DOCxdirect in the News

copyright "mdsi's Repertoire", October 2002

IDN Dunks Docs’ Donuts

Sentara offers its docs a no-frills distribution service called DOCxdirect.

Sentara Healthcare has a reputation for being at the cutting edge of supply chain management. For example, in the mid-1990s, the Norfolk, VA-based IDN cut an innovative risk-sharing agreement with Eastman Kodak based on an agreed-upon cost per procedure. Then, five years ago, it decided to drop its med/surg distributor, set up its own warehouse and buy direct from manufacturers. Although all these projects are team efforts, inevitably, Elizabeth Duncan-Hawker’s handiwork can be found somewhere in them.

“Our manufacturers are used to Sentara asking for unusual arrangements,” says Duncan-Hawker, Sentara’s corporate director of strategic programs. “They know that when I call, it’ll be about something they’ve never heard before. But we have a huge trust factor with them. We want to do innovative things, and we want them to be part of the team.”

So it is with Sentara’s newest venture, DOCxdirect, a non-profit, web-based distribution company serving physicians who have established working relationships with the IDN.

Sentara operates 70 sites of care including six hospitals with 1,823 beds, 10 long-term care facilities, 25 primary care sites, home health and hospice services, physical therapy and rehabilitation services, and a number of health coverage plans.

Hawker was recruited 12 years ago by Sentara to become its director of purchasing. Prior to that, she had served as a director of materials management and as a buyer at two other Virginia facilities.

Docs Identified Need

DOCxdirect grew out of a survey Sentara conducted among its physicians three years ago. Essentially, the IDN asked the docs what Sentara could do to help reduce costs and improve health care in the Greater Hampton Roads (VA) region. Among their answers was this: Help lower physicians’ supply expenses.

“They told us that they didn’t understand why they were paying 30 to 40 percent more for products in their offices than the hospitals were paying for the same products,” says Duncan-Hawker. “That was our challenge. We recognized we needed to do something to help them.”

The idea from the start was to use Sentara’s formidable purchasing power to extend one low price for products destined for all “classes of trade,” including the IDN’s long-term-care facilities and nursing homes. “Our ultimate goal is to offer a continuum of care for Sentara patients, so that the item we use on them on the acute care side is later used in the physician’s office,” says Duncan-Hawker. (Ultimately, she hopes to extend it to the home.) That called for negotiating with manufacturers a uniform price for all of Sentara’s entities.

Sentara had a good track record, having spent the prior four or five years standardizing many supplies throughout the IDN’s hospitals. The carrot they held in front of manufacturers was the prospect of driving that standardization all the way to the non-acute-care sites.

Delivery Services

Because Sentara had already set up its direct-buying system and warehouse in Chesapeake, VA, it studied the possibility of supplying the docs’ offices from there. But the closer that the materials team examined that option, the less attractive it looked.

“It would have been difficult for us to work out the logistics in a short period of time,” says Duncan-Hawker. So, Sentara decided to find a distributor that already had an established physician billing program, products on the shelves in small units of measure, an established delivery system, and the ability to work with manufacturers to expand product offerings for the docs. “We had enough to do identifying product needs, creating catalogs, developing a content website, identifying an ordering system, targeting our market, performing customized savings projections to the physicians, and selling the program,” she says.

The Sentara team contracted with Besse Medical Supply, a division of AmerisourceBergen of Valley Forge, PA, for picking, packing and shipping products for DOCxdirect customers out of Besse’s Louisville, KY-based warehouse.

The next step was to set up a comprehensive, easy-to-use website from which doctors’ offices could order supplies. Setting up such a site was crucial, because it would be the sole means by which DOCxdirect customers would order supplies. That is to say, at no time did Sentara envisage sending scores of sales reps out to docs’ offices looking at shelves and taking orders.

To help set up such a site, Sentara’s IT director, Donna Servidio, was recruited. “She was a wonderful fit,” says Duncan-Hawker. “I had the background in purchasing, and she brought with her the knowledge of website components and how to build interfaces. We are like a dynamic duo.”

The outcome was the selection of Choice Systems Inc.'s Intelliorder product, which had the ability to send one order to multiple distribution sites.

Donuts or Dollars?

In January 2001, armed with a catalog of more than 600 items, Duncan-Hawker began knocking on doors, following leads from Sentara staff, physicians and vendors. She conducted informational meetings with Sentara docs and non-staff physician groups, beginning with OB/GYNs, then moving to urology and orthopedics. What they had to sell was a departure from what the docs were used to.

“We do not offer a boutique service,” says Duncan-Hawker. “Their current vendor might go in, bring donuts, inventory items on the shelves, write purchase orders, restock products, and manage the entire ordering process every week. All great features; but at an additional cost to the physician practice.” But DOCxdirect works differently.

“If we [as consumers] want to get something at a reasonable price, we will shop at the large stores known for top quality, name-brand products, great value, and strong customer service,” she says. “And that’s how we see ourselves. Not that our customers have to buy everything in bulk. We’re very cost-efficient and service oriented, but never at the expense of quality.

“We educate [our customers] to realize that if cost is added to a program, it has to be accounted for somewhere….It’s the old axiom that nothing is ever really free.”

In other words, donuts are nice, but they cost money. For Duncan-Hawker, the question for docs becomes, “Would you rather have donuts or dollars?”

In return for offering lower-priced goods, then, the DOCxdirect team has to do some educating. “When we sign up a member, we let them know they need to alter their ordering behavior,” she says. “For example, if they want freight free, they may have to meet a minimum. We encourage them not to order a box of gloves today and a box of syringes tomorrow. We challenge them to achieve their anticipated cost-savings.”

The other message to doctors is: Their practices can realize the savings that DOCxdirect promises only if they use the same items that are used in the system’s facilities. “Unless there is a clinical reason why they can’t use an item, we say ‘This is what is available,’” says Duncan-Hawker.

Naturally, if there’s a quality issue, all bets are off. In one case, for example, DOCxdirect was actually responsible for changing an item used by the IDN, based on clinical practice information from a DOCxdirect customer.

Although it may not offer donuts, DOCxdirect prides itself on providing strong customer service, including training on the e-commerce system and prompt responses to service issues. “We go back into the practices in six months or a year after they sign up and validate the savings they have seen using the program,” says Duncan-Hawker.

Where Others Fear to Tread

And how do the practices respond, especially those that are used to the “boutique” suppliers? Says Duncan-Hawker, “When you explain it to the physician, he usually says, ‘Why aren’t we already doing it this way?’

She cites one success story – that of a savvy physician who told his staff there would be a reward for the nurse who pursued and achieved the savings projected by Sentara’s DOCxdirect team. Such incentives can take many forms, says Duncan-Hawker: a bonus, catered luncheons, a shopping spree or monthly movie tickets. “In our experience,” she says, “staff is even more willing to accommodate a physician's goal when they are acknowledged for supreme efforts.”

The office staff usually embraces the program once they realize the benefit of having lowered the practice’s operational expenses without anyone having to work extra days, process additional claims, or see extra patients, says Duncan-Hawker.

“Some physician market vendors are afraid that, when they initially come into a physicians’ office, they won’t get the account if they constrain the office buying patterns,” she continues. “We tell them up-front, ‘We're your partners in the healthcare community. We can work with you to modify your buying behavior and reduce your costs.’”

Growing Catalog

Getting DOCxdirect up and running hasn’t been a piece of cake. “It has had its challenges,”says Duncan-Hawker, noting that some practices are reluctant to embrace change. Other barriers have included slow ISP connections and a lack of familiarity with the Internet on the part of some office staff.

Nevertheless, DOCxdirect now has more than 260 physician customers spread over a 120-mile geographical radius. Most members come through referrals and word of mouth. DOCxdirect’s catalog (which Duncan-Hawker calls a “formulary”) now contains more than 2,000 items, available from Besse as well as a handful of specialized vendors for radiology, orthopedics, laboratory, women’s health, surgical instruments and office equipment. All of these products are available through www.DOCxdirect.com.

“Our presence here has changed the whole market place…,” says Duncan-Hawker. “The medical community has repeatedly expressed how thrilled they are that Sentara had the foresight to develop this program for them.”

But Duncan-Hawker is already looking ahead. Her next target is to create a program that delivers first-dose medical supplies to the homes of patients being discharged from Sentara facilities.

The IDN’s environment allows her to keep creating and building something new, she says. And that’s what she likes to do.