By: Dr. Michael Romenesko, DDS
When my journey began with IndepenDENT Dental Solutions in July of 2017 I was completely naïve as to how supply chain worked in dentistry or any industry for that matter. I didn’t think that it really affected me or had any bearing on my dental practice. After all, dental supplies and capital equipment were simply the cost of doing business. Or so I thought. Supply chain wasn’t a topic mentioned in my undergraduate biology studies or dental school. I assumed that purchasing my supplies and capital equipment was the exact same as purchasing a television. You go into the store, or go online, find the television you want and purchase it. In many areas of retail the pricing is very similar across the board. If you purchase the television from one store the price is usually the exact same in the store across town. Also, if your friend walked into the same store and wanted to purchase the same television, he/she would pay the exact same price as yourself. This is not how supply chain in dentistry functions. Over the past two years I’ve come to learn that traditional dental supply chain is filled with a variety of pricing structures and strategies to keep true pricing hidden. There is a major lack of transparency and most importantly our colleagues are all being treated and charged differently regardless of factors such as yearly spend and longevity of being a customer.
When IndepenDENT Dental Solutions formed by my father, Dr. Rick Romenesko Sr., and I joined with two health care supply chain leaders, Brian Heyndrickx and Jordan Herbert. The expertise provided by these two individuals was paramount to our supply chain education. What they provided my father and me was essentially a full disclosure view behind the curtain. It allowed us insight into how the system works. Once it was explained it was time for Brian and Jordan to demonstrate to us the importance of supply chain and how knowledge in this area will protect us and make us smarter consumers.
We began by compiling the data from our dental office as well as my uncle’s office. We have two separate practices operating out of the same building. Everything about our practices are separate except the building and three front office staff which we share. We were both purchasing supplies and capital equipment from the same distributor, same sales rep, same ship-to and very similar yearly spend. Upon examination of the data we learned that the two practices had different pricing on 95% of exact same items. Needless to say, we were shocked, but also extremely interested and motivated to learn what can we do about it.
Throughout the past two years my team members and I have spoken with upwards of 2000 dentists on supply chain, various models and our own model. Over time, we began to notice several trends. It was and continues to be extremely common for a dentist to say either during the presentation or after, “I’ve been with the same people for a very long time and I know I’m getting a good deal and being treated fairly.” How do they know? The truth is they have no idea. What I’ve seen is that the blind follower is often taken advantage of more than anyone else. There is no risk of this dentist leaving. There is no contracted pricing. The dentist is complacent, trusting and naive. It creates a perfect storm, or in the eyes of traditional dental supply chain models, a perfect customer.
The transparency that data can provide is of the utmost importance. If you never see your pricing stacked up against your colleagues how can you possibly know how you’re being treated. The dentists that had these sentiments and allowed us to show them the data comparing their practice’s pricing compared to their colleagues and/or IndepenDENT Dental Solutions pricing were often the most shocked to learn they were paying 18-33% more than their colleagues. How could they not know? The reason is the lack of transparency and the strategies implemented to keep them complacent and trusting.
Throughout this journey I was fortunate enough to become educated on various models manufacturers, aggregators and distributors utilize from the point of manufacturing the product until it ends up in the hands of the end user. Some models have greater benefit for the dentist than others. Some models put the dentist at a complete disadvantage. Admittedly, there are several intangibles in each model which have value that varies from dentist to dentist.
In the traditional model, which is easily the most common and likely very familiar to everyone, you the dentist have the least amount of protection. In this model you are on your own and you have the purchasing power of yourself only. You do not have contracted pricing and you have very little to no transparency on pricing. Your pricing is unique to your office and price increases occur frequently and without warning. On top of that, there is a myriad of strategies meant to cloud the pricing even further. Such things as manufacturer rebates, free goods, a straight percentage off the catalogue pricing, point systems, tier level service or repair etc. The list goes on and on. It truly is the wild west and with the fragmentation that exists in dentistry this model has flourished. Without dentists becoming educated on supply chain this model will continue to flourish and dentists using this model will be at a huge disadvantage. The traditional model does have some benefits that not all models share. The traditional model is typically a full service offering. Meaning you have the benefit of a sales representative to help you with your various supplies and potential services in which you may be interested. They also usually have service and maintenance offerings as well.
In the e-commerce model, which has become more common in recent years with the rise of online retail stores like Amazon, the dentist will have access to better and more consistent pricing. There is usually no contract so pricing can and still does fluctuate. Pricing is straightforward and listed directly on the website. You are paying the same amount as your colleagues. The biggest hurdles for e-commerce models is the lack of installation, service/maintenance, lack of sales representatives and because they are simply an aggregator of goods returning product can be a nightmare. Similar to the traditional model, e-commerce lacks a strategy moving forward. Manufacturers often do not provide better pricing than they offer a traditional model and the pricing is still based on the power of only one purchaser. The more competitive pricing is often due to lack of overhead (sales reps/occasionally warehouse/travel).
In the group purchasing organization (aka GPO) model the organization will seek out contracts on behalf of their members. This provides the protection of contracted pricing and also has the benefit of a team of individuals acting as the checks and balances for the dentist in regards to the relationships that exist between manufacturers and distributors. In the traditional GPO model there is often a hands-off approach with the main goal being to obtain the best contracted pricing and grow scale so pricing improves over time. In a GPO model there is strategy for the future, there is equal treatment of the dentists and there is protection of having a third party watch over everything so you can do dentistry.
When IndepenDENT Dental Solutions formed the goal was to educate and empower dentists. With supply chain education dentists can obtain far greater benefits by becoming better consumers. We wanted to create a unique model never before seen. We took the advantages that exist in traditional models, e-commerce and GPO’s while also being able to provide the intangibles. Midway Dental was willing to partner with us in order to flip the existing models on their heads and help us create what I feel is the best offering that exists today. We took contracted pricing from the GPO model to provide fair treatment of the dentists all while being far more competitive than traditional or e-commerce models. We also took it a step further with our strategy to take initiative with the manufacturers for even better offerings to our distributor which passes to the dentists. We took the sales force, service and maintenance and other intangibles from the traditional model so our dentists have a team behind them supporting them along the way.
Having choices is best. Being educated is king. With more options existing than ever before I strongly encourage my colleagues to explore the various model options that exist. Learn about this area of our industry. It will make a large impact on your bottom line and help you and your team become more savvy consumers.
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