Buying Groups
Group purchasing organizations (GPOs) are known for their ability to help independent home medical equipment (HME) providers gain the leverage needed to compete in the competitive home medical industry by acquiring products at a lower cost. Now, buying groups offer benefits that extend far beyond cost acquisition. Member benefits can include vast marketing and educational programs as well as other benefits specific to the individual buying group. Today's buying groups give the independent provider a complete set of tools needed to compete in the home health care market.
"While group purchasing is a critical element of cooperative networks, the total package of services that allows independent firms to better manage their operations is equally important," said David Miller, CEO, The MED Group, Lubbock, Texas.
In addition to cost acquisition and contract negotiations, buying groups offer benefits to HMEs that can include: gaining a competitive edge against larger players, networking access, as well as marketing and educational programs that include new product updates, free trade show access and reimbursement problem-solving tools.
"Not only are acquisition costs important, but so are the subjects of margin management, expense containment, financing, operational procedures and processes and personnel development," Miller said.
While group purchasing is a critical element of cooperative networks, the total package of services that allows independent firms to better manage their operations is equally important. |
The marketing, educational and professional development services of buying groups--no longer considered as merely add-on features or programs--now attract members as much as the expected purchasing discounts. Although special programs and services were first developed as a natural carryover of business values from founding members of GPOs, the demand for member services increased as membership increased in GPOs.
Excellent pricing is just the tip of the iceberg, Miller said. For providers in a competitive environment, buying groups can give HMEs the tools to provide the differentiation needed to stand out. The collective power of a GPO can level the competitive playing field for the independent HME.
Formed in 1968 when five independent businessmen needed a way to exchange information in order to strengthen their companies, The MED Group developed their shared vision into the backbone of what The MED Group is today. Currently The MED Group has contracts with more than 60 HME/ DME manufacturers. "We continue to provide a forum for the exchange of ideas among its members and we also offer vendor contracts and help to our membership in all facets of the industry," Miller said.
With a niche in womens' health care products, the nine entrepreneurs of Essentially Women, Oxford, Mich., began developing their vision for their buying group in 1996. Out of frustration of trying to run a profitable business without sacrificing high quality merchandise and service levels in the rapidly changing health care environment, grew a mutual desire to find positive, long-term solutions for independent providers of specialty products and services for women--and from these goals, Essentially Women was formed.
"Our members take advantage of special pricing and discounts that have been negotiated with key vendors in our industry, enabling members to become more competitive and remain profitable," said Cindy Ciardo, manager of vendor services for Essentially Women.
In its first year of operation, Essentially Women grew to more than 200 members. Today, the membership exceeds 300. Originally focused on the post-breast surgery market, now EW's scope of services has grown to include breastfeeding, lymphedema management, orthopedics, skin care products, wigs, incontinence, credit card services and more.
"Membership in Essentially Women has given independent businesses the distinct advantage of collective buying power--a unified voice--shared resources and leverage to negotiate prices small businesses would otherwise be unable to do," Ciardo said.
The membership of Essentially Women covers a diverse group representing everything from women's health boutiques to large medical equipment companies with departments dedicated to women's health care products. "It continues to grow as we diversify our product selection and add participating vendors," Ciardo said.
Known as the largest GPO, The VGM Group, Waterloo, Iowa, sets many standards in the industry.
"All of our programs are geared toward saving the independent HME provide in terms of expenses--including their time--or building sales volume," said Jim Walsh, president of VGM Management Ltd. "We ask that our participating manufacturers offer our members the best available pricing. We want the price they buy a product for to be equivalent to what their largest competitor can buy it for," he said.
VGM offers an extensive variety of networking, educational and marketing services to help members be competitive and profitable.
Networking
It is often not what you know, but whom you know. Buying groups offer networking opportunities that give the independent provider the ability to reach out on a national level. Members can form relationships with other retailers to share information and make connections with manufacturers to establish business contacts.
"Besides the obvious cost savings, networking is an important focus for Essentially Women," Ciardo said.
Being involved with GPOs will give members networking opportunities with other retailers and a variety of manufacturers across the country, which may otherwise have been impossible. Members can exchange ideas with other members and industry consultants. "This is a great way for members to build relationships, learn about new products, increase their industry knowledge and broaden their business horizons," Ciardo said.
"As a vendor, Essentially Women offers us the opportunity to reach a very specific group of potential customers who carry and sell the kinds of products we manufacture and distribute," said Barbara Ettenger, senior product manager at Camp Healthcare, Jackson, Mich.
"The organization also provides an opportunity for us to communicate with a large group of customers who know our products well. We get the opportunity to hear their opinions, ideas and concerns at their annual meeting and at other times. This helps us to better understand the product needs and market issues that face both retailers and manufacturers," Ettenger said.
The networking connections that are established in buying groups provide a valuable tool by assisting members to communicate with each other. Additional networking opportunities are gained through special programs.
"The main benefit for members is to be able to access all of the programs that we have developed to help them be better providers as well as employers. Our networking system alone is a great way for out members to talk to each other and find solutions to problems that plague them," Miller said.
VGM offers a networking program with a twist. Its Freedom Link program allows HMEs to relocate patients anywhere in the United States and Canada. "Not only does it free up a providers staff from time consuming arrangements for traveling and relocating patients, it also gives the provider a valuable marketing tool with referral sources," said Walsh.
Networking opportunities--trade shows, newsletters, fax communication systems and e-mail systems--are tied closely to the marketing and education services offered through buying groups.
Education and Marketing
Marketing services offered by buying groups can include national advertising and promotional programs that would not be financially feasible for the independent provider. Educational programs extend to staff business and management development, product knowledge and reimbursement training.
"The educational trend will cover many aspects from proper reimbursement training to quality outcome measurements to testing and certification of all employees. We have developed programs and coursework for our members so not only can they stay abreast of any changes in a responsive manner, but they also can take a proactive approach by encouraging their personnel to learn through our educational programs," Miller said.
Reimbursement and assistance with the maze of managed care is invaluable to many HMEs. Managed care benefits are something many members look for before joining a buying group.
Homelink, the managed care division of The VGM Group, is a national network of community-based providers of home medical equipment, IV therapy, orthotics and prosthetics, home health nursing and physical therapy companies. With more than 4,500 locations throughout the United States, referrals double annually.
"We give more than 5,000 referrals per month to providers in our network and continue to service about 3,500 continuing customers--rental or resupply customers--each month. All of this business is from national payers who would not deal with individual providers. This business would go to national companies if we didn't have the sophisticated marketing, data systems and financial acumen to handle it for independents," Walsh said.
The MED Group also helps the provider obtain managed care contracts. "MED provides sample contracts, proposals, glossaries of terms and actual contracts to assist all MED members in their quest for managed care business," Miller said. "Most important, MED stays out of the middle in the order and billing process, not charging any administrative fees for our managed care services, thereby leaving more profit available to the providers."
"As part of our Essentially Women's Essential Reward Rebate Program, members are issued quarterly checks based on their buying group purchases, rewarding them for purchasing from our participating vendors and at the same time, promoting our participating vendors," Ciardo said. Members also benefit from manufacturer specials that are exclusive to Essentially Women Buying Group.
Marketing efforts of buying groups also can benefit manufacturers by allowing them to avoid costs of marketing and delivering products individually and, as a result, reduce the pressure to raise prices.
The extended marketing effort that is gained through the buying groups' sales and marketing department is an important benefit to the manufacturer, Miller added.
"Awareness of new products, special promotions, contract launches and introduction of new vendors are all results of our partnership work with our vendors."
Manufacturers can benefit in a number of ways, Walsh said. "Manufacturers are able to increase their exposure with a key market at a lower cost. They experience market share increases and build customer loyalty by supporting the group that their HME customers have chosen to support," Walsh said.
Educational and marketing programs provided by buying groups help the independent HME to save on costs without compromising on service.
VGM offers VGM L.E.A.R.N., its learning, education and research network, financial services tailored for the health care provider, credit assistance to meet members short-term financial needs, managed care contracts and telecommunication consulting.
"Telecommunications consulting can help reduce costs for long distance and telephone service, pagers and paging service, on-hold messaging, telephone systems, DSL connections, credit card processing services plus many other communication and services," Walsh said.
In 1998, VGM creative, The VGM's Group's in-house graphic design and advertising division, began offering its services to members of VGM buying alliances and other business entities. VGM creative produces a wide variety of print projects, including logos, brochures, presentation portfolios, letterhead and collateral materials.
The MED Group's marketing programs include private label directories, guidebooks and patient information sheets designed to reinforce HMEs professional image without straining their budgets. "We also have a national Yellow Page program as well as an advertising design service--again with our members' budgets in mind," Miller said.
Technical assistance is another tool that GPOs offer, and it can range from industry advice from consultants to repair centers for products.
Marketing opportunities for Essentially Women members include new product information, updates from vendors on a regular basis via direct mail and broadcast fax, and EssentialAdvantage, the quarterly newsletter that provides sales, marketing and business ideas.
With the regulatory and legislative forces that our members deal with becoming more complex, we feel that the trend is professional development for the entire industry. |
Access to trade shows is another member benefit. Members are invited to attend Focus on the Future, Essentially Women's free annual trade show. "This event provides an opportunity for our members to visit vendor exhibits, evaluate new products and attend seminars encompassing a wide range of topics," Ciardo said. "We believe that cutting edge information is the key to success. Exposure at Medtrade and Medtrade West has increased visibility and resulted in an additional contracts and companies eager to be part of Essentially Women and increase their customer base," Ciardo said.
Members of the VGM Group met last month for the Heartland Conference, where 300 HMEs and more than 40 faculty members met for three days. Educational tracks were offered for case managers, HME and respiratory providers, high tech rehab specialists and orthotic and prosthetic practitioners.
The MED Group has an annual conference where members pay a nominal fee for attendance. "Our members view this as an investment upon which they earn a handsome return because of the ideas that they are able to exchange with other members across the nation," Miller said.
Educational programs for the personnel of the independent provider can include seminars, specialty area group meetings, career development programs and training programs. "There isn't a staff member that doesn't need some type of ongoing training to help them become a better technician, salesperson or CEO," Miller said.
Educational programs at The MED Group raise the professional level at which members operate, Miller said.
"Correct reimbursement is a primary concern to our members, and we address that through our reimbursement area, our discussion database and the educational opportunities we have developed. Negotiating the best pricing for your company isn't going to help if you don't have any knowledge on how to be reimbursed for that product," Miller said.
"Member education is very important to us--increasing business acumen, sales and marketing techniques, managed care contracting--these are areas we are focusing on right now," Ciardo said.
Visions for the Future
In the rapidly changing health care market, GPOs can be the helping hand that HME providers need in order to prosper. The benefits are extensive, and more services are being developed as buying groups incorporate the ongoing needs of HMEs into their overall package of member benefits. Programs in the works include targeted consulting services, strategic planning and expansion of educational programs. Many companies are focusing on business development to stay profitable in the ever-changing health care environment, and with the numerous and valuable services GPOs offer, they are likely to grow.
"The women's health care market is recognized as one of the top niche markets in the health care field, and it will grow even stronger as the baby boomers age. In response, we will continue to expand our product selection, increase membership and be responsive to the diverse needs of our membership," Ciardo said.
In addition to the aging population, another trend that will facilitate the growth of buying groups is the demand for professional development in the industry--needed for HMEs to thrive amid changes in the marketplace.
"With the regulatory and legislative forces that our members deal with becoming more complex, we feel that the trend is toward professional development for the entire industry," Miller said.
"One thing is clear as it relates to the professional development of personnel in the industry--doing nothing is not acceptable. Bringing the providers in the HME industry to a higher level of professionalism is a must in order for them to maintain and enhance their position in the supply chain," he said.
This article originally appeared in the October 2001 issue of HME Business.