Published in Business London, September, 2015
It’s probably the last thing anyone considers while being wheeled into the operating room, two minutes from a date with an anesthesiologist who will put you out for the next four hours.
But that doesn’t mean it’s not a good question: Where exactly did the hospital get that a) screw b) pin c) suture the surgeon is about to put into your body? Hospitals routinely order thousands of products, but let’s be honest: Who cares where they get the gloves, gauze and Kleenex used every day? What are the risk factors there?
Of more interest is that piece of metal or ceramic going into your body, often permanently.
The answer is surprisingly mundane. Hospitals and surgeons order the most sensitive items in much the same way they order the most ordinary items. They issue an RFP and look for the best deal. The good news is that price is only one factor used to make a decision. But it certainly is a factor. Maybe you’ve heard…health dollars are at something of a premium.
“About 80 per cent of our products are purchased on a contract basis, with vendors who provide a certain volume,” says Dr. Graham King, chief of surgery at St. Joseph’s Health Centre and medical director of the Roth McFarlane Hand & Upper Limb Centre (HULC).
“The other 20 per cent are lower volume, more specialized, products: things like a shoulder or elbow replacement. In those cases, the hospital issues an RFP and the results are evaluated by all levels at the hospital.”
Since 2008, a London company has been among the leaders providing specialized products for arthroscopic and minimally invasive orthopaedic surgical procedures. Although it was incorporated two years earlier, 2008 was the year Tribe Medical Group took its first significant step in becoming a national orthopaedic supplier.
That was the year it signed with Arthrex and became that company’s exclusive Canadian distributor. Tribe has grown impressively since then, racking up sales growth of roughly 20 per cent compounded annually. It has 80 employees, and sales this year will reach $36-million. The company has done a lot right to reach this point. But choosing Arthrex is still the most important thing it ever did.
“Signing with Arthrex in the summer of 2008 is what really moved us forward,” says Tribe president and co-founder Gordon McArthur. “We had incorporated in 2006, but things start to happen in 2008.”
Close to 90 per cent of everything Tribe sells is made by Arthrex, a company named before terrorists made anthrax a household name. Based in Naples, Florida, it began in Germany in 1981, when founder Reinhold Schmieding invested $60,000 of his savings and started making devices for the emerging field of arthroscopic surgery. As anyone who plays or follows sports knows, arthroscopic surgery uses sophisticated instruments to enter the body through tiny incisions, as opposed to open surgery that opens up large wounds that take much longer to heal.
Schmieding still owns the company, which today enjoys annual sales of about $2-billion (U.S.).
“We only partner with privately held companies,” McArthur says. “Publicly traded companies face more pressure to make quarterly profits. Companies like Arthrex make profits, of course, but can be much more innovative.”
In 2006, McArthur founded Tribe with Chris Johnson, a former Ottawa Gee-Gee football player. They had been working for another orthopaedic supplier and had started dabbling with their own company on the side. The opportunity to represent Arthrex prompted them to jump in full-time and go national in 2008. Johnson lives in Ottawa and runs the sales force of more than 50 people who work directly for Tribe across the country.
McArthur runs the head office out by the airport, where a team of 25 looks after operations and runs the warehouse, filling and shipping orders to many of Canada’s 900 orthopaedic surgeons. (That’s right, there are only 900 orthopaedic surgeons in Canada, according to McArthur. He says there are more than 100 who are fully trained but can’t get jobs.)
Tribe stocks about 4,500 SKUs in six general segments. Its mix of products is known as its bag, and Tribe salespeople have to be conversant with every product it contains. “They are meeting with surgeons, explaining why a given product is superior to something they might be using or offers something different,” McArthur says. “They have to know their stuff. Plus, there are about 600 new Arthrex products available every year. We don’t stock every one of them, but our reps have to know about them. They do a lot of training.”
The training begins before a rep even gets hired. Aware that its sales force is the lifeblood of the company, Tribe established a unique internship program. It takes on a group of four interns and provides housing and a stipend of nearly $3,000/month. The interns, typically graduates with health science or business degrees, attend classes run by Tribe personnel.
“They learn about surgical techniques and how our products are used,” McArthur says. “It’s the best way to get an understanding of what we do.”
After six months, the interns typically are offered sales jobs somewhere in the country, matching the needs of the company at the time. “We match the numbers with what we think our need with be,” he says. “I don’t know of any other companies that go to that extent to train their salespeople, to really educate them before they start working for them.”
A cynic might describe Tribe as a simple link in a chain that delivers medical devices from the manufacturer in Florida to an operating room somewhere in Canada. Collect the orders, fill the orders, rinse and repeat.
But the company’s customers – surgeons who rely on Tribe to deliver what they need to perform surgery – view Tribe as much more than a glorified order taker.
Tribe’s mission is to “put patient outcomes first in everything we do.” That simple statement drives everything it does.
“What sets Tribe apart is they don’t just care about making money,” says King. “They are always asking, ‘What can we do to help your patient get better results.’ Their employees think that way and are looking for ways to help.”
King is particularly grateful to Tribe because this spring the company donated $100,000 over the next five years to support the James Roth Research Chair at the HULC. The donation was matched by Western as part of a $3-million fundraising campaign. The donation was one of many Tribe has made in recent years, including another $100,000 of product to the LHSC for research.
“The other thing about Tribe is that it’s London-based,” King says. “That makes a difference for us because we get unparalleled service.”
If 2008 was the most important moment in Tribe’s development, 2012 is next on the list. At that point, the company had revenues of about $15-million and was growing impressively. But its foundation was still that of a small startup, dealing with issues as they came up and not as focused on the future as it needed to be.
“It was a tipping point,” McArthur says plainly. “We didn’t have the infrastructure we needed to support our growth.”
That’s when the company hired its first chief financial officer, Nicole Archibald, a CA with two decades of experience.
“We introduced SAP Business One and began running the infrastructure with it,” she says. “That was a big reason we were able to double our sales in the last three years.” In fact, Tribe has performed well enough to land on Profit Magazine’s Top 500 small businesses in 2014 and 2015.
To accommodate growth, the company moved to its current Sovereign Road location two years ago.
While Arthrex is Tribe’s primary partner, it also partners with LifeNet Health, a Virginia-based supplier of bio-implant technologies, cellular therapies and organ procurement. It’s not just organs that are donated when people die. Surgeons can also use cartilage, tendons, skin and ligaments.
In a typical anterior cruciate ligament reconstruction, for example, doctors typically use the patient’s own hamstring tendons to stabilize the ACL. That means there are two procedures: one to harvest the tendon and another to repair the ACL. Two incisions, two wounds, more time to heal.
Working with LifeNet, Tribe supplies doctors with a vast array of bio-implants. By its nature, it will never be a major part of the Tribe portfolio, but when a doctor needs something exotic, Tribe delivers.
The newest growth area is the veterinarian market. Dogs rupture their ACLs too, and Arthrex supplies vets with everything they need to perform the surgery – along with many more. Tribe now has a full-time manager of veterinarian supplies and expects sales in that area to grow.
In its new headquarters, with the right infrastructure in place, Tribe is poised for continued growth. With Canadian healthcare budgets what they are, continuing at 20 per cent annual growth could be a challenge. But the growth of arthroscopic procedures and the aging population combine to create real opportunities – not to mention the potential vet market.
“We’re focused on helping patients,” McArthur reiterates. “That’s how we’ve been successful, and it’s what we will continue doing in the years to come.”