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6 Tips for Switching Distributors
Whom you contract this valuable service to might be your biggest sleeper in terms of cost and operational efficiency.
Judith Lee
Publish Date: October 10, 2007

Think fast: Name the top three things that have the ability to disrupt or even shut down your surgery schedule. What did you come up with? Patients who aren't prepared or who don't show up at all? Staffing shortages? An equipment breakdown?

If you didn't think of your surgical supply distributor, you might be overlooking its importance - and in so doing, missing out on a big way to reduce costs and improve efficiency.

"There is one thing that can shut us down, and that is not having surgical supplies when we need them," says Wes Becton, CASC, the executive director of the Elmhurst Outpatient Surgery Center in Elmhurst, Ill. "We expect our distributor rep to behave as an employee, thinking about lower-cost and substitute products, a better way to do things."

Mr. Becton and other facility and materials managers who have recently evaluated their distributor's performance say its impact is far-reaching. Here's their advice for assessing your distributor relationship.

Develop your business acumen
Become thoroughly acquainted with your surgical supply needs, inventory levels, delivery schedule and of course, what it all costs. If you have a nursing background, this might be the toughest part.

"It's basic business sense, but nurses aren't trained for it," says Suzanne Rodenheiser, RN, BSN, CNOR, the chief operating officer of Delaware Surgery Center in Dover, Del. "If you come from a hospital setting, there are purchasing professionals who take care of all of this for you. It was difficult."

Her situation: The surgery center had been operating for about six months when supply costs began to rise in relation to increasing case volume. Ms. Rodenheiser looked at her GPO contracts to determine the source of the increases.

"We realized that not all the contracts were viable or getting correct pricing," she says. "The bottom line was that no one was managing our contracts. I tried to figure out who dropped the ball. The resolution that I came to: It was partly my fault, the GPO's and the distributor's."

Who's Who in Supply Distribution

Distributor

Products

Added Value

Discount Off List

Years in ASC Mkt

Contact

Cardinal Health

Supplies from 2,000 manufacturers; products in every category

Information management software, robotic picking and packing; Pyxsis and OptiFreightsm

Participate with all major GPOs

20 years, 10 years with ASC team

cardinal.com and cardinalmd.com

International Hospital Supply

Full range of surgical instruments.

German quality, one-time-use instruments from other sources

Pricing based on quantity economics

More than 25 years

[email protected]

McKesson

All surgical supplies plus McKesson brand

Business-intelligence software; hand-held barcoding; large ASC customer base

Participate with all major GPOs

15 years, 5 with ASC team

mckesson.com

Medline

All surgical supplies plus Medline brand

Utilization review, consignment programs, convenient ordering options

10% to 32%

17 years

medline.com

Physician Sales and Service

Medical supplies, equipment, pharmaceuticals plus PSS Select Products

30 distribution centers enable just in time delivery, weekly consult with PSS rep

10% to 50%

Over 20 years

pssd.com

Priority Healthcare

Pharmaceuticals

Caselot purchasing to single units; inventory control, formulary management, best pricing

10% to 25%

10 years total focus on ASC

priorityhealthcare.com

Southern Anesthesia

Surgical supplies and pharmaceuticals from major manufacturers

Monthly inservice by rep; online and fax ordering; featured products and specialties

10% to 20%, plus 2% discount on credit card orders

20 years

southernanesthesia.com

Suture Express

Suture/endo only: J&J (Ethicon) products and Tyco products (Syneture & Autosuture)

High fill rates eliminate backorders and expediting chores; ability to lower inventory levels; no drop-ship or expediting fees

Participate with all major GPOs

7 years total focus on ASC

sutureexpress.com

Look for help
Although you probably prefer to let your staff focus on the surgery schedule, including them in the distributor assessment can pay off big time. First of all, they may know more about the supply situation than you do. Second, they may have some ideas about how to improve it.

When Ms. Rodenheiser was looking for a new distributor, she formed a panel of nurses and physicians to interview three candidates. She says the panel asked relevant questions, such as: What are your processes for on-time delivery? And how do you handle backorders?

Add value
If your supplier offers to reduce the time and effort your facility puts into supply management, that may be a larger cost savings - in fact your real savings with regards to distributors - than any pricing discounts. Mr. Becton switched distributors based mainly on this.

"There wasn't a big difference on price, they were comparable," he says. "The big reason is level of service, expertise and responsiveness."

The value-added service that made up his mind: The distributor he's switched to offered an electronic PO system that greatly reduces the time staff devote to purchasing.

Here's where it pays to know what you want. Negotiate the fine points, such as exactly when and how you will submit and receive orders.

"Our orders go in electronically every day at 2 a.m. The supplies arrive in totes to our department by 2 p.m.," says Maureen Spangler RN, CNOR, the director of perioperative services for Lexington Medical Center in West Columbia, S.C.

Because Ms. Spangler's unit is part of a large hospital system, the distributor keeps a 60-day supply of inventory for Lexington Medical Center, which pays an extra 2 percent of cost of inventory. Although your facility may not have this kind of clout or extra funding, make sure the distributor understands how problematic backordered items can be.

Improve on cost
While facility managers we talked to said they believe they receive fair pricing, they also say there is always room for improvement. But it's up to you to monitor pricing and motivate the distributor to work with you to keep costs down.

"I think the pricing is fair, but I want it cheaper, and I remind them," says Cheryl Wolf, RN, director of perioperative services for Irvington General Hospital, Irvington, N.J. She and other facility managers agree that belonging to a GPO is an important way to keep costs competitive.

Ms. Rodenheiser says to make sure your GPO and distributor are in harmony; this accounts for some of the 12 percent to 14 percent she has saved by switching distributors.

"The supply management company acts as our purchasing network. We get the benefit of volume purchasing," says Ms. Rodenheiser, "and they focus on our business, handle the paperwork and all the details."

Prepare for due diligence
Know that switching won't happen overnight. "It's difficult and time-consuming; you have to make sure all appropriate people are advised of vendor terms, conditions and expectations," says Joy Barnett, Purchasing Agent for Louisiana State University Health Services in Baton Rouge, La.

Her experience is not uncommon. Ms. Rodenheiser describes a year-long process of investigating, interviewing and negotiating with candidates.

"We asked so many questions: What is the restocking fee? What do you feel your role is when interacting with the surgery center and GPO?" says Ms. Rodenheiser.

Find out as much as you can about the distributor's relationships with other facilities. Ms. Barnett suggests that you request references and ask the facility manager if they would make the same choice again.

Mr. Becton says to consider where your facility fits into the distributor rep's food chain. Even if the distributor is flexible, accountable and responsive, if you are having difficulty getting a potential rep to return your phone call or to come for a meeting, that relationship may not be right for you.

Know the downside
Should you decide to change, factor in the time it will take to transition to the new system. Even if the change is for the better, it will take its toll in terms of confusion and possible errors.

"The downside is that it takes some time to learn how best to work with the distributor to get what your facility needs," says Ms. Wolf. She suggests that you create a team approach so staff members don't feel they are stuck with the changes.

For Ms. Rodenheiser, the downside was the time spent waiting for her new contract to go live. She suggests that you plot a timeline and make sure your facility isn't temporarily left without a supply chain by changing both the GPO and distributor at the same time.

Mr. Becton says his facility changed over several months. His main concern was stock-outs on essential supplies.

"Stock-outs can kill us. We expect the distributor to have products in the warehouse, so we can call and have them shipped," he says. "We are managing this closely. We didn't take switching suppliers lightly."

Doing the dance
And neither do other facility managers. They say that interviewing distributors is a lot like dating, and switching to a new one is like entering a long-term relationship: You won't know for sure until you take the plunge. And don't be afraid to use tough-love if needed.

"We have excellent reps, but we let them know we won't hesitate to change if we don't get the service we need," Ms. Spangler says.

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