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While a familiar face David Ricker is re-energizing
the corporate reins

For nearly 30 years, Ricker has logged extensive supply chain management executive experience, including a vice presidency at the former Premier Health Alliance, a divisional vice presidency at drug delivery and vital signs technology manufacturer IVAC and a senior vice presidency at Tenet Healthcare Corp. and CEO of its BuyPower group purchasing program, which he navigated into Broadlane Inc.

Born during the booming, but ultimately short-lived, dot-com flurry in late 1999, Broadlane since has expanded beyond its GPO-online exchange hybrid roots into a full-fledged cost management services company involving clinical, contracting, information technology, group purchasing and workforce management operations for investor-owned and not-for-profit hospitals and health systems.

Originally Broadlane’s founder, president and COO, Ricker recently upgraded one-third of his title trinity to CEO with the addition of TowerBrook Capital Partners LP as a majority private investor replacing Tenet Healthcare Corp. and two other private investment companies. Last month, Tenet renewed its exclusive contractual relationship with Broadlane for seven more years. Terms of the agreement, nor its buyout, were not disclosed.

With all of the changes this year designed to move Broadlane forward Healthcare Purchasing News Senior Editor Rick Dana Barlow sought Ricker’s insights on recent events and his outlook for the company.

RICKER: There was never any secret motivation for seeking private investment versus going public. We simply need to recapitalize in order to ensure we had the funds that would provide a strong, stable financial platform from which we could operate. As far as going public is concerned, we have looked at financing through the public markets; however, we believe we can best serve our clients through remaining private and focused on delivering the services that help them reduce their supply costs. We can take a long-term view from a financial standpoint and do not have the pressure of earnings projections.

Towerbrook will have the majority interest at approximately 80 percent and Broadlane employees and clients will retain a 20 percent interest.

This is somewhat of a misunderstanding. We are not receiving an infusion of capital. We are simply replacing one set of investors with another. TowerBrook purchased 100 percent of Tenet’s interest in Broadlane and that of other investors in Broadlane.

Tenet chose to divest themselves of their interest in Broadlane in order to take advantage of the cash they will receive. We look forward to a continued relationship with them. Whether they stay public or go private is really not something I am qualified to comment on.

There is no effect whatsoever.

Our GPO is the largest business and generates the most revenue; however, we continue to diversify through Broadlane Workforce Management, our clinical workforce offering, and The Preference Group, our clinical services business. Both are growing. However, workforce management has a tremendous upside. Also, our materials management and supply chain outsourcing business generates 39 percent of our revenue and allows us great revenue diversification from the client and supplier side.

Historically, our GPO business has grown the fastest. We were awarded ‘Inc. 500’ awards in 2004 and 2005 for being one of the fastest growing companies in the U.S. Going forward, we believe our supply chain outsourcing business will be one of the fastest growing pieces of our business. Fundamentally, for the same cost as hospital spends now, they can outsource it to Broadlane and let us run it for them. This year, Beaumont Hospitals in Michigan and St. Luke’s Episcopal Health System in Houston both outsourced their supply chain to us. That is approximately one-half of a billion dollars in supply chain business that we have picked up to manage directly this year alone. Our Capital Equipment Services business continues to grow very quickly, and we are able to generate double-digit savings for our clients.

Simply put, instead of contracting with a supplier and then letting the customers decide if they want to use a contract, our Executive Steering Committee — made up of our largest clients — makes the decision which vendor or vendors they want to work with, and then we put the contracts in place. Our model is inherently different from our competitors.

One of our more powerful contracting strategies revolves around pre-commitment. For a pre-committed contract, our clients decide that they will commit — in writing — their purchases for a particular product category. Based on the available volume in that category, the supplier knows that earning the business will provide a significant increase in market share.

For example, we recently put a contract in place for a pharmaceutical wholesaler that guaranteed the winning vendor over $1 billion in new business. Our clients actually committed in writing to use the supplier that met the criteria they set. One supplier now has all that business and our clients have an industry-leading cost structure. We are able to do what we do because our clients are committed to driving costs down in their supply chain.

Workforce Management is really outside of the GPO. However, our expertise in contracting is certainly leveraged as we perform all the contracts specifically for the client or clients in a certain geographic area. Then we enhance the contract by adding proprietary technology that allows our clients to better manage their use of the clinical workforce.

Without giving away too much, our contracts contemplate rising raw materials prices, and we put language in the contracts that protects them.

We don’t have any contracts with fees over 3 percent. We don’t earn marketing fees or have private-label products. Based upon whatever deal structure we have with our clients, they can determine exactly what we are earning for the work we do for them.

Based upon complete disclosure of what we earn, I believe we are very transparent. In addition, we post the HGPII Annual Accountability Questionnaire on our Web site and have our own code of ethics that we believe is the most stringent in our business.

Since our inception, we have been fortunate to have two extremely capable leaders. They helped us grow from a company with no clients to one that serves 1,055 hospitals today. That does not even take into account the surgery centers, physicians offices, long-term care facilities and other points of care that we service. All of our clients have come to us from our competition. I was — and am — proud to have been a part of that. However, I believe that I was best able to serve the company in the role of president and COO. I am very excited about my new role and about the opportunity to continue to help us grow and prosper by doing what we do best: Serving our clients.

Chuck had the skills and vision to guide us to the TowerBrook transaction and where we are today. He was a tremendous asset to our company, and the direction he set will serve us well in the future. While a cliché, the most valuable part of Broadlane is the people I work with every day. I am constantly amazed at the depth of knowledge and expertise the people that I work with possess.

We don’t want to be the biggest; we want to continue to be the best. Since we were founded, our focus has been on three guiding principles: 1. We wanted to manage a highly compliant GPO. 2. We wanted to leverage technology to deliver services. 3. We wanted to capitalize on our operational expertise.