Distributors wrestle with serving new integrated systems

Health Industry Today, August, 1995 by Curt Werner

The nation's number-two distributor is Owens & Minor, Inc., also of Richmond, where vice president of sales and marketing Tom Sherry agrees with Nielsen that most systems' decision-making chains are underdeveloped. One major exception to that is Group Health Cooperative of Puget Sound, the long-established Seattle-based integrated system that Owens serves today under a per-member per-month capitated supply agreement. In general, though, he says that the most difficult part of serving an IDS is putting in systems that track utilization throughout the system to establish inventory levels.

Since last fall, Owens has served another IDS, Phoenix-based HealthPartners of Arizona, under a system of charges that by next month is expected to be based on adjusted patient discharges. However, unlike Group Health, which is 95% penetrated by managed care, not all HealthPartners patients are in the managed care mix. Some are still in fee-for-service while others are in retrospective billing arrangements, a situation that complicates Owens' margins and charges to the HealthPartners system.

All sites in an IDS like HealthPartners won't necessarily find Owens trucks pulling up at their door. Carriers like UPS may be utilized.

In the future, Sherry sees IDSs as one of Owens' four major customer groups, along with investor-owned chains like Columbia/HCA Healthcare Corp., Nashville, Tenn., med-surg distribution to the Department of Defense system, extended care facilities and unaligned hospitals.