Most OEMs do not service their competitors’ equipment in addition to manufacturing, selling, and repairing their own, but in the mid-1990s, confident in its repair capabilities, that is precisely what Warrendale, Pa-based MEDRAD Inc did. Now, 36 years after its creation, MEDRAD employs upward of 2,000 employees worldwide and services equipment and facilities around the globe. 24×7 recently spoke with Denny Durmis, the company’s recently appointed vice president of global service business, to discuss MEDRAD’s rise, business practices, and prospects for the future.
24×7: Can you tell me a bit about the history of MEDRAD?
Durmis: : MEDRAD was founded in 1964 by “Doc” [M. Stephen] Heilman, [MD]. He was a cardiologist who thought he could create more effective ways to use technology for angiography. He created the first flow-controlled, angiographic power injector. Since then, we’ve grown to a greater-than-$700-million-a-year business.
Service offerings were started back in 1974 or 1975. We had to support our products over the years and we created a best-in-class service organization. As time went on, people started to say, “We like your repair capabilities. Can you begin repairing other people’s equipment?” In 1995, customers requested that we begin repairing non-MEDRAD coils. MEDRAD manufactured and repaired coils for itself and for some other OEMs, and customers began recognizing that MEDRAD was one of the leading manufacturers of MRI coils.
We started dabbling in what we call multi vendor service. We continued to expand upon that until 2002, when we formally set up a business unit called Multi Vendor Service. As of last year, the Multi Vendor Service group was of the size that we could start working more closely between our traditional service organization and our Multi Vendor Service organization. Today, they’re under one umbrella and looking to provide a common and consistent offering to our customers.
24×7: What is the company’s mission?
Durmis:: It’s to be a leading global medical device provider. We pursue three primary goals. One is to improve the quality of health care, which takes care of our customers; another is to provide an enjoyable and rewarding place to work, which is taking care of our employees; and finally, delivering profits to our shareholders. So we have a three-pronged approach here—focusing on customers, employees, and shareholders equally, and having a balanced approach to each.
24×7: What is your service area?
Durmis:: We are worldwide. Around 74% of our revenue comes from North America with the remainder coming outside North America. We have 450 service employees globally, and around 350 of those are based in the US.
24×7: Can you discuss your Multi Vendor Service?
Durmis:: We have three primary offerings. We started in MRI coils where, traditionally, OEMs would exchange the product. To replace a product, you would send one of the OEMs a coil and they would send you a replacement. You would typically pay a premium for that. We started repairing those coils. As we evolved, we started investing in loaner inventory: We can send the customer a coil to keep them up and running while we repair their product, typically at a much lower price than they were getting through the OEM.
Then we replicated that model in the ultrasound transducer and probe area, where we made a significant investment in inventory, basically holding all OEMs’ products. Again, we will send a loaner product to a customer while we repair their product. When we first got into the business, our repair rate was around 50%. So 50% of the time we were able to repair a customer’s product, but the other 50% of the time they would have to swap it for and keep our loaner product. Of late, we’ve moved into a total repair concept, so as we continue to invest in repair capabilities, we’re now at a greater than 95% success rate of repair for almost all transducers. That has helped us differentiate ourselves from the market and give our customers a more stable, cost-effective solution because the exchange model is typically much more expensive than the repair. The more we can repair, the more money the customer can save. We’ve done a good job of investing in our repair capabilities and applying it broadly. The third area is in dry laser imaging and CR repair where we have another field-based service solution and can do preventive maintenance and contracts on non-MEDRAD equipment.
24×7: What’s the typical turnaround time for a repair?
Durmis:: Typically, the repair time for us is 3 to 5 days. The challenge lies in when a customer will give up their product to us after they get a loaner, how quickly they get their damaged product back to us, when they approve a repair, etc. So a lot of it ends up being a logistics process. But the applied time on our end is 3 to 5 days.
24×7: All repairs are returned to OEM standards?
Durmis:: Obviously, we go through painstaking detail to not only recognize that functionally—the product is working at OEM standard—but that it also looks like the OEM product as well. If it’s a coil housing or probe housing, when we send the product back, it’s going to look just like the OEM housing did, even if it was damaged significantly and had to be replaced. 24×7
24×7: What’s the purpose of that detail on repairs? Is it just cosmetic?
Durmis:: Some of it is cosmetic, but hospitals are in the sales business as well, so they want their equipment to look like the latest and greatest. It doesn’t help, from a customer satisfaction perspective, for us to repair something so that it works but doesn’t look the same. We do go out of our way to make the product look like new. Docs and technicians are finicky people. If it looks a little different, they’re not into that. They want the OEM product. We do everything we can to make sure we’re holding it to that standard.
24×7: Is it a challenge keeping your techs up to date on new OEM models?
Durmis:: It is, but we’ve got a pretty thorough process now for when new products come out. On the ultrasound side, it’s a little easier for us just because they’re basically launching a new ultrasound system and a suite of probes that, from a repair perspective, are covered under warranty for 1 year. We have some time to get up to speed on the product and figure out what is typically failing and what we need to invest in.
The coils are a little more challenging because there isn’t a volume of products out there. You may only see a coil once every couple of years, but we have a couple of engineers that are taking that product and sketching out what the schematics look like, what components make up the coil, and what makes the coil tick. The first time we do that with a coil, it usually takes a little longer. We spend a lot of time and energy creating repair procedures and documentation to make sure that when it trickles down to the tech level, it’s just another coil. They all function in basically the same way, but there are some nuances that we need to understand.
24×7: Can you discuss your biomed training program?
Durmis:: We offer some training to biomeds. Certain biomeds would like to understand what we do on a higher level. So we offer a few programs on the MEDRAD products and on the ultrasound side of things as well.
Most of the time, customers will come to Pittsburgh and do the training here. But we do offer on-site First Look training on MEDRAD products to our highest level of contract customers, which is completed at the time of a PM. We don’t do any training online as of yet. But we’re currently reevaluating all of our training programs to support the launch of some new service products that will change the way customers and MEDRAD interact with our equipment.
24×7: What other services/features do you offer to biomeds
Durmis:: We have a very comprehensive tech support group—a call center where we can help troubleshoot with a customer to get their equipment up and running faster than we can dispatch a field service rep there. Conversely, if we can identify what the problem is ahead of time, we can make sure that when our field service rep gets on-site, that he gets the product up and running as quickly as possible. It’s a little easier for us in large cities. If it’s New York City, we can get a field service rep on-site in quick order typically, but if it’s somewhere in Wyoming and a customer is down, we do anything we can to help them while our field service rep is on the way.
24×7: What’s the distribution of revenue between sales and repair/service?
Durmis:: Service makes up about 19% of MEDRAD’s annual revenues. The rest is capital equipment sales and associated disposable components—for example, syringes.
24×7: When did MEDRAD begin doing international service?
Durmis:: It was in the early 1990s when we started a couple of operations in Europe. Now, we have offices in most major countries there, and our European headquarters are in Maastricht, the Netherlands. We also have offices in Brazil, Japan, Australia, and China. We have some form of service offering there as well.
24×7: Does MEDRAD intend on expanding the international business?
Durmis:: Absolutely. From a growth perspective, a lot of it is going to come from outside the United States. But culturally, different regions have different approaches to service. Japan is a good example. If you go back 10 years, typically they paid a very high price for their equipment, and they expected service to be free indefinitely. MEDRAD, along with a lot of other companies, has started to change the mind-set. Service is a business and has a cost to it. You can’t offer those lifelong contracts and stay in business. Slowly, other cultures began to adopt this concept. We’ve been very successful doing that in Japan and Brazil, and we’re looking to follow that path with some other countries that traditionally don’t pay for service.
24×7: When you first move into those markets, do you have to adopt their business practices or do you stay with your methods?
Durmis:: Typically, we start with a distributor or dealer, and, as the region grows, we decide if we should invest locally. When we do invest locally, we traditionally have started by establishing a sales office and try to establish that service is a business at that time. But often, what has transpired is that our distributors and dealers have not traditionally done that because to them, service is a cost specifically in the business of distributing product. It’s usually a gradual change versus an immediate change, but the goal is to establish service as a business as soon as possible. We’ve actually considered leading with service as opposed to setting up a sales office first, because oftentimes you establish a very close relationship with your customers through service and quickly gather many customer preferences. So shouldn’t we set up service in the area first and understand the customers’ needs?
24×7: How has MEDRAD fared throughout this economic downturn?
Durmis:: Corporately, we’ve still seen growth across our product offerings, but the growth has been less than what it was prior to the economic downturn. It’s been challenging for us because we’re looking 2 to 5 years out, to see what resources we need and what investments we want to make. But we’ve had to adjust expectations internally to deal with the lower-than-traditional growth. We’ve seen that pick up and start to go the other way lately. Specifically, from a service perspective, you would think that it would be good for service with customers wanting to extend the life of their product, but what we’ve seen is some hospitals taking on risk. They’re saying, “I’m not going to buy that service contract this year and hope that the product doesn’t fail.” Sometimes that works, but oftentimes it doesn’t. We’re trending back to customers buying service contracts. It’s a less risky model.
We have invested a lot outside of the United States. MEDRAD has made a significant investment in emerging markets such as Brazil, Russia, India, and China. There has been continued growth there. We want to make sure we have a strong presence in those markets.
24×7: What do you see for the future of MEDRAD and third-party service companies?
Durmis:: There clearly are a lot of questions around health care reform and what it means for our industry. I think that’s one big unknown that we have out there. I think you will continue to see more third-party service providers enter the market and try to take advantage of continuing price pressures. In certain segments, they can be very effective at taking advantage of the opportunity. In other segments, there is more intellectual property, trade secrets, or technological equipment that will make it much harder for them to penetrate.
It’s really going to be up to the customers. Whether you’re a third-party provider or an OEM—MEDRAD is a little bit of both—I think you need to make sure that you’re delivering what your customers want. Whether that’s best-in-class service, lowest price, high quality, or minimizing downtime or cost, I think you need to understand the market and what is critical to the customer. Hopefully, you can find that sweet spot, and I think that MEDRAD has done a good job of that over the years and is something we’ll continue to do.
24×7: Are more third-party companies good for the industry?
Durmis:: I think healthy competition is a good thing. Personally, I don’t care if it’s third-party companies or OEMs competing head-to-head. I think that a third-party presence makes the OEMs continue to focus on adding value to the customers rather than just adding cost. I think that’s a win for the customer. It’s also a win for the OEM group because it continues to challenge us with new, more efficient ways of doing business. I don’t see it as a good thing or a bad thing. I think it’s a necessary thing that keeps the market balanced and makes sure that there’s healthy competition and that the customers win in the end.
24×7: Is there anything else you want to talk about?
Durmis:: I think MEDRAD is in a unique position because we are an OEM but we also have a third-party role with probe, coil, and dry laser imager repair. There aren’t many companies that do that. I know some do, but we really focus on repair. We’re not an asset-management company. I think the large OEMs have tended to go in that direction. We have really focused on staying close to our customers and working with them to offer an optimal solution. We know we deliver OEM quality, and hopefully that’s what customers are interested in. We think that we have a good balance of cost versus benefit.
Chris Gaerig is the associate editor of 24×7. Contact him at .