BondTech Corp.

When Stephen Richards recently considered how to adapt his Nashville, Tennessee-based records and information management services company to meet today’s demands, he recognized it all starts with people. So, he added professionals to Richards & Richards’ sales team, increasing it from two to five people. He says he’s looking to add another salesperson as well.

Yet, while the company’s sales staff has traditionally focused on records management services, from scanning to shredding, this time he’s hiring for a different purpose. One sales associate will focus on a new service the company is offering: medical waste collection.

“We are going to be allowing that person to sell medical waste [collection],” says Richards, chairman of the board for the 30-year-old company. “That person will be specific to that industry and for good reason.”

That reason, Richards says, is because “the industry is growing, booming and we don’t want them to be selling too much of anything else.”

Explosion of entrants

He’s not the only secure destruction service provider to see the potential in this sector. The regulated medical waste disposal industry has seen an “explosion of new entrants,” says Bob Johnson, CEO of the Medical Waste Management Association (MWMA), Phoenix. Johnson helped to establish MWMA in 2016, an international trade organization for biohazard transporters and processors and the professionals they serve. He also serves as CEO of Phoenix-based National Association for Information Destruction (NAID).

“There has been significant crossover between data destruction firms moving to medical waste disposal and vice versa as evidenced by Stericycle’s purchase of Shred-it a couple of years ago,” Johnson says.

In the late July 2016 announcement of MWMA’s inception, the group said while it is a standalone organization, “it has a strong crossover appeal to the secure destruction industry due to the large number of members entering that business as well as the potential for common regulatory overlap under evolving HIPAA (Health Insurance Portability and Accountability Act) requirements.”

MWMA has 75 members as of late September. Made up predominantly of service providers, Johnson says the remaining members are industry suppliers and medical waste practitioners working for health care organizations, among other groups. The association also recently added its first member from Australia, “hinting to the fact that what we are attempting will gain traction globally,” Johnson says.

Medical waste mostly includes hypodermic syringes, disposable medical devices, bandages, swabs, fluid drip bags, colostomy bags and catheters, tissue and blood samples and body parts. Hospitals are among the largest generators of medical waste. Others include veterinarians, dentists, labs, clinics, hospice shelters and nursing homes.

Johnson says regulated medical waste collection has grown substantially in the last three years, responding to what he says are “growing customer needs in the absence of competitive options.”

Challenges come to light

The secure destruction industry has seen much change over the years. From rapid growth to high levels of competition followed by consolidation and a tighter focus, secure destruction companies have had to adapt to survive.

As Richards says of Richards & Richards, “The company 15 years ago is not the same company that it is today. And I can assure you that in 15 years the company that we have today we will not have then.”

The industry is still in the phase of consolidation and tightening its focus on programs and services with stronger margins, says Erik Brown of American Shredding in Salt Lake City.

American Shredding started up its first mobile paper shredding service for documents and hard drives in August 2005. In the 15 years since, Brown says there is now an increased level of understanding of how to be efficient, increase margins and grow relationships with customers beyond the basic shredding service offering.

While American Shredding has not gone down the path of medical waste collection, Brown says he can see how providers could find it to be a worthwhile venture. However, it is a risk and a challenge.

“At this point, servicing large hospital groups offers a very narrow profit margin for document destruction alone,” Brown says. “By combining the shredding services and medical waste services, it allows those companies a chance to increase efficiency in service and raise margins.

“The big challenge that can be impossible in some cases,” he continues, “is converting the mindset of hospital administrators who believe the safest way to shred documents is on-site.”

The service company must convince hospitals that off-site shredding is a safe option and must be able to provide cost savings to justify the change, Brown says.

“With the high risks associated with HIPAA regulations, many health care groups have policies in place that require on-site shredding,” Brown adds.

Lake Forest, Illinois-based Stericycle, which acquired Shred-it in late 2015, has realized this hurdle. (Stericycle declined to be interviewed for this feature.)

In the June 2017 Recycling Today article, “Coming to maturity,” available at www.RecyclingToday.com/article/coming-to-maturity, Managing Editor DeAnne Toto describes this move: “While Shred-it was founded based on an on-site service model, its current owner is trying to move the company to an off-site model. In an April 28, 2016, conference call to discuss the Stericycle earnings report for the first quarter of 2016, Brent Arnold, executive vice president and chief operating officer of the company, said Stericycle had reassessed the timeline for this conversion. ‘While several regions have successfully made this conversion, the time to convert each region is taking longer than previously anticipated,’ he said.”

One source points to Stericycle’s stock: Prior to purchasing Shred-it, the medical waste management provider’s price per share was nearing $150. Sept. 22, 2017, Nasdaq shows stock worth $70.34, less than half of what it was two years ago. An Oct. 23, 2015, MarketWatch report, “Stericycle tops S&P 500 losers on weak quarterly results” shows Stericycle’s shares stumbled 21 percent to $118.46 as of that date.

The 2015 MarketWatch article reports, “Stericycle said late Thursday [Oct. 22, 2015] its third-quarter earnings per share slumped to 47 cents from 96 cents a year ago. … Revenue rose 7.6 percent to $718.6 million but undershot the $735 million expected by Wall Street.”

Richards says Stericycle’s entry into the secure destruction market is what helped to encourage his company also to invest in it.

Richards explains, “It’s an industry that is dominated by one player and the industry is not being served well by that player, according to some of our clients. Some of our clients are their clients.”

He says that a casual conversation turned into a long discussion. This eventually led to the idea of collecting medical waste. When talking with a close friend that is a doctor, Richards says he offered the idea of Richards & Richards collecting his office’s medical waste. “Turns out he’s talked to his buddies in that building, and we have several clients lined up and ready when we’re ready to pull the trigger on it.”

Richards says a lot of his company’s potential medical waste customers already are clients of Richards & Richards.

Figuring it out

Working with hospitals on the medical waste side is the main reason Scott Fasken, founder of Colorado Document Security, Grand Junction, Colorado, does not want to get into medical waste collection. Colorado Document Security works with 10 hospitals for document shredding. When it comes to medical waste collection, Fasken says, “I don’t need the headache.”

He recognizes that medical waste collection can be profitable. “It’s going to be a good growth area,” he says. He also says he has a number of friends in the industry who have had success adding this service and have done well.

For secure destruction companies considering this sector, MWMA’s Johnson has some advice. “The decision to diversify into medical waste disposal services is a very personal one and depends on many factors, including bandwidth, talent [and] the market conditions in their locale,” he says.

For Nate Segall, owner and president of Toledo, Ohio-based AccuShred LLC, it’s all about the regulations. He says he would prefer to stick with what his company knows best: serving as a high-security information destruction company.

“Medical waste disposal is too heavily regulated for us to dip our toes in that market,” he says.

Regulation is one challenge Richards & Richards has faced. Zoning is another. Insurance is yet another.

The company is working through permits and “a myriad of things we have to go through,” Richards says, including adding a new location for processing.

“We can’t put it in our building here,” Richards says of medical waste processing. “It’s perception.”

Medical waste processing should be in a highly industrial area, he says. In addition, there is city, state and federal permitting to deal with. The most difficult issue to manage is the state compliance, Richards says. “They want to know that you’re handling everything properly.”

Richards describes the process of collecting medical waste in plastic bins. After transporting the collected containers to the processing facility, the bins are opened and their contents are dumped into a stainless steel cart. The autoclave can accept up to four of these carts, Richards says. The carts are pushed into the pressure cooker autoclave, it’s sealed up and for one hour at 275 degrees at 75 pounds of pressure, the medical waste is processed. “All the plastic in there has dissolved,” Richards says. It is then hauled off and landfilled.

Richards says he is looking forward to expanding the company’s service offerings as well as adding to its sales team.

“Stericycle has opened a window of opportunity so wide, it’s going to allow a lot of people in a lot of cities to go into this,” Richards says of medical waste collection.

Here’s to the next 15 years.

The author is associate editor of Recycling Today and can be contacted via email at mworkman@gie.net.