In an effort to reduce costs and to better align resources Cardinal Health, a global healthcare provider, has announced a consolidation of its businesses into two primary operating and reporting segments, which will lead to job cuts for some.
Cardinal Health's network of pharmaceutical and medical product distribution centers and nuclear pharmacies will form the Healthcare Supply Chain Services segment, led by Vice Chairman George S. Barrett. With annual revenue of more than $80 billion, this segment serves customers in North America with distribution services for prescription medicine and medical products.
Products for infusion, medication dispensing, respiratory care and infection prevention will be grouped in the Clinical and Medical Products segment under the leadership of Vice Chairman David L. Schlotterbeck. With annual revenue of approximately $5 billion, this segment serves global customers with clinically differentiated products used in hospitals and other primary care facilities.
Company officials said the segments would be connected by a lean corporate organization and Cardinal Health's hospital sales force.
"Through this restructuring, we sharpen our focus on two distinct, large and growing segments of the healthcare industry by aligning our resources, reducing costs and helping to speed decision making for our customers," said R. Kerry Clark, chairman and CEO of Cardinal Health. "In many ways, these changes formalize the organization we began to put in place 18 months ago and will make us a stronger company that has a greater focus on both our supplier-customers and provider-customers, with a goal of creating more value for shareholders."
As part of the restructuring, Cardinal Health will also separately report results for a group of other businesses as a third reporting segment. These units include Pharmacy Services (outsourced hospital pharmacy management services), Tecomet (orthopedic implants and instruments), Medsystems (enteral devices and airway management products) and Medicine Shoppe International. While these businesses continue to add value to Cardinal Health, the company says it will be conducting an in-depth review during the next 12 months to evaluate their fit in the existing segment structure.
"In fiscal '09, we remain committed to the turn-around of our pharmaceutical supply chain business, as we continue to strengthen our medical supply chain business, invest in an innovative pipeline of clinical products and ensure we have strong regulatory compliance programs in place across the company," continued Clark. "We will also continue to optimize our portfolio to strengthen the core business. In all, we will do fewer things exceptionally well, all under our mission to make healthcare safer and more productive."
Cardinal Health plans to reduce its workforce by approximately 600 positions under a restructuring charge of approximately $63 million, the substantial majority of which it expects to recognize in the current fiscal year. Of those positions, about 160 are currently open and will not be filled. Employees affected will be offered severance benefits, company officials said.
What is your opinion of this restructuring? Do you think that it will be successful in sharpening the company's focus? E-mail Associate Editor Molly Merrill at molly.merrill@medtechpyublishing.com