Executive Suite: Henry Schein CEO Stanley Bergman

CEO Stanley Bergman says the animal health unit’s

CEO Stanley Bergman says the animal health unit’s sales decline was due to bad weather. He is shown in the company's Manhattan office on Feb. 11, 2014. Photo Credit: Bruce Gilbert

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Stanley M. Bergman has been chairman and chief executive of Henry Schein Inc. for a quarter century. The 64-year-old native of South Africa guided the global distributor of dental, veterinary and medical products and services to record sales of $9.6 billion in 2013, and the Melville-based company is an odds-on favorite to retain its spot as Long Island's largest publicly traded company by revenue. The market has noticed. Henry Schein stock has flirted with all-time highs in recent weeks.

With more than 16,000 employees, Schein also has been on Fortune's list of most-admired companies for 13 years running. Newsday caught up with Bergman, a regular at the World Economic Forum's annual meeting in Davos, Switzerland, and an opera buff, in midtown Manhattan.

How does Long Island fit into Henry Schein's worldview?

We still have a very strong presence on Long Island. We want to attract people to our company from Long Island. But more importantly, when we want to relocate somebody to Long Island, they do research on the Internet. We want Long Island to come across as a place where people want to live. Yes, the taxes are high, but you get a good education.

What demographic trends are affecting your business?

The baby boomers are the most affluent generation ever. They understand the importance of preventive care, wellness and taking care of oneself. That has an important impact on our business, because our customers are generally involved in preventive care -- doctors in their office and dentists. What you're seeing is a desire for preventive care, wellness, leading to more visits to the dentist, to the physician, and at the same time investing in more pets.

What role does preventive care play in the equation?

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Governments are understanding more and more that we need to have health care plans, not sick-care plans. Sick people don't help our business. Sick people help the business of the hospitals. We're not in the hospital business. We're only in the business of what we call the alternate care setting. That is the physician in private practice and the surgicenters and some form of the laboratory work that takes place at the doctor's office.

How does prevention affect the cost equation?

No health care system in the world can continue to afford taking care of people only when they're sick. We have 18 percent or something like that of GDP in the U.S. assigned to health care today, and that's because we're not preventing people from getting sick. In fact, the last six months of people's lives are accounting for something like 40 percent of the health care dollars. The big issue we need to deal with is keeping people out of the hospital. At the end of the day, it's the office-space practitioners in the medical and dental world that are helping to drive down costs through prevention. Diet, smoking, weight loss, healthy living, exercise -- all of this can and should be discussed in the office-space setting.

How is consolidation of office practices affecting you?

We're experiencing consolidation in medical practices. Also in dental practices and to some extent animal health practices. There are two ways that's going. One way is through these large specialty practices. The other is these networks -- multiple locations of practices under common management. Both of these models are driving efficiency. These customers also are able to use technology: practice management software, electronic medical records to drive the efficiency of the practice. These larger practices that are professionally managed are very good customers of ours. And there are some big ones on Long Island.

How is Schein affected by the Affordable Care Act?

First of all, public health care policy for decades now has been to reduce the emphasis on the acute-care setting and move procedures to the office-based setting. Gradually the cost of the hospital has gone down per visit, per day, and the number of days per patient has gone down. Now there's even greater emphasis on prevention. The second point is: Who's going to pay? Is it the drug company? Is it the hospitals? The doctors? The ambulance players? Or the public? Is it going to be companies? Is it going to be the government? When Medicare was passed, it was decades to sort this all out as to who pays. We're going through that debate now. It's not a question of whether health care reform is good or not. Everybody knows you can't continue with the system today of having people getting sick and going to the hospital. We have to prevent sickness.

The biggest change will be, through health care reform, we'll be providing physician services to something like 20 or 30 million Americans who today, if they're sick, they go into the hospital. We've got to keep them out of the hospital so the costs are less. We've got to keep people healthy, not take care of them when they're sick. That's what health care reform is all about. It's been cast into terrible political debate because the left and right view this through different lenses.

How is technology changing health care?

The biggest movement in health care today from a product-efficiency point of view is the digitalization of health care. In dentistry, for example, a CAD/CAM [computer-aided design] machine can take the scan of the mouth, and within one hour [you] can walk out of the dentist's office with a bridge or crown. The key is to educate our customers to the value in investing in this type of technology. Some of [it] is on the bleeding edge, but we want to be on the leading edge. As a company we generally only bring technology to customers when it's mature enough to be used by the average practitioner.

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What are you seeking when you make an acquisition?

We make acquisitions for three reasons. The first is to expand our presence in the markets we're in. We call those tuck-in acquisitions. We may be in Germany, and we may want to add more dental products. We may want to add more customers to our German business. Then, we get into geographic expansion. We just announced the acquisition of Medivet in Poland, which expands our presence into a brand new market. The third area is expansion of new products. We made an investment in [Birmingham, Ala.-based] Biohorizons, which brings us a brand new technology in the area of dental implants.

Which foreign markets look appealing?

About 20 percent of the world's population is spending about 80 percent of the world's money in the markets that we serve. But the part that is growing the fastest is the 80 percent of markets that [are] not spending much money today, the developing world. That market is growing rapidly, and we are starting to slowly advance our business in the developing world. We announced a small investment in South Africa last year, and we'll expand our presence in Africa. Hopefully, in the not too distant future we'll make an investment in Brazil. Our goal is to expand our presence in the developing world, which, in the long run, will give us access to 80 percent of the world's population that today is only spending about 20 percent of the world's GDP.

What about growth in your current markets?

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We get asked by analysts all the time: So what's the fourth leg of Henry Schein? There's no need for a fourth leg. We're in a market that's probably about $45 billion. We have, what? $10 billion in sales, and we're the big fish. As the middle class grows throughout the world, there will be more focus on the markets that we serve. We do not want to be in the acute-care business. We don't want to be in the drugstore business. We're not in the nursing home business. We're in the office-space alternate-care side.


CORPORATE SNAPSHOT

Name: Stanley M. Bergman, chairman and CEO, Henry Schein Inc. in Melville.

What it does: Global distributor of dental, medical and veterinary products and services to office-based practitioners.

Employees: More than 16,000 worldwide; about 1,200 on Long Island.

Revenue: $9.6 billion in 2013.

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