentation Embrace the IDN power shift Source: HIDA-The Distributor of the Future
HIDA The Distributor of the Future… • Strategies for Success… • Manufacturer relationships – manufacturers challenged to preserve or rebuild their brand power – manufacturers threatened by drive in product standardization and distributor private label – manufacturers want a distributor declaration for rules of engagement to avoid unplanned competition – distributors need to define the role and importance of manufacturer alignment in their businesses Source: HIDA-The Distributor of the Future
Medical-Surgical Distribution Is the landscape changing? Does the landscape need to change? Change will affect us. We can impact change.
Potential Market Drivers… WH HO W WH EN WHAT ERE HY W
Potential Market Drivers • Europe 10 -15 years ago – new warehousing • no large pan distributor • 3 PL – broad statement • would warehouse anything, selling service • would not own inventory but would manage it • would market, collect the money, report • brought forward with the advance of • computer systems and bar codes popping up all over/extremely efficient
Potential Market Drivers… By 2007, estimated that more than 75% of commodity products distributed by the medical-surgical distributor will come from outside the United States.
Potential Market Drivers… Wall Street Journal, July 5, 2005 • Omnibus facilities (outsourced warehouses) are increasing as way stations in the global, just-intime economy • cost cutting • shifting of production offshore • $89. 4 billion third-party logistics • • Source: Wall Street Journal, July 5, 2005 industry 16. 3% increase in 2004 revenue for the U. S. warehouse and logistics sector distribution warehousing/the next arena of corporate reengineering and cost-cutting
Potential Market Drivers… • Key Players • C. H. Robinson Worldwide, Inc. • Penske Logistics LLC • United Parcel Service, Inc. • DHL Source: Wall Street Journal, July 5, 2005
Potential Market Drivers… • ODW Logistics, Inc. • operates in Columbus, Ohio (third largest port • • of entry for textiles in U. S. ) warehouses in Dallas; Chicago; Urbana, IL; Battle Creek, MI 515 employees expects revenue to increase 38% in 2005 from $35 M located along transportation corridors Source: Wall Street Journal, July 5, 2005
Potential Market Drivers… • ODW Logistics, Inc. … • Ralston Foods will use ODW to meet Wal- • • Mart’s demand for RFID/rather than Ralston making the investment they and other ODW customers will share the expense Edwards Lifesciences Corp. chose ODW two years ago – 90% of product shifted to ODW Demanding customers (customer order in by 4 pm Eastern for next day delivery – 3 hours to pack/ship 400 items) Source: Wall Street Journal, July 5, 2005
Potential Market Drivers… • UPS Opens New Logistics Facility To Serve Healthcare Industry • press release, Louisville, Sept. 30, 2005 • 500, 000 square-foot distribution center • more accessibility to pharmaceutical, medical device, and equipment companies • located near company’s Worldport global air hub • 25 th UPS facility in North America dedicated to healthcare • can deliver to mass market retailers, pharmacies, healthcare facilities, and consumers
Potential Market Drivers… • Suppliers of physician preference products are maintaining a limited supply chain • tend to only ship direct • desire to maintain their relationship with the end user/decision maker • desire to control their destiny to profitability • shifting of investor funds from the pharma sector to devices • medical devices have quick product cycles but device companies develop lasting relationships with customers
Potential Market Drivers… • Manufacturer models are changing Johnson & Johnson • December 2003 – Change in J&J’s distribution policy – would sell only to U. S. wholesalers that buy its products only from J&J. Aim to eliminate secondary market • April 2005 – J&J products stocked in their new 400, 000+ square foot warehouse in Memphis, TN, next to Federal Express Today, estimated they are shipping 20% of their Wound Closure-Endomechanical direct from Memphis versus virtually 0% over a year ago
Potential Market Drivers… • E-Commerce • Hey dot. com what’s your value • proposition? GHX – Purpose is an – affordable portal In the product business and wanted to protect the interests of the manufacturer and provider
Potential Market Drivers… • IDN Maturation • Focused on supply • • expense management Deflation of product cost Looking at distribution options – shift of products from med– – surg to pharma outsourcing to distributor self-distribution leveraging better deal with existing partner aggregating business on a geographic basis
Profile: Sisters of Mercy Health System Member Facilities • 18 acute care hospitals • 1 heart hospital • 818 integrated physicians • Managed care organization Mercy Health Plans • Community-based Outreach Mercy Ministries of Laredo In Arkansas: St. Joseph’s Mercy Health Center, Hot Springs St. Edward Mercy Health Network, Fort Smith Mercy Health System of Northwest Arkansas, Rogers In Kansas: Mercy Health System of Kansas In Missouri: St. John’s Mercy Health Care, St. Louis St. John’s Health System, Springfield In Oklahoma: Mercy Health System of Oklahoma Co-workers 26, 000 FTES Physicians 3, 100 (818 employed) Inpatient Discharges Outpatient Visits Acute: 143, 579 Total: 158, 943 4, 979, 788 Emergency Room Visits 428, 257 Charity Care, Medicare Allowances And Community Benefit $144. 1 million Beds 4, 119 total licensed beds (3, 232 acute) Information current for Fiscal Year 2004, ending June 2004
Our Structure… Group Purchasing Supply and Pharmaceutical Contracting Capital Equipment Contracting Contract Compliance Monitoring Rebate Management Pricing Administration Member Services Facilities • Consolidated Services Center – Springfield, MO Supply Chain Management Consolidated Services Center Inventory Management Pharmaceutical Repackaging Purchasing Customer Service Optimization Management Transportation Management Performance Consulting Clinical Resource Optimization Pharmacy Performance Improvement Process Performance Improvement • Corporate Office – St. Louis Co-workers Net Revenue 142 FTEs from varied clinical and business disciplines $200 million ROi helps Mercy with innovative solutions that improve the costeffectiveness, quality and safety of care through tactical and intellectual resources fortified by aggregation, teamwork, and shared values.
The CSC Operation… Springfield, MO 4 4 4 4 101, 000 Square Feet Air conditioned Refrigerated Storage Frozen Storage Controlled Substance Cage and Vault Suitable for all Healthcare supply storage needs in one facility Pharmaceutical Repackaging Operation Customer Service on-site
Comparison of Distributors to ROi Motivation Traditional Distributor Goals Capital Configure facility to support their core service (med surg, linen, pharmaceutical, etc…) Configure facility to support all system and affiliate supply needs and goals Stocking Logic Only stock goods that move frequently Service Provide service equal to competition or generally accepted standards Stock the goods needed to support system and affiliate needs Provide service that meets the expectations of Mercy and other affiliates Financial Maximize profit Remain cash neutral Representation Consistently reducing staff. On-site representation with deeper knowledge of business and customer needs - a service focus, not sales Decision making remotely located
QUESTION: How large of a distributor is ROi? According to the Health Industry Distribution Association’s membership of over 200 distributors, the distributed volume through the CSC ranks ROi in the top 10 largest Healthcare distribution companies in the nation. $180, 000 Membership Listing 1. 2. 3. 4. 5. 6. Cardinal Health (Allegiance) Owens & Minor Fisher Healthcare Me. Kesson Medical-Surgical Henry Schein, Inc PSS/World Medical, Inc +$1, 000, 000, 000 +$1, 000, 000 7. 8. 9. 10. 11. Burrows Company Midwest Medical Supply Resource Optimization Professional Hospital Supply Seneca Medical, Inc 12. 13. 14. 15. Buffalo Hospital Supply Company $50, 000 - $100, 000 Medical Specialties Distributors $50, 000 - $100, 000 Neighbor. Care $50, 000 - $100, 000 Pharmed Group Corporation $50, 000 - $100, 000, 000 - $250, 000, 000 $100, 000, 000 - $250, 000
Potential Market Drivers… • GPO • deflation of product cost – impacts • • distributors margins in the cost plus model move away from sole source – increases contract administration for the distributor government impact on administrative fees – potential shift pressure to drive increased value for members exploring non-traditional opportunities
Potential Market Drivers… • Impact of boutique distributors (e. g. , Suture Express) • Reduction in secondary source buying • U. S. fuel prices up from a year ago 1 • • Source: 1 eia. doe. gov 4/17/06 Gasoline up 24. 4% Diesel up 22. 4%
Potential Market Drivers… • U. S. Truck Driver Shortage • long-haul, heavy-duty • predict shortage of 111, 000 by 2014 • wages, away from home, unpredictable • schedules next decade – supply will grow at 1. 6% annual rate – demand will grow at 2. 2% annual rate (320, 000) – retirement (219, 000) Source: American Trucking Association
Potential Market Drivers… • Pharma distribution • shift of products from med-surg • • • to pharma (e. g. , contrast media; hemostatis; IV solutions/sets) move from forward buys to drug manufacturers paying fees for service Medicare drug benefit onslaught of new generics anticipated that 20 -30% of vendor margin driven by price inflation YTD branded price inflation solid, second half trends and beyond less clear
Potential Market Drivers… • Distributors moving to protect their margins • private label 2 x the margins of standard • • • distribution self-manufactured 3 -5 x the margins of standard distribution buying small manufacturers low unit of measure programs pushing to migrate to activity based exploring non-traditional opportunities
Cardinal Health Inc. (CAH) • $74. 9 B in sales (2005) • Cost reductions, restructuring to drive earnings • • • 50 plus past acquisitions have not been integrated working to consolidate/outsource IT to India $20 M annual savings estimated integrating financial functions $25 -35 M annual savings estimated integrating HOUR functions and outsourcing transactions $10 M annual savings estimated consolidation of customer call centers $5 -15 M annual savings estimated Source: Merrill Lynch, April 19, 2006
Cardinal Health Inc. (CAH)… • Expansion opportunities • CAH views as key driver of future growth – – today 10% or so of EBIT is international 2010 20% of EBIT could be international likely Canada and Europe most immediate in CTS and med-surg distribution • April 17, 2006 R. Kerry Clark succeeds Robert D. Walter as chief executive
Medical-Surgical Distribution Is the landscape changing? Does the landscape need to change? Thoughts… Discussion…
4ac827a7a73f92b6bb6064fdb9627a26.ppt