Medical supply firm off to a quick start QualitiCare touts response time


Wendell M. Kelly and Dennis J. Garrett's company began with their assignment from the Baltimore business community to scout opportunities in health care and life sciences. The two men not only discovered a niche for locally owned minority firms, but this month also opened a company to fill it.

After 18 months of nights and weekends spent working on a business plan, the two expect their medical and surgical supplies distribution company, QualitiCare Inc., to reach sales of $20 million by its second year of operation.

Mr. Kelly and Mr. Garrett are the first to admit that the scenario of how they came to be and their projected rapid growth is unusual for a start-up business.

"We are the exception to the rule," Mr. Kelly said in an interview at the company's warehouse in Holabird Industrial Park.

They attribute their quick success to QualitiCare's ability to get supplies to hospitals faster than competitors and on early commitments from the University of Maryland Medical Center and Johns Hopkins Medical System.

QualitiCare uses state-of-the-art technology to receive and fill same-day orders. It competes with national and independent distributors and aims to fill a hospital's needs for just-in-time delivery of supplies, a system that frees the institutions from stockpiling expensive inventories. It delivers orders in five hours, compared with several days for competitors whose offices are not located in Baltimore.

The 100 percent minority-owned company can trace its origins to the fall of 1990, when Mr. Kelly, a former regional manager with Johnson & Johnson Co., and Mr. Garrett, a computer and financial expert with start-up company experience, were named to a Greater Baltimore Committee task force charged with proposing ways locally owned and minority businesses could benefit from life sciences initiatives by the state and federal governments.

They found two things: first, that a local, highly automated warehouse could distribute medical and surgical supplies to hospitals better and cheaper; and second, each other. Mr. Kelly had 20 years of experience in medical supplies, and Mr. Garrett a similar amount of time in computer systems. The business plan they drew up attracted a third investor and a loan from a commercial investment firm specializing in health care. They declined to identify either the investor or the firm.

Both Mr. Kelly, who took the role of chief executive officer, and Mr. Garrett, who is chief operating officer, also invested their own money; together they own a majority share.

A $4 million initial investment brought equipment and space. QualitiCare's doors opened early last month, and since then, its computers have taken orders from the UM Medical Center every morning, and QualitiCare has delivered the goods to the downtown hospital each afternoon.

Hopkins began ordering supplies the first week of October, and six more hospitals are expected to sign on by the end of the year.

In addition to the lower costs a local warehouse brings, the automated records the company keeps will improve customers' ability to analyze supplies they use and reduce waste, its founders say. Eventually, orders and payments will be totally automated. Right now, doctors at the UM Center already are ordering supplies by computer right in the surgical suite.

"I think [Wendell Kelly] has opened the state-of-the-art facility in the area," said Sharon L. O'Keefe, UM Medical Center senior vice president for operations and patient services.

The UM Center orders $100 million of medical supplies annually and continues to do business with other distributors and manufacturers. But it wants to use its leverage to promote minority and city firms, Ms. O'Keefe said. In this instance, the university precommitted to the project subject to competitive prices and helped QualitiCare managers decide which products client hospitals were most likely to use.

The university decided to stop tangling with hundreds of suppliers for the 1,000 items its operating room needed a few years ago, and closed its own warehouse and turned to distributors. According to Ms. O'Keefe, QualitiCare provides cheaper and faster service. The university has a multiyear contract, valued at $3 million this year.

Hopkins is expecting to buy $3 million to $5 million worth of supplies from QualitiCare in each of the first two years of a five-year commitment, said Colene Y. Daniel, vice president of corporate and community services.

She said QualitiCare is one of only a few black-owned distributorships in the Northeast, and most of those are mom-and-pop operations. QualitiCare says it eventually could supply 60 to 75 hospitals in Maryland, Virginia and Washington. In turn, it could benefit if the health care systems controlled by hospitals expand as expected under health care reform.

"We were in the right place at the right time," Mr. Kelly said.

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