This month's headlines
 

Walker questions ‘bad apple’ rationale for vendor credentialing. IMDA President Shawn Walker displayed her knowledge of and concern about vendor credentialing during a panel discussion on the topic at the Healthcare Manufacturers Management Council conference in Chicago. Insurance program catching on among IMDA members. A dozen IMDA members have found the way to a good night’s sleep. It is IMDA’s product and professional liability insurance program, offered in conjunction with Medmarc and Alliant Insurance Services. ‘Our capital sources are sound’: Med One Capital. As the nation’s financial crisis rocked and rolled throughout September and October, IMDA members were no doubt feeling the pinch. But even so, they have good reason to continue to sell equipment to their acute-care customers. Credit crunch? What credit crunch? News reports of a crippling credit freeze might be a bit overstated, at least as far as IMDA members are concerned. Service first – and always – for John Kasberg. For IMDA’s newest member, selling is simple: “It’s about finding out what a customer wants and why he wants it, and getting it to them.” Hospital compliance officer has viewed vendor credentialing from both sides. Darlene Mitchell first caught wind of vendor credentialing almost three years ago, when she was working on the compliance program at Cordis Corp. Today, as a hospital compliance officer, she’s dealing with the issue from a different perspective.

John Kasberg of Genesis Medical

Walker questions ‘bad apple’ rationale for vendor credentialing

CHICAGO—IMDA President Shawn Walker displayed her knowledge of and concern about vendor credentialing during a panel discussion on the topic at the Healthcare Manufacturers Management Council conference in Chicago in October. Walker appeared on the panel with Curtis Rooney, president of the Health Industry Group Purchasing Association and the Healthcare Industry Supply Chain Institute; and John Pritchard, publisher of the Journal of Healthcare Contracting. HMMC is an association for senior-level sales and marketing executives in healthcare manufacturing companies.

Walker began by expressing her concern about the potential “chilling effect” that vendor credentialing could have on the introduction of new technology into healthcare settings. Conceding that hospitals have a legitimate and genuine interest in making sure that sales reps are fully versed on universal precautions and aseptic techniques, she questioned whether the stampede to vendor credentialing is really all about patient safety.

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Hospital executives sometimes cite “bad apples” and “renegade purchases” as two reasons driving them toward vendor credentialing, she said. “But nobody has been able to describe to me what a bad apple is. And as far as renegade purchases go…I don’t know of anyone in my organization who can generate business without talking to a hospital committee and getting a purchase order.”

Walker fears that vendor credentialing is fueled not only by a desire by providers to mitigate risk, but also to limit the access of healthcare industry representatives to hospital decision-makers. And that reflects an underlying mistrust of sales reps and/or a misunderstanding of the role they play. Many hospital executives believe that salespeople either have no value, or they are doing way too much (such as actually assisting in surgical procedures), she said. “Because people in the C suite don’t understand the role [sales reps] play and the value we provide, it’s easy for them to fall for the sales pitch of some of the vendor credentialing companies. So we have a responsibility to make sure we don’t take our customers’ perception of us for granted.”

Potential costs cited

Walker cited the potential cost to the industry of vendor credentialing. The hard costs are the actual fees that vendors must pay to hospitals and vendor credentialing firms. The soft costs include the administrative costs of gathering information, lost sales time, and further erosion of vendor/hospital and vendor/distributor relationships. Equally worrisome are the issues raised by the potential loss of privacy, said Walker, including:

• Identify theft. “We have no idea what security these [vendor credentialing] companies have around their databases,” she said.
• The fact that reps might be forced to divulge private information about their medical conditions.
• Disclosure of the financial status of privately owned companies.
• Inclusion in hospital mailing lists. Walker said that one rep that has registered with a vendor credentialing firm has been getting e-mails from a hospital account asking her to take out a $1,400 ad in the hospitals’ newsletter.

Walker recounted the actions that IMDA has taken to heighten the industry’s consciousness of the vendor credentialing issue, including dissemination of the following three documents (posted on IMDA’s website) to a variety of clinical and non-clinical healthcare associations, and media outlets:

• Statement of the issue, which reiterates the value of IMDA members to the healthcare community, particularly their role in introducing new technologies; and the dire consequences that could result from shutting vendors out of hospitals.
• Acceptable clinical rep credentials, which lists the four credentialing requirements that IMDA agrees are legitimate.
• Recommended attributes of vendor credentialing organizations. “We have found that hospitals are not doing due diligence on these companies,” said Walker. “We have said to them, ‘These are the things you need to think about if you’re considering going to a vendor credentialing organization.’”

Moving forward

Walker talked about IMDA’s creation – along with the Health Industry Representatives Association, HMMC, the Health Industry Distributors Association, the Medical Device Manufacturers Association, and Tri-anim Health Services – of the Innovative Healthcare Access Coalition, or IHAC. “We represent a cross-section of companies,” she said. “Our commonality is the innovative and transformative nature of the products we bring to market.”

Moving forward, IHAC will work on recommended credentialing requirements for non-clinical reps, and will work with AORN and AdvaMed to produce a statement on vendor credentialing requirements to submit to the Joint Commission. “We will also strive to make an impact on the American Hospital Association’s and Federation of American Hospitals’ best practices on vendor credentialing,” she said. “They ultimately will be the ones to which hospitals will turn to find out, ‘What should we be doing?’” 

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A dozen IMDA members have found the way to a good night’s sleep. It is IMDA’s product and professional liability insurance program, offered in conjunction with Medmarc and Alliant Insurance Services.

“We repair a lot of scopes on a daily basis,” says Rick Dodson, CEO of MicroMed LLC, Indianapolis , Ind. More customers are demanding that MicroMed carry insurance, and so are the manufacturers for whom the company provides OEM repair services. In March, MicroMed became one of the first IMDA members to sign on with Alliant, which serves as the broker for the coverage. “The two biggest positives for us were, one, it offered better coverage, and two, the cost,” says Dodson.

MicroMed was able to increase coverage and still significantly reduce their premiums, resulting in a savings of several thousand dollars.

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Petaluma, Calif.-based Boracchia + Associates has signed on as well. Having comprehensive insurance coverage is “huge” for the company, says CEO Ed Boracchia. In the current climate of vendor credentialing, hospitals are asking vendors if they carry product liability insurance, he says. “They want product liability, but as an organization, you should always have that errors-and-omissions aspect too. You need to protect your reps.”

Boracchia saved more than 30 percent by joining the IMDA program. “This pooling of risk will benefit every member,” he says. “At some point, all vendors – especially those selling into the OR – will have to have [product liability coverage] with errors and omissions.”

The IMDA program picks up on a tradition that the association started soon after it was founded in 1978. In fact, the availability of affordable insurance was one factor that attracted Boracchia to the association back in 1982. But IMDA’s carrier dropped out of the medical business several years ago, leaving IMDA without a program.

“We are expanding coverage, lowering deductibles and lowering premiums in a significant fashion,” says Alliant First Vice President Matt Cohn. “Due to these significant competitive advantages, we can substantially improve coverage and/or price in excess of 90 percent of the time.”

IMDA members (and companies interested in joining IMDA) can call Matt Cohn for more information on the insurance program at (602) 707-1917 or by e-mailing him at mcohn@alliantinsurance.com.

Created in 1979 by the healthcare technology industry, Medmarc’s purpose is to be the superior provider of liability insurance protection and related risk management services at consistently fair prices and to support the development, testing and delivery of products that save lives and improve the quality of life. Further, through strategic alliances with The Hartford, Medmarc policyholders benefit from seamless, comprehensive property and liability insurance protection, loss prevention services and claims management tailored to the needs of medical technology and life sciences companies.

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As the nation’s financial crisis rocked and rolled throughout September and October, IMDA members were no doubt feeling the pinch. But even so, they have good reason to continue to sell equipment to their acute-care customers, says John Campbell, director of national accounts for Med One Capital, Sandy, Utah, a long-time sponsor of the IMDA Annual Conference.

“Every one of my customers that sells capital equipment is telling me that their reps are seeing reluctance on the part of their accounts to say, ‘Let’s do this thing,’” says Campbell, whose company offers flexible financing arrangements for healthcare providers wishing to make medical purchases. “Hospitals are afraid. They don’t know what the future will bring, and they’re finding their lines of credit aren’t very liquid.” Aggravating the situation is the fact that would-be patients are postponing elective surgery, threatening hospitals’ revenues.

All that said, the fact is that Med One Capital continues to have access to capital, according to Campbell. “Med One is poised and ready. Our company is strong internally, and our capital sources are sound. We need people to realize we can keep putting our hard dollars to work for them.”

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As always – but especially in the current climate – IMDA members should lead their sales efforts with the leasing option, instead of offering it as an afterthought, says Campbell. “If you ask a car dealer how much a certain car costs, and he says, ‘Fifty thousand dollars,’ you’d have to chew on it,” he says. “But if that dealer said, ‘Four hundred dollars a month,’ then it’s a lot more palatable.” Similarly, hospitals might resisting buying a ventilator outright, but might readily agree to take on a $1,000-a-month lease.

MedOne offers customers a fixed-term rental, which allows the hospital to obtain the use of critical equipment without having to make a capital commitment or incur a permanent long-term obligation, says Campbell. The hospital makes a rental commitment of six to 12 months. “Pricing is lower than typical month-to-month rental, and the big benefit is that the hospital is credited back a portion of the total rent paid if it ever decides to purchase the equipment – which it has the option to do at any time. The big benefit to IMDA members is that they make a sale whenever their customer opts to use this program.

“I think things will get worse before they get better, and IMDA members are going to find it more difficult to close business,” says Campbell. “Every one is much more conservative right now. With that said, I’ll go back to my earlier statement that hospitals need Med One more than ever. And the same is true for IMDA members. We can help them overcome the challenges posed by this crunch and help them close the business.”

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News reports of a crippling credit freeze might be a bit overstated, at least as far as IMDA members are concerned. In fact, while the national media were reporting a drying up of commercial paper and bank lines of credit, several IMDA members were finding that money was still available.

“I am not experiencing any problem with my bank and/or line of credit at this point,” reported Kevin Trout of Grandview Medical Resources, Bridgeville, Pa., earlier this month. “They never got involved with subprime mortages, so they are very stable. I guess I’m lucky.”

“If you run your business properly, and you have collateral and good relations with your bank, you should have no problem,” said Duke Johns, Medical Specialties, New Orleans. “This is a great time for people who have run their businesses properly, who haven’t taken everything out for themselves, and who have assets and not a whole lot of debt.

“It like this: If you have a job, you can get another job. If you don’t, people look at you and say, ‘I don’t want that person.’ If you have money, you can borrow money.”

“Unless you are a startup or have bad credit, there doesn’t seem to be much of a change in local lending practices,” reported Bruce Cheatham of CVC Inc., Arlington, Texas. “I will readily admit that Texas is not experiencing the downturns occurring in other states. The state is growing, the state budget has a $15 billion surplus, and our business environment is still very active.” Not only has CVC’s bank indicated a willingness to extend additional credit at reduced rates, but CVC was recently approached by two other banks offering attractive loan rates.

All that said, bad news can take on a life of its own, says Cheatham. “I cannot help but think that a continuous stream of negative news coming out of New York, as it dominates the national news, will impact the consumer and small business owner. They are going to have to react to it, even if it doesn’t agree with what they are seeing personally.”

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John Kasberg may be an unlikely candidate to operate a medical specialty distribution business. In school, he was far more interested in liberal arts than in the sciences. But he always was attracted to service-type industries, such as the restaurant business. At one point, he even considered becoming a priest. Healthcare is an extension of that interest in service. It turns out that selling is, as well. “It’s about finding out what a customer wants and why he wants it, and getting it to them,” says Kasberg, president and owner of Indianapolis, Ind.-based Genesis Medical, IMDA’s newest member.

A native of Indianapolis, Kasberg entered the restaurant business in his early 20s. After attending Indiana University for awhile, he moved to Europe, where his father (who worked for Eli Lilly) had been transferred. There, he worked in various pubs and spent time bartending and cooking on an American military post in Germany. When he was 25, he returned to Indianapolis and continued working in restaurants, as a waiter, cook, manager, bartender – you name it.

Switching gears

He got married at age 30 and decided to make a change. Given the long and irregular hours associated with the restaurant business, “I realized it was not conducive to a successful marriage,” he says. A former high school teacher had gone to work for a local company called SMI, which rented out Mediscus specialty beds. He asked Kasberg if he’d like to join the company, renting low-air-loss therapy systems (vs. the conventional high-loss-therapy beds). “It was a new concept in pressure redistribution,” he says. Kasberg served as liaison between sales and service, making sure the beds were in-serviced correctly and operating properly.

Later, he accepted a position with ATI Medical. In a joint venture with Sunrise Medical Bioclinic, ATI rented portable pressure redistribution systems, or mattress replacements, which offered a much lower-cost alternative to specialty beds. This time, Kasberg was in the field, renting critical-care equipment to hospitals in Indiana, Ohio and Kentucky. “I had never thought of myself as much of a sales guy,” he says. “But it turned out that the skill sets I had used waiting tables, bartending and interfacing with the public were basically the same as medical sales.”

When ATI undertook merger discussions with Mediq/PRN, Kasberg went to work for Sunrise Bioclinic full-time, renting portable air flotation therapy systems (vs. the conventional fixed-frame, low-air-loss therapy beds). “It was yet another new concept in pressure redistribution,” he says. Though he enjoyed the job, particularly the aspect of pioneering new technology, the company experienced some financial issues. Around the same time, his regional boss approached Kasberg about joining him in starting their own specialty distribution business. So, 13 years ago, Genesis Medical was founded. (Today, Kasberg is sole owner.)

Focus on pressure management

From the start, Genesis Medical has focused on pressure redistribution systems and complementary product lines, particularly those associated with wound care. “We’ve been on a quest to find innovative products to complement our pressure redistribution mission.” That’s why Genesis is not only a provider of pressure-management surfaces, but also of bariatric products and patient-transfer equipment. The company has seven salespeople (including Kasberg) calling on home care agencies, hospitals and nursing homes in Indiana, Illinois and Kentucky. Kasberg learned about IMDA through Kevin Trout of Grandview Medical Resources, a fellow distributor of SizeWise bariatric products.

As Baby Boomers age, Kasberg is confident that the demand for pressure management and wound care systems will grow. That should be good for business. At the same time, he wonders about the future of America’s healthcare system. “The biggest unknown is, who will pay for healthcare?” he says. Meanwhile, he will continue doing what he has attempted to do ever since founding Genesis Medical – providing service to healthcare providers.

“As a salesperson, you’re given a quota and told to ‘go make it happen,’” he says. “I didn’t feel like I was part of the solution in healthcare,” he says. “So when we started Genesis, the idea was, rather than go to a customer and say, ‘Here’s my stuff; it’s cheaper, better,’ we would say, ‘Let’s talk about what you’re trying to accomplish.’ We would try to get in tune with them fiscally and clinically, then put together programs and products that made sense. That was significantly more appealing to me [than traditional selling.]” And it still is.

IMDA members can welcome John Kasberg to the association by calling him at (317) 347-2000 or e-mailing him.

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Darlene Mitchell knows all about vendor credentialing. She first caught wind of it almost three years ago, when she was working on the compliance program at Cordis Corp., a Johnson & Johnson company. “Reps started coming to me with packages from hospitals saying they had to be credentialed,’” she says. “This was even before they had set foot in the hospital.” Cordis made sure its reps signed nothing without checking in with the compliance officer.

Some hospitals asked that reps pay $25 to buy a badge, recalls Mitchell, who today is director, internal audit and corporate compliance for Hunterdon Healthcare System in Flemington, N.J. But others demanded that reps receive full physicals in their clinics, get trained on bloodborne pathogens and hospital safety, etc. “They went from one extreme to the other, and they ranged in cost from $25 to $250 per sales rep,” she recalls. At that time, as many as half the hospitals were administering their own credentialing programs. But soon, the third-party vendor credentialing firms emerged.

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A couple of concerns

Johnson & Johnson had a couple of concerns about the growing trend, says Mitchell. First, the company was concerned that it could potentially spend hundreds of thousands of dollars in credentialing fees for sales reps to visit an estimated 5,000 hospitals nationwide. Second, it needed to make sure that paying credentialing fees wouldn’t result in a violation of the federal Anti-Kickback statute, which prohibits healthcare providers from taking bribes, and suppliers from offering them, in exchange for referring, prescribing or using a product reimbursed by federally funded healthcare programs, such as Medicare and Medicaid. The question was, could payment of credentialing fees be construed as an attempt to buy providers’ business, or a so-called “access fee?” “We would ask the hospitals, ‘What are you using that $150 for?’” says Mitchell. “We wanted to make sure they were doing true credentialing and incurring a cost to do so.”

Mitchell understood where the hospitals were coming from. Growing up in Columbus, Ga., she had worked for 10 years for Columbus Regional Health System, first as director of corporate accounting, then as compliance officer and director of internal audit. She moved to New Jersey in 2001 and became compliance officer for AmeriChoice (now a UnitedHealth Group company), a Medicare Advantage company, that is, a provider of managed care services for Medicare and Medicaid patients. Soon after that, she accepted a position at Independence Technology, a Johnson & Johnson company, which was just launching the iBOT® electric wheelchair. Designed by Dean Kamen (known for the Segway), the iBOT can climb stairs and raise a wheelchair-bound person to a height of 5 ft. 8 inches to 5 ft. 10 inches.

The iBOT was a new venture for Johnson & Johnson, not only because of the technology, but because Independence Technology sold it directly to consumers, not medical professionals or distributors. When sales didn’t take off as briskly as the company had hoped, Mitchell was offered the opportunity to transfer to Johnson & Johnson’s worldwide corporate headquarters. She did so, helping develop the first training initiative for the company’s new worldwide compliance program. Soon after that, Cordis’ endovascular division set about beefing up its compliance program, and Mitchell was asked to help.

Another look at vendor credentialing

Two years later, Cordis downsized, forcing Mitchell to seek a new position. That’s when she got the job at Hunterdon. “It was a good fit for me,” she says. “I was returning to my roots in hospital life.” It was also an opportunity to see vendor credentialing from the other side. In fact, Hunterdon was in the process of developing a vendor credentialing program when they hired her. Given her experience in the area, she was a natural to help with the effort.

“Vendor credentialing is tied to compliance,” she says. ‘The idea and concept of patient safety – of making sure you know who’s coming into your building and where they’re going – is an issue of patient safety. That’s why I’m involved in it.”

Although patient safety is a key concern of Hunterdon’s, vendor credentialing also offers a way for the provider to check up on the companies with which it does business. Hunterdon wants to make sure its vendors are solvent. It also wants to ensure that none of its vendors’ employees (sales reps) have been barred from doing business in the Medicare system, is listed on a terrorist watch list, or presents any kind of infection-control hazard.

On Jan. 1, 2008, Hunterdon outsourced its vendor credentialing activities to Atlanta, Ga.-based Vendormate. “Much to my surprise, Hunterdon was one of the first hospitals – if not the first – in our geographic region to initiative a vendor registration program,” she says. “We liked the background check of the sales reps coming into our facility, and of the company they were representing and its principal officers. We also consider this part of our commitment to doing business in an ethical and reasonable fashion. I’ve said to sales reps that we never want to hamper patient care. ‘If it’s an emergency and you need to get in, we’ll let you in.’ We give three grace visits before we demand that they have credentials.

“We’re trying to make it a more efficient process,” she adds. “At our facility, it’s not unusual to have 300 visits from sales reps in a one-month period.”

Mindful of the challenges

Mitchell is mindful of the challenges that vendor credentialing presents suppliers. “Since we came on with Vendormate, I’ve had a sense of the ongoing discussions between Joint Commission, AdvaMed and others – including IMDA,” she says. “The manufacturers are saying, ‘We’re having to get five different sets of credentials together. Why can’t we have one that’s consistent across all hospitals?’” She has since spoken to Joint Commission about its efforts to establish some industry standards, and will watch developments closely.

“I understand how and why the credentialing/registration process may seem grueling and time-consuming to the manufacturers and their sales reps,” she says. “At this point, yes, quite a bit of paperwork is involved, and the requirements still vary from one hospital to the next. I am hopeful that eventually, requirements will be uniform from one hospital to the next.

“Having been a compliance officer since the ‘early days’ of compliance in healthcare settings (back in the mid 1990s), I’ve seen the government’s concern for patient safety and their philosophy of ‘patient before profit’ gradually cover the spectrum of healthcare providers. When compliance began, the government first looked at hospitals and quickly progressed to nursing homes, labs, and home health agencies. They started with the entities that provided the direct, hands-on patient care before progressing to the pharmaceutical manufacturers.”

Ultimately, the feds turned their attention to the medical device industry, she says. “The delay had been that the government had to understand how a medical device manufacturer marketed and sold its products. The government understood how a pill was sold, but they quickly realized that the medical device industry was more complex. All that said, this concept of credentialing/registering a sales rep is simply one more step in the continuum of the government’s concern for patient safety, quality of care, and the elimination of fraud, abuse and wasteful spending.” 

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IMDA Update Published by IMDA 5204 Fairmount Ave., Downers Grove, IL 60515 Phone:  (630) 655-9280 (866) IMDA-YES (866-463-2937) Fax: (630) 493-0798 Website:  www.imda.org E-mail:  imda@imda.org   Staff Katie Swartz: Executive Director Judy Keel: Executive Vice President Patti Perillo:  Senior Administrator Mary Moran:  Chief Financial Officer Mark Thill, Editor & Communications Director (847) 255-0716 Mitchell Kramer, Legal Counsel (800) 451-7466 Barbara Kramer, Legal Counsel (734) 930-5452 George Ayd, Jr., Insurance Administrator (703) 652-1309         2009-2010 Directors President Kevin Trout, Grandview Medical Resources, Inc. (412) 914-0950 President-Elect Anthony Marmo, Martab Medical (201) 512-1100 Secretary/Treasurer Hal Freehling, Jr., O.E. Meyer Company (419) 609-1633 Chairman of the Board Dave Campbell, PhD, Vital/Med Systems Corporation (303) 660-0888 Directors-at-Large Tom Birmingham, Bay State Anesthesia, Inc. (978) 682-6321 George Howe, Mercury Medical (727) 573-0088 Philip M. Reilly, KOL Bio-Medical Instruments, Inc. (703) 378-8600 Don Reiter, Specialty Respiratory Care, Inc. (818) 717-8807 x19 Bill Schultz, IPV Medical, LLC (760) 212-2769 Past-President Shawn Walker, Bay State Anesthesia, Inc. (978) 682-6321 Manufacturer Representative to Board Tim Beevers, Beevers Manufacturing & Supply (503) 472-9055 The ideas presented in this newsletter may or may not be applicable to your particular situation.  Always consult your tax advisor, attorney or CPA before putting them into effect.