Your competitors can save you money
Win-win agreement with other local providers
You're surrounded by competition and struggling to save every penny you can. Wouldn't it be nice if you could combine those two facts into a beneficial situation?
With some creative marketing and the proper approach, you can do just that, according to Rob Tapia, a contract sales manager with Pharmaceutical Buyers Incorporated (PBI), a Denver-based group purchasing organization for the alternate care industry.
"What we recommend to our clients is to form a network of providers in your own community that you can fall back on when you need to borrow products," he says.
In the first part of a two-part series, Home Infusion Therapy Management will look at two distinct definitions of networks. This month's article will focus on information, supply-only networks, while next month, Tom McNulty, PharmD, president of Pasadena, CA-based data processing and home care consulting firm Health Integration Strategies, discusses the more traditional definition of networks, the various models that exist, and the benefits and disadvantages of each.
Why help competitors?
Earlier this year, Tapia addressed the National Home Infusion Association conference on how to team up with competitors to save money and improve your bottom line.
In working with clients around the country, Tapia sees an area in which nearly every pharmacy can cut costs.
"Pharmacies tend to carry a little buffer [extra amount] of a product that chews up precious capital by sitting on the shelf," he says. "To be an effective buyer, you need to get your inventory down to levels that are somewhat low, and you are going to run out of product."
And there's the risk of keeping supplies at a bare minimum. And because you usually won't be able to get product from a wholesaler until the next day, that is where competitors come into play.
"You want to create an understanding with them that you know they are competitors, but we can both gain by teaming up and sharing products," says Tapia. "Make it clear that you don't want to focus on who their patients or referring doctors are, that you simply want someone you can fall back on if you run out of product."
The first step is to contact anyone who is a candidate to become part of this informal network that you are looking to establish.
"Get out and meet vendors, sales reps, hospitals, competitors, nursing agencies, and long-term care hospitals in your community," says Tapia. "Even if you're in a rural area, there has to be a center or something with patients. Bring them bagels, get out there and cultivate a relationship."
Tapia notes that half a dozen providers in a network is probably a minimum, although the numbers can vary depending on your location.
"I always say five to seven providers, but I don't think you can get too many," he says. "But for some providers, seven sources for their community would be a lot."
Knowing product is available in a pinch isn't the only benefit you may reap. Tapia points out that you may find that the other providers in your network are willing to take your obsolete or overstock inventory.
"Instead of having to return the product to a vendor and pay restocking fees, your network is an excellent way to unload a lot of that," he says. "Hospitals tend to be better because they will use more of a product that you [also] may have ordered for just one or two patients, and now find it sitting on your shelf. Hospitals are also good because they use obscure products."
Use data to determine stock levels
Once you've made the connections and established an informal agreement, you need to reset how much stock your pharmacy keeps on hand. This will vary month to month depending on your patient mix, location, and other intangibles.
"If you're in a rural area, you may have not choice but to build in a buffer," says Tapia. "But that's not to say your buffer can't be small."
The key to walking the fine line between having just enough product to get by and running short is data.
"You need as much information as you can collect to balance that high-wire act," says Tapia. "The more information you have and the farther back in your history you can go, the better you'll be able to arrive at a comfortable yet on-the-edge number of products on the shelf. It takes a lot of work to get that number, and the only way you're going to be able to get that number is if you have large quantities of good, usable data."
First, start a log book of what you borrow, whom you borrow it from, when you returned it, and who is borrowing what product from you.
"It's important to keep track of it, and in most cases it is just borrowing a product and replacing it as quickly as you can," says Tapia. "That keeps the money out of it and prevents you from having to write invoices, but it has to be tracked because you don't want to forget that you borrowed something. Paying them back as quickly as you can is critical."
But you won't be the only one doing the borrowing. When someone requests a product from you, make sure you can deliver.
"Make sure you come through for them, even if you have to borrow yourself," says Tapia, "especially if it is someone that you really need, like a hospital or a large competitor, who has a lot of a product and will be able to benefit you. I stress that if they ask you first, it is important to come through and pull out all the stops."
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