Vol. 17 •Issue 8 • Page 28
Surviving as a Small Medical Transcription Service Organization
Don’t let your quality and the efforts of your medical language specialists become just another gallon jar of pickles.
Let me tell you a story about Wal-Mart and Vlasic Pickles and how it relates to the transcription industry. Obviously, Vlasic Pickles wasn’t a transcription company—it wasn’t even a service industry—but it’s a great illustration of what commoditization can do to an industry. And in this case, service was what Vlasic had to sell. See, pickle companies don’t make their money on buying big cucumbers and pickling them, they make their money on the quality of their pickles; their crispness, the clever cuts (spears, hamburger chips, sliced-for-a-sandwich chips), flavors and the garnishes that they include in the bottle; yes, often they’re pickled peppers.
When a product becomes commoditized, the customer sees only the price. Because pickle production became commoditized, even though sales skyrocketed, prices were so low that Vlasic Pickles filed for bankruptcy and was purchased by one company after another. They eventually went out of business as Vlasic Pickles.
The story goes something like this:
A Wal-Mart associate visited Vlasic one day in the 1990s.1 The buyer saw that Vlasic sold gallon jars of pickles. They weren’t sliced, they weren’t garnished; none of the usual finesse that distinguishes a quality jar of pickles was there. These were whole pickles floating in a big gallon jar. Vlasic sold them to bars and delis, to groups for church suppers, Fourth of July picnics and tailgating parties. They were just a special, niche bulk item that Vlasic sold to a limited group of buyers for about $3 a gallon jar. There was little or no markup, because they didn’t apply any of their expertise to the pickles.
Falling Prices
The Wal-Mart buyer saw the gallon jar of pickles and decided to offer it in Wal-Mart stores. But in the best tradition of “falling prices,” Wal-Mart talked Vlasic into getting the price below $3 and featured the gallon jars on pallets at the front of their stores at $2.97 a gallon. This price was so low that even Wal-Mart was only making a penny or so a jar, and Vlasic’s profit was about the same.
Well, who knew? The pickles flew out of Wal-Mart stores. Pickle buyers were scrambling to find fields of cucumbers to fill their Wal-Mart orders. But the profit margin was so low, it was putting Vlasic out of business. Fields of pickles disappeared into the gallon jars, so the finer varieties of pickles were soon hard pressed for supply, further crushing profits. While pickle sales skyrocketed, profits fell. People couldn’t eat a gallon of pickles, so most of the pickles molded in family refrigerators and were thrown out.
More than that, the price of pickles, used as an indicator by buyers, sellers, competitors and farmers, in general was a lie. Sales were so huge that they affected all pickle sales, but there was no profit margin and no quality in the product. So while it seemed like the price of pickles had plummeted, and demand for cucumbers had skyrocketed, actually the profit margin on pickles had plummeted and uneaten cucumbers were rotting in refrigerators all over America.
Commoditization is the process by which the customer comes to focus only on price. Quality differences are ignored. Delivery times become unimportant. Everybody is scrambling to produce the $2.97 gallon jar of pickles, so taste, crispness, fancy cuts and the quality of the cucumber becomes unimportant; so unimportant that uneaten cucumbers are thrown out.
Educate the Customer
How do you fight commoditization? “By educating the customer,” the economic gurus will tell you. Did you know that Vlasic Pickles had gone out of business? A company founded in the 1920s by a dairy farmer in the Chicago area was crushed by debt and falling prices. Did you buy any of those gallon jars of pickles? I know I did. I thought the jars were cool! I threw out more than half of my pickles, too. I tried cutting them up myself, but I couldn’t get those cute little corrugated cuts when I cut them. And when I sliced them lengthwise they were curvy and uneven. I tried putting pieces of cauliflower and peppers in with the pickles, but they just got soft and mushy, and they didn’t really pickle.
So I went back to buying regular, smaller jars of pickles. I didn’t know I was buying them from a conglomerate now, because Vlasic had gone out of business. I didn’t know that the people who had prided themselves on their fancy cuts and special spices had all lost their jobs. And not because the market demanded poorer quality or less value; but because Wal-Mart was slashing prices.
Today, transcription has become a commodity. Prices have been slashed because they can be. One company, a large software company that recently purchased one of the two pillars of our industry, says they’re going to do away with transcription completely. Because quality has not improved, customers say, “Why not? What difference does it make where the work is done or how the work is done? The quality was only so-so to start with. I’m just looking for a better price.”
Anything to Save Money
In the health care industry where there is tremendous pressure to cut prices, anything that will save money sounds like a good idea.
The electronic medical record is going to save money and lives in health care today. We all have anecdotes about repeated tests, false positives and poor handwriting that has led to mistaken prescriptions. But in the drive to “cut prices now,” transcription is being commoditized. Prices are slashed!
In the march to the electronic medical record, standardization is being implemented to replace quality. Let the machine do it; lower prices will more than compensate for bad grammar, mistaken terms and redundancies. Why pay for the finesse of improving syntax, flagging errors, deleting redundancies, making sure that the patient starts out as a “she” and stays a “she” during the whole record. Let the consumer edit his own work.
The same issues are facing architecture, construction, banking, accounting and even attorneys. The work can be offshored, automated and streamlined to slash prices now. And lower prices aren’t leading to more or better work. It truly is a race to the bottom.
So how can you make money in a commoditized market? Educate your customers, create value, take advantage of technical innovation and don’t compromise quality. Create a niche market, but like the gallon jar of pickles, this is a limited shelter. Broaden services and add integrated services. Get active, shape industry practices. Change your vision. Shift to Kaizen, the concept of continual improvement. And whatever you do, don’t confront the big guys (the Wal-Marts of your industry) head on.
Small MTSOs Compete
How does the small business owner continue to find transcriptionists when the Wal-Marts in our industry have set up mass training programs with the good schools? MTSOPower.com has started a new list of transcription services that are willing to work with new grads. Working with independent contractors is a win-win solution.2 It takes advantage of technical innovation (well-educated moms can work at home and have a satisfying, sustaining career), and it doesn’t compromise quality. Most of the independent contractors working with me now have undergraduate degrees. I’ve found that quality and pride in accomplishment has soared. Innovate value, use intelligent editing and true language specialist abilities to add value to the medical record. Educate your customers. I believe that voice recognition, order entry and offshoring will assist in that process. We transcribe a lot of referral letters. Clearly it’s a waste of time for the most expensive link in the chain, the physician, to be fixing errors that can be less expensively avoided.
Carly Fiorina observes: “Leaders are candid and courageous; they know their strengths and use them; they bolster their weaknesses by relying on others with complementary skills and by constantly learning and adapting; they know when they need help and seek it; they know when help is required by others and they provide it. They have strong peer networks and are not afraid to share with others.”3
Efforts like educating the customer can’t be done by one service alone. It is possible to collaborate with your peers without giving away your trade secrets. We can’t let our professional organizations reinvent our product without our input.
And don’t let your quality and the efforts of your medical language specialists become just another gallon jar of pickles.
References
1. The Wal-Mart Effect, Charles Fishman, Penguin Press, 2006
2. Big Vision, Small Business: The Four Keys to Finding Success and Satisfaction as a Lifestyle Entrepreneur, Jamie S. Walters, Ivy Sea, 2001
3. Tough Choices, Carly Fiorina, Penguin Group, 2006
Beth McLaughlin is president and founder of Adept Word Management, The Transcription Experts, with headquarters in Houston, since 1990. She is also the founder and sponsor of MTSOPower.com.
