When hospitals and healthcare providers take steps to modernize and streamline their operations, they often focus on how to make their service lines and medical record systems best in class. The area of supply chain typically has been underinvested, and yet it offers one of the biggest opportunities for making healthcare more affordable to patients, says Simrit Sandhu, Executive Director of Supply Chain at Cleveland Clinic.
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“The goal is to make sure that the right product for every patient and medical need is available, without compromising quality or affordability,” she says.
She notes that supply chain in healthcare faces some unique challenges not experienced in other industries. While the manufacturer of an Audi A4 knows every part that goes into building that vehicle, “when it comes to patients and their anatomy and myriad of health conditions, it isn’t that simple,” Sandhu says. At the same time, physicians have their own preferences and opinions about products. “We’re not building inanimate objects,” she says. “We’re helping caregivers effectively deliver the very best care to patients.”
Here are five lessons Sandhu has learned about negotiating for products in healthcare.
- Don’t focus on price alone. Negotiators need to consider quality, value and the usage patterns of physicians to purchase supplies that the hospital will actually use – not what they think it will use. “The most effective lesson I’ve learned is that negotiating on price alone is a lose-lose proposition,” Sandhu says. “You could buy the cheapest car on the planet, and the physician would use a Mercedes Benz every time, but at the end of the day you purchase what’s best for your patient.”
- Bring physicians into the process. Care providers will resist using products if they feel they are being pushed on them – and if they are products they don’t prefer or weren’t trained to use, Sandhu notes. Her department created a leadership level of medical directors so that purchasing decisions within each service line are guided by clinical experts, with Supply Chain providing product information and data that facilitate good decision-making. The hospital also appoints “physician champions” to help introduce new products and influence choices and behavior at the point of use. “This has led to a truly engaged physician model – one where physicians do not see Supply Chain as doing something to them, but rather doing something that creates more value for their patients.”
- Present a united front. Another benefit of working closely with physicians is the strong foundation it provides when negotiating. Knowing that purchasers will stand by the decisions made by clinical staff brings a credibility to the negotiation process, Sandhu says. “The vendor community understands that sitting by your side is the leader of your service line and the physician who empowers you to make that purchasing decision,” she says.
- Build a team of specialists. Supply Chain employees are often generalists who are tasked with serving a very specialized set of end users, Sandhu says. After noticing that procurement officers were finding it challenging to understand physicians’ needs, she organized her team so that they are assigned to specific service lines and product types. By developing specialty areas, sourcing and procurement experts are better able to work with physicians to understand value analysis, appropriate use and product utilization guidelines. “These are all dialogues that typically did not happen in this space, because Supply Chain employees and the users of their service were not speaking the same language about products,” she explains.
- Invest in data systems. Sandhu’s latest project is to implement the use of radio-frequency identification (RFID) smart labels (or tags) on all products in clinical use at Cleveland Clinic. Historically, most supplies in procedural areas have been managed by hand by healthcare staff. Now, by tagging products and tracking them electronically, hospital supply managers can monitor their use in real time. “Eventually, you create efficiencies by understanding needs and true supply and demand forecasts,” she says.
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