IMDA members have probably been hearing this story
from their customers for awhile: Fewer patients are
seeking hospital care. A growing proportion of patients
need help paying for care. Investment income is drying
up. Margins are shrinking.
Many hospitals are beginning to see the effects of the economic downturn, with more than 30 percent of survey respondents reporting a moderate to significant decline in patients seeking elective procedures, and nearly 40 percent of respondents reporting a drop in admissions overall. The majority of hospitals surveyed also noted an increase in the proportion of patients unable to pay for care. Uncompensated care was up 8 percent from July to September vs. the same period last year. Total margins fell to negative 1.6 percent in the 3rd quarter of 2008 vs. positive 6.1 percent during the same period last year. Recent turmoil in the stock market has reportedly turned investment gains to losses, further worsening hospitals' financial condition. Meanwhile, state and federal budget difficulties raise worries about potential cuts to Medicare and Medicaid, which cover half of the patient care provided by the nation's hospitals, according to the hospitals surveyed. Financial stress is forcing hospitals to make or consider making cutbacks, including cutting administrative costs (60 percent of survey respondents), reducing staff (53 percent) and reducing services (27 percent). The report also shows that the credit crunch is increasing the costs of borrowing money, making it more difficult for hospitals to find the financing for facility and technology improvements. Hospitals saw interest payments on borrowed funds increase by an average of 15 percent from July to September vs. the same period last year. As a result, many are reconsidering or postponing investments in facilities or equipment. Specifically:
To view the report, “Report on the Economic Crisis: Initial Impact on Hospital,” go to www.aha.org.
Editor’s Note: IMDA members are aware of the steps
that President Shawn Walker has taken to draw
industrywide attention to the vendor credentialing
issue. But in an attempt to understand what’s happening
in the field, IMDA Update asked members how they were
faring with their customers, where the rubber meets the
road. Several expressed concern at the potential cost of
the process. One member – Jack Burgess of CVC Inc. –
called for a national credentialing policy established
by the American Medical Association, Joint Commission
and others, whereby each rep would have a nationally
recognized number and would be credentialed by his or
her company. The company would assume liability for its
reps, as it does now, suggested Burgess. Meanwhile, Phil
Reilly, vice president of finance for KOL Bio-Medical
Instruments, offered his take on the issue, as well as
some potential solutions. Here’s what he had to say.
The old horror stories of salespeople taking part in surgical procedures were raised. In addition, publicity surrounding Stark/anti-kickback measures and Medicare anti-fraud and abuse provisions was growing. Granted, it was quite a stretch to jump from a salesperson buying coffee and bagels or sending flowers to staff, to a company offering a grant or trip to physicians. But IDNs found it more expeditious to place restrictions on the sales reps, at least initially, and therefore demonstrate that they were attacking the problem. Re HIPAA, it is true that hospitals needed to take measures to restrict or justify access to and dissemination of patient information Therefore, they had to be on record protecting patient information. From there, it was then an easy stretch to institute new requirements, such as criminal background checks, educational requirements, debarment letters, etc. Add to that insurance certificates demonstrating coverages, as well as knowledge of the provider’s parking restrictions and regulations, location and use of fire extinguishers, check-in procedures, etc. Soon, the spinning top was on the move. Additionally, by imposing such requirements, materials managers could become more involved in the acquisition process. That’s not necessarily a bad thing, but it certainly is an indicator of internal power struggles between clinicians and administrators. Execution Soon enough, hospitals saw that they were going to have to find ways to control all this, and many turned to the web-based companies that were springing up and offering to smooth out the process. Selling themselves as intermediaries to facilitate the data flow, these companies both eased the problem and made compliance more complex and expensive. Each of the majors -- Vendormate, REPtrax, Status Blue, VendorClear -- has slightly different models, but all claim only to follow the mandates of the providers, rather than devising new policies or language. This is apparently true, but doesn’t make the compliance any easier. Further, each of the vendor credentialing company’s approaches is different. For example, Vendormate charges $250 to distributors who need significant access. They can add reps or managers. Status Blue supplies the list of hospitals it deals with in a particular state, and the distributor can then download the various requirements back to them. However, each hospital, regardless of the firm it uses, retains the right to – and often does -- impose its own language, requirements, etc. So, one hospital may make conflict-of-interest a major component, while another may not even have any language or policies applicable to this. As a result, complying with, and being approved by, a particular hospital may take longer with one service rather than another. Concerns IMDA members need to be aware of a number of things, particularly:
Staying on top of things. Make sure your
people advise you if they are either turned away from,
or are issued a temporary pass because they lack the
proper credentials. We have found that many hospitals
are poor at advising smaller companies of their
policies, and the first time someone finds out is when
he or she is turned away from a hospital, sometimes even
though they have an appointment. Most of the major
systems, such as Tenet, HCA, etc., have programs.
Small staff, small office Back in 1999, Grandview had a small staff to match its small office, and owned no delivery vehicles. What’s more, e-mail had yet to become a primary means of communicating with one’s customers. Marketing campaigns via fax were popular, says Szpara. The young intern helped create marketing campaigns for some of the company’s primary product lines, and was placed in charge of transmitting ads to nursing homes throughout western Pennsylvania, West Virginia and parts of Ohio and Kentucky. In addition, she rode along with Trout as he visited a number of Grandview’s facility customers. “This was a wonderful experience, because it was on these trips that Kevin passed along to me his valuable sales and marketing lessons,” Szpara recalls. “And it was during this time spent in facilities that I decided to pursue a career in healthcare.” Two weeks after she finished her internship, she received a call from Trout, who told her that when she graduated, she had a job as the company’s marketing director. She accepted it, and remains in that post today. “I would definitely say that my internship was valuable,” she says. “Prior to Grandview, I did not have any idea what field I wanted to pursue following graduation. It was my time with the company and with Kevin that opened my eyes to healthcare.” A 15-year tradition Trout has been hiring interns from his alma mater, Indiana University of Pennsylvania, for 15 years or so. Not every summer, but close to it. The internships at Grandview tend to be marketing-and-sales-oriented, since that’s the part of the business that Trout most closely controls. Indiana students need to work six weeks to earn credit for the internship, but almost all of them stay throughout the summer. When Trout started bringing in interns, the positions were unpaid. Now they are paid. His 2008 interns were fraternity brothers. “I’m active on the alumni board of directors of my college fraternity,” he says. The screening process for summer interns is simple, says Trout. “I ask them, ‘What do you want to do when you graduate? If you want to go into something related to healthcare sales and marketing, this is an appropriate internship for you. If you have no desire to get into healthcare, then this is not for you.’” He encourages students who are interested in other industries to do volunteer work for a company or organization in that industry. From Day 1, Trout focuses on teaching the interns about the healthcare industry. Most often, he assigns them to some special project, of which there are always plenty at Grandview. They also go on sales calls, demos, and even spend time in the truck and in the warehouse. This past summer, Trout assigned his two interns to two projects. The first was developing a website for the company. “It hasn’t been high on our priority list,” he says. But the interns spent their summer compiling information to present on the website, which should be up and running soon. The second project found the interns calling up people from IMDA’s database of prospective members to find out if they were still in business, and if they were still qualified and interested in IMDA membership. The interns then did a little selling. “They would explain, ‘IMDA has a lot of benefits you may not be aware of,’” says Trout. “We had them focus on product liability insurance, sales training and the opportunity to pick up product lines. ‘And it’s only a hundred bucks a month to belong.’ They ended up passing several names on to me. We may actually get a couple of members out of it.” Focus on ‘real’ projects Trout makes sure his interns are engaged in real projects that will help them learn about healthcare. “You don’t want to bring them on and make them a clerk. You want to challenge them, let them be creative. They’re marketing majors. They need to be creative. So I say to them, ‘Tell me what you can come up with based on what you know about our business.’” The payoffs for Trout are several. First, he gets inexpensive labor. Second, he gets a first-hand look at people he might want to hire for his company. “Fitting into a company’s culture is such an important part of professional hiring,” he says. By hiring interns, “You’re putting people to the test. What would they be like if they were an employee here? They might be good, good people, but they might not fit in your company.” Of his interns, he has hired two: Szpara and one other. “He was a dynamo,” says Trout of the second one. He spent a year doing order intake, learning the business. Then he went into the field as a sales rep, a position he held for four years before joining Cardinal Health recently. “He wanted exposure to corporate America,” says Trout. “These are two examples where our interns were so good, they became part of our organization and were huge contributors to our success.” To Trout, bringing in interns has additional meaning. It’s called payback. “I had a mentor who got me into this industry. If you’ve been mentored, you owe it to mentor someone else behind you. I’ve been doing that for students from my alma mater for almost 15 years. I tell them, ‘If I knew when I was your age what I know now, this is what I would have done differently.’ Things nobody told me.”
Within the past year, a number of major medical
manufacturers have requested independent medical
distributors to take over the sale of product lines that
had been sold by the manufacturers’ direct sales forces.
Manufacturers see this as a way to cut expenses and to
convert their fixed costs to variable expenses, greatly
improving cash flow.
Before making a conversion, manufacturer and IMDA member alike must consider personnel and financial matters. If the IMDA member purchases product from the manufacturer, the manufacturer’s gross sales would be diminished, because the distributor’s margin would be subtracted from the manufacturer’s gross sales in financial reports. This generally would not be acceptable to the manufacturer. Therefore, the distribution company must agree to be compensated by commissions, while the manufacturer continues to bill customers. In order to determine a commission rate that works, the IMDA member should do a careful cost analysis of such things as billing, bad debts, inventory, value of money tied up in inventory, and the like. The distributor will probably have to hold consigned inventory and, if necessary, take responsibility for the handling and repair of consigned instruments. Manufacturers used to require distributors to purchase instruments, but that practice seems to have faded in recent years, freeing up distributors’ cash and adding to the manufacturer’s assets on its balance sheet. Even so, in a conversion to an independent sales force, the manufacturer and distributor must make sure that the issue of who owns and who pays for the instruments is dealt with. What about the sales force? Another extremely important issue must be addressed: What happens to the manufacturer’s sales force? The IMDA member taking on a major line will need additional salespeople, while the manufacturer will have to take care of its displaced sales force. In most cases, the manufacturer will require the distributor to absorb all or most of its sales force. This requires intense due diligence on the part of the distributor. In fact, the IMDA member must:
In addition to absorption of employees, the distributor
may be required to absorb leases on office space and
equipment. All such leases must be analyzed to determine
their cost and duration. Mitchell Kramer is IMDA’s legal counsel. He may be reached at (800) 451-7466 or by e-mail.
Your goals. What are you aiming for and why are you “in the game?” When you are focused on WHY as you “enter the battle” every day, you will find that you can put up with almost any of the WHAT you have to do. The customer. Make sure that your customer and their needs are not lost in your need to continue to drive revenues. Reconnect with your customers and their needs of today! Their needs today may be different than their needs of yesterday. Pre-call preparation. Make a conscious effort to spend more dedicated time prior to every sales call in preparation for the call. Understand the purpose of the call and the things that need to be uncovered, discovered, and communicated. Every minute you spend in preparation can increase your opportunity for success on each call substantially. Contact. Make sure that, in your effort to keep driving revenue, you don’t lose contact with your customers and clients. Remember that selling is a contact sport, and continue to develop and roll out new ways to add value and stay at the top of their consciousness. If you’re not visible, you are in-visible!
Training and growth -- If you’re not training,
you’re not gaining. Stay focused on sharpening the axe
and continually developing ways to add to your personal
and professional growth. Read, listen to audio programs,
and attend workshops. Turn off the TV and turn on the
brain!
As IMDA members know, today’s innovation is tomorrow’s
standard of care. Cleveland Clinic physicians and
scientists unveiled their Top 10 Medical Innovations for
2009 during the health system’s recent 6th annual
Medical Innovation Summit in October. The innovations
touch on avian influenza, electronic medical records,
and various minimally invasive surgeries to treat
uterine fibroids, repair heart valves, and remove organs
through the body’s natural orifices.
9. Doppler-guided uterine artery occlusion. Fibroid tumors occur in close to 40 percent of women older than 35, triggering pelvic pain, pregnancy complications, and heavy bleeding, according to the health system. Doppler-guided uterine artery occlusion is a new, non-invasive approach to treat such tumors. 8. Integration of diffusion tensor imaging (tractography). Diffusion tensor imaging, or DTI, allows neuroscientists to non-invasively probe the long-neglected half of the brain called white matter, with its densely packed collection of intertwining insulated projections of neurons that join all four of the brain’s lobes, allowing them to communicate with each other. 7. LESS and NOTES. Laparoendoscopic single-site surgery (LESS) reduces laparoscopic surgery to a small cut in the belly button. Natural orifice transluminal endoscopic surgery (NOTES) bypasses normal laparoscopic incisions altogether. Instead, the surgeon gets to an appendix, prostate, kidney, or gallbladder through one of the body’s natural cavities, such as the mouth, vagina, or colon. 6. New strategies for creating vaccines for avian flu. A newer vaccine approach that uses a mock version of the bird virus called a virus-like particle (VLP) may offer a better solution to protect people against infection from the deadly avian virus, according to Cleveland Clinic clinicians. 5. Percutaneous mitral valve regurgitation repair. Using a tiny barbed, wishbone-shaped device, the heart is fixed non-surgically from the inside out. A catheter is guided through the femoral vein in the groin, up to the heart’s mitral valves. The clip on the tip of a catheter is then clamped on the center of the valve leaflets, which holds them together and quickly helps restore normal blood flow out through the leaflets. 4. Multi-spectral imaging systems. The imaging system is attached to a standard microscope, where researchers can stain up to four proteins using different colors and look at tissue samples with 10 to 30 different wavelengths, allowing for the accumulation of more information than is currently available, according to Cleveland Clinic. This helps researchers to better understand the signaling pathways in cancer cells, and to develop more targeted therapies, which might allow physicians to better personalize treatment for individual patients. 3. Diaphragm pacing system. Four electrodes are connected to the phrenic nerves on the diaphragm. Wires from the electrodes run to and from a control box about the size of two decks of playing cards worn outside the body. When the electrodes are stimulated by current, the diaphragm contracts and air is sucked into the lungs. When not stimulated, the diaphragm relaxes and air moves out of the lungs. 2. Warm organ perfusion device. Once a heart becomes available for transplant, surgeons have just four hours before the organ begins to decay. This device, though, reportedly recreates conditions within the body to keep the heart pumping for up to 12 hours. 1. Use of circulating tumor cell technology. A blood test that measures circulating tumor cells – cancer cells that have broken away from an existing tumor and entered the bloodstream – has the ability to detect recurrent cancer sooner, while also predicting how well treatment is working and the patient’s probable outcome, according to Cleveland Clinic. The test results will allow physicians to better monitor a patient’s progress, adjusting treatment if necessary.
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Editor’s
Note: In this month’s issue, Gerry Layo covers the first
three letters of the acronym “REFUSE.” In next month’s
issue, he’ll pick up with “U,” “S” and “E.”