This month’s headlines

Vendor credentialing issue heating up. IMDA members can look forward to some clarification on an issue that has alarmed many of them in the past year or so – vendor credentialing.

Penlon Ltd. acquires Keomed companies. Long-time IMDA member Keomed Inc. has been acquired by Penlon Ltd., a United Kingdom-based manufacturer and developer of anesthesia systems, patient monitoring equipment, laryngoscopes, suction equipment, oxygen therapy devices and medical gas solutions.

Goal to go. Goal-setting is on everyone’s lips this time of year. Learn how to set and attain meaningful goals at IMDA’s “Smart Selling” seminars in January.

Venture capitalists love medical device companies. Good news for IMDA members! Venture-capital firms are investing in small, privately held medical device companies like never before.

Manufacturers seek representation by IMDA members. The IMDA staff has posted six “Request for Representation” solicitations on the IMDA Website (www.imda.org) in the past 30 days alone.

 

Vendor credentialing issue heating up

IMDA members can look forward to some clarification on an issue that has alarmed many of them in the past year or so – vendor credentialing.

The Joint Commission is planning to conduct what it refers to as a “field review” of the subject early next year, during which it will solicit comments on the issue. IMDA President Shawn Walker and legal counsel Mitchell Kramer are considering how IMDA will respond when the Joint Commission begins its review.

Gaining steam

The vendor credentialing issue has gained steam in recent months, as distributors, manufacturers and manufacturers’ reps have grown increasingly concerned about the proliferation of requirements that vendors must meet in order to call on healthcare providers. Suppliers are concerned not only about the time involved in complying with providers’ request, but the cost, too.

“I’ve seen these vendor access programs really accelerate in the past 18 months,” said John Tara, director of corporate strategic marketing for Boston Scientific, speaking at the Fall Conference of the Healthcare Manufacturers Marketing Council (HMMC). That’s a big problem for the company, which has about 2,500 field reps in the United States alone. Tara estimated that 75 percent of U.S. hospitals have some type of formal credentialing process in place. “It’s hard to see it not going to 100 percent,” he added.

The problem for suppliers is that the credentials they must present to one hospital or hospital system are seldom identical to those they must present at another. “There are 5,000 hospitals, and 5,000 different vendor credentialing requirements,” said Tara, who has worked on a committee for AdvaMed, the Washington, D.C.-based association of manufacturers, which has been exploring the issue. “You can be looking at tens of thousands of credentialing requests processed each year. Then you have renewals. So there’s redundancy, risk management, compliance issues, and the cost of the system.”

Suppliers represented on the HMMC panel – which included Frank Krimowski, president of the Health Industry Representatives Association, and Matt Rowan, president of the Health Industry Distributors Association – conceded the need for some kind of vendor credentialing. Beginning last year, the Joint Commission began quizzing hospital administrators about the extent to which they knew who was walking the floors of their facilities. “Most hospitals realized they didn’t know who was gaining access to the institution,” said Tara. Unfortunately for suppliers, many providers simply modified their medical-staff-credentialing processes to accommodate a vendor-credentialing process. The result is a myriad of requirements, few of which take into account the nature of the sales rep and his or her business in the providers’ facility.

A delicate balance

What’s needed, the panel members agreed, is a process that will ensure patient safety, patient confidentiality and quality of care, while also ensuring that providers gain access to innovative medical technology and skilled sales professionals to demonstrate proper use of their technologies.

Along those lines, AdvaMed has already submitted comments to the Joint Commission. In a letter, the association supported the goal of establishing “minimum HCIR standards that protect the interests of patient care.” (“HCIR” stands for “health care industry representative.”) That said, the organization decried the current state of affairs in hospitals today. “Currently, the HCIR is experiencing an expanding range of burdensome and inconsistent vendor access policies which are applied to both clinical/sales and, on some occasions, to nonclinical/administrative medical technology personnel, as well as vendors such as delivery personnel and non-healthcare product vendors,” the association wrote. “In other instances, hospitals and health systems are applying professional credentialing standards (such as standards applicable to physicians) to all third parties who enter the facility.” Such standards often duplicate the suppliers’ own screening and training procedures, and even violate the privacy of field sales reps (if the provider demands their social security number, home address, etc.), according to AdvaMed.

One passport?

Some suppliers are lobbying for the creation of a universally accepted “passport,” which field reps could carry, certifying that they had met certain basic requirements, such as criminal background checks, vaccinations, knowledge of patient confidentiality laws, etc. In addition, AdvaMed and others have proposed that the industry recognize that reps calling on the OR and other patient care areas should meet different standards than reps who call on the purchasing department. (This approach was advocated earlier by the Strategic Marketplace Initiative, an organization that brings together providers and suppliers to work out issues of concern to both. See “Vendor-access guidelines issued,” October 2006 IMDA Update.)

Precedents

As it prepares to conduct its field review, the Joint Commission has consulted existing industry documents for guidance, according to organization. Specifically, it cited the “Statement on Health Care Industry Representatives in the Operating Room,” issued by the American College of Surgeons, which was revised in September 2005 (see http://www.facs.org/fellows_info/statements/st-33.html); and “The Role of the Health Care Industry Representative in the Perioperative/Invasive Procedure Setting” by the Association of periOperative Registered Nurses, which was most recently ratified in March 2006 (see http://www.aorn.org). 

Both the ACS and AORN concede the vital role that sales reps can play in providing quality patient care. For example, the American College of Surgeons says that “[h]ealth care industry representatives…, by virtue of their training, knowledge, and expertise, can provide technical assistance to the surgical team, which expedites the procedure and facilitates the safe and effective application of surgical products and technologies.” That said, ACS calls for providers to verify documentation that certifies the sales rep has had education and training in:

• HIPAA compliance and all matters related to patient rights and confidentiality
• Appropriate conduct and attire in the OR environment.
• Aseptic principles and sterile techniques.
• Infectious disease and blood borne pathogens.
• Occupational safety (biohazardous waste, fire, electrical, radiation and other safety protocols).
• Other applicable practices that may be related to the operation of the hospital.

Growing cottage industry

It’s unlikely vendor credentialing will go away, according to the panelists at the Chicago HMMC meeting. If any proof was needed, IMDA members need look no further than at the growing number of independent companies that offer third-party vendor-credentialing services for a fee. They include:

• Reptrax (www.reptrax.com)
• VendorClear (www.vendorclear.com)
• Vendormate (www.vendormate.com)
• Status Blue (www.status-blue.com)

Watch IMDA Update for more details on the vendor-credentialing issue. Members interested in offering their input on the subject should contact Shawn Walker (swalker@bay-state.com) or Mitchell Kramer (mkramer@kramerandkramer.com).
 

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Long-time IMDA member Keomed Inc. has been acquired by Penlon Ltd., a United Kingdom-based manufacturer and developer of anesthesia systems, patient monitoring equipment, laryngoscopes, suction equipment, oxygen therapy devices and medical gas solutions. Keomed will continue to function as a specialty distributor and service organization in the Upper Midwest, though it will operate under the name Penlon America.

Minnetonka, Minn.-based Keomed has had a relationship with Penlon for about four years, explains Keomed President Gavin Keogh. In 2003, Keomed worked with the manufacturer to redesign its anesthesia machine for the United States market. Keomed formed a new company, Penlon America, which acted as a master distributor for Penlon in the United States. (Penlon America was Keomed’s third company in its group of companies, the other two being its specialty distribution company and its service organization.) Two years later, at the American Society of Anesthesiologists show, Penlon America launched the equipment with some fanfare.

Soon after the launch, Penlon Ltd. decided to put itself up for sale. Keogh tried to put a consortium together to buy it. “I tried to cobble something together, but we didn’t have enough time,” he says. As it turns out, Penlon took itself off the market, but began seeking buyers again the following year, in 2006. Again, Keogh decided to pursue the company. “I interviewed about 50 investment companies and narrowed it down to five, and then to one that specialized in medical companies,” he says. That one was Altaris Capital Partners in New York. The acquisition was completed in May. Keogh is a minority shareholder in Penlon Ltd.

Operating as Penlon America, Keogh’s company will continue to act as a specialty distributor in the Upper Midwest, and will retain its service organization as well. In addition, Penlon America will continue to act as the master distributor for the manufacturer’s equipment in the United States. (Penlon Ltd. has no plans to acquire other specialty distributors in this country, according to company Vice President Craig Thompson.)

“We are committed to this significant opportunity for growth and, as a Penlon company, will continue to partner with our customers and offer them top quality affordable anesthesia solutions,” says Keogh, whose father – Desmond Keogh – founded Keomed in 1975.

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“Goal-setting” seems to be on everybody’s lips this time of year. Sales managers are asked by their bosses, “How is 2007 going to close?” “What are we looking at for 2008?” Then they turn around and ask the same questions of their reps.

Too often, goal-setting is a well-intentioned but disappointing exercise. Reps use words like “more,” “better” and “bigger” to describe their year ahead. Everyone’s pumped…for awhile. But the end results are seldom what were expected. Why? Because neither sales managers nor sales reps are totally clear about what success means to them. As long as they do better than last year, they assume they’re growing.

IMDA’s “Smart Selling” seminars, led by sales coach and speaker Gerry Layo, will help reps understand how to set goals and how to reach them. Designed specifically for sales reps from medical specialty companies, the seminars will be held January 17-18 in Atlanta, Ga., and January 21 in Scottsdale, Ariz.

Layo will demonstrate that success must be defined before it can be designed. That’s why true goal-setting:

• Clearly identifies what the rep wants (and needs) to accomplish.
• Offers a deadline for reaching those goals.
• Identifies all the steps required to meet them.
• Provides a written plan (by priority and sequence).
• Allows the rep to see what he or she must do (or leave undone) every day.

Layo will help IMDA-company reps:

• Identify their priorities based on agreed-upon objectives.
• Effectively design a system to streamline their tasks.
• Manage themselves rather than simply manage their time.
• Master the art of scheduling.
• Enjoy having more time at the end of the day because they’ve wasted less time during it.

For more information on IMDA’s “Smart Selling” seminars by Gerry Layo, visit the IMDA Website (www.imda.org) or call headquarters at 866-IMDA-YES (866-463-2937). Register soon. Time and slots are running out!
 

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Here’s some good news for IMDA members. Venture-capital firms are investing in small, privately held medical device companies like never before, according to a recent report from VentureOne, a Dow Jones company.

As reported in VentureWire (a Dow Jones publication), venture firms poured $1.9 billion into U.S. device makers through the first half of this year. That's well ahead of last year's pace, when they invested a record $2.6 billion for the year, and nearly as much as the $2.2 billion wagered in all of 2005. What’s more, it is already $200 million more than the $1.7 billion invested in all of 2004. Fueling the action is rising demand from consumers and investors for devices to help an aging population conquer back pain, heart disease, wrinkling skin and other maladies, according to VentureWire.

For most new device companies, the end result is a sale to a larger, well-established one. In fact, in the first half of this year, corporations spent $1 billion to acquire nine U.S. venture-backed device companies. That’s on pace to equal last year’s $2 billion. Far fewer companies go public. One exception is pulse-oximetry maker Masimo Corp., which went public in August 2007 at $17 a share. At press time, it was selling for about $30 a share.

Medical-device investing has surged before, according to VentureWire. Interest swelled in the mid 1990s as numerous upstarts went public, including Cytyc Corp., (recently acquired by Hologic), developer of the ThinPrep® system for cervical cancer screening. Device investment climbed from $970 million in 1998 to $2.1 billion in 2000, when venture firms deployed a total of $94 billion for the year, according to VentureOne. The amount settled back in the $1.7 billion-to-$1.9 billion range between 2001 and 2004.

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Manufacturers seek representation by IMDA members

 

And then there were six.

The IMDA staff has posted six “Request for Representation” solicitations on the IMDA Website (www.imda.org) in the past 30 days alone. That’s a record. “I’ve received a dozen phone calls from manufacturers with new products who are interested in working with specialty distributors,” says IMDA Executive Director Katie Swartz. “That’s good news for our members looking for new lines.”

Manufacturers of innovative medical devices have long relied on specialty sales and marketing companies to build market share in the United States and Canada. For about the past year, IMDA has made it easy and risk-free for them to seek specialty representation. The “Request for Representation” process allows the manufacturer to post information about the company, its technology, and its sales-and-marketing needs free of charge in the “Members Only” portion of the IMDA Website. (IMDA members are notified via e-mail when a new “Request for Representation” is posted.) In return, the manufacturer agrees to pay IMDA $1,000 if and when it signs its first contract with an IMDA member. Companies from a variety of specialties have already participated.

IMDA members can view all the “Request for Representation” forms that have been filed with the organization since the program was begun in September 2006. Go to “Members Only” on the IMDA Website. Members are encouraged to let IMDA headquarters know if they sign a contract with a manufacturer who found them through the “Request for Representation” process.

“It’s another key benefit of belonging to IMDA,” says Swartz.

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IMDA Update Published by IMDA 5204 Fairmount Ave., Downers Grove, IL 60515 Phone:  (630) 655-9280 (866) IMDA-YES (866-463-2937) Fax: (630) 493-0798 Website:  www.imda.org E-mail:  imda@imda.org   Staff Katie Swartz: Executive Director Judy Keel: Executive Vice President Patti Perillo:  Database & Finance Admin. Mary Moran:  Chief Financial Officer Mark Thill, Editor (847) 255-0716 Laura Thill, Associate Editor (847) 255-4854 Mitchell Kramer, Legal Counsel (800) 451-7466   2007-2008 Directors President Shawn Walker, Bay State Anesthesia (978) 682-6321 President-Elect Kevin Trout, Grandview Medical Resources (412) 914-0950 Secretary/Treasurer Leo Mindick, Med-Tech Consultant Partners, LLC (516) 708-1111 Chairman of the Board Dave Campbell, Vital/Med Systems (303) 660-0888 Directors-at-Large Hal Freehling, O.E. Meyer (419) 609-1633 Tom Birmingham, Bay State Anesthesia (978) 682-6321 Tony Marmo, Martab Medical (201) 512-1100 Past-President Ed Boracchia, Boracchia + Associates (707) 765-3100 Manufacturer Representative to Board Rick Pfahl, Bovie Aaron Medical (727) 384-2323 The ideas presented in this newsletter may or may not be applicable to your particular situation.  Always consult your tax advisor, attorney or CPA before putting them into effect.