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By Kristen Barrett, Planning Consultant, Attainia Professional Service
With supply costs projected to outpace labour costs by 2020, hospital supply chain departments are focusing on their capital equipment expenditures. One significant area of focus is Physician Preference Items (PII). According to Definitive Healthcare, physician preference items constitute 40-60 per cent of a given hospital’s total supply costs. While physician feedback on supplies will always remain a central component in decision making, healthcare supply chain touches biomedical engineering, clinical engineering, clinicians, facilities, construction, and more. Effective decision making requires each stakeholder to provide feedback during the purchase process.
The cornerstone of a first-class equipment procurement initiative is a high functioning value analysis committee (VAC). Before the emergence of VACs, purchasing decisions were subject to influence by one or two key individuals. VACs are comprised of a diverse collection of individuals who are employed by the hospital. While they differ in size and composition, VACs typically include at least one of the following:
- Clinical staff who will be using the equipment
- Members of the hospital’s purchasing department
- Hospital supply chain managers
- Members of the hospital’s finance team
- Hospital administrators
- Risk mitigation specialists
- Clinical engineering specialists
- Facilities management and operations team
VACs meet on a regular basis to review equipment requests and determine whether the hospital can accommodate proposed devices and whether procurement makes financial sense. In addition to contributing to a standardised equipment purchasing strategy, VACs serve as a checks and balances system that prevents any single stakeholder or individual from single-handedly controlling the purchasing process.
The Greatest Challenge to Procurement Efficiency
Even with a robust equipment procurement strategy and the rise of VACs, today’s hospitals still face barriers in the procurement arena. Of all of the roadblocks in the supply chain management process, one of the most challenging barriers is a lack of equipment standardisation throughout the hospital and collaborative vendor vetting protocol. This typically stems from conflicting product preferences among clinical staff in different departments. Examples of this type of conflict include the following:
- A new staff member demands a different style of stretcher than the stretchers currently used in recovery, but research shows currently used stretchers could meet their requirements with addition of accessory
- Physician requests specific transport ventilator because they used that model throughout their residency, but current ventilators meet all clinical requirements for the facility.
- Medical equipment vendor works directly with physician to spec out equipment, but the equipment does not meet procurement standards.
- The monitors used by a hospital were supplied by four different manufacturers and accessories are not interchangeable
- Staff request for newest and highest-grade model of equipment as opposed to mid-grade model that meets requirements.
When a hospital purchases from a variety of different equipment manufacturers in an effort to satisfy the individual preferences of multiple clinical departments, the end result is higher expenses. Suppliers are less likely to extend package discounts to hospitals that do not purchase in bulk or with any consistency. Additionally, equipment servicing expenses are costlier because service contracts must be established for every manufacturer. Essentially, the hospital’s buying power is compromised due to a lack of consistent purchasing.
Building a thorough vendor procurement protocol requires collaboration between physicians, clinical engineering and sourcing from planning inception through long term strategic planning. A solid process ensures medical equipment standards are created and maintained.
Bringing in key stakeholders early allows both clinical requirements from physicians and standardisation from sourcing to meet specific criteria before making a purchasing decision.
Streamlining the Purchasing Process
Fortunately, stakeholders, managers, and hospital staff are beginning to recognise that a unified, streamlined effort is required to control costs and improve outcomes. Leveraging a well-organised capital equipment request and budgeting software is a key building block of successful hospital supply chain management.
Ideally, the software should make it easy for a diverse value analysis committee to identify why the equipment is needed and whether procurement would be cost-effective.
A well-organised request capital budgeting software should include the following elements:
1. Preloaded contact details for ease of submitting requests.
2.Robust catalogue that incorporates updated equipment categories and associated information
3. Vendor catalogue with concise contact information
4. Categories for financial and safety related benefits.
5. Supporting documentation to include cut sheets, specifications and reporting on previous success with the device.
6. Ability to attach and share documentation such as formal quotes, technical information and pro forma from vendors.
Utilising a tool to funnel information such as Attainia’s BUDGET offers a simplified method to:
7. Determine critical need
8. Simplify the review and approval by the value analysis committee.
9. Consolidate and standardise final requests
10. Create a pathway for review and approval.
11. Automated prompts to ensure completion of all requests.
Capitalising on GPO Contracts
“Group Policy Objects (GPOs) save hospitals and free-standing nursing homes between 10 to 15 per cent off their purchasing costs. Overall, this means GPOs enable hospitals to save up to $33 billion each year through lower product prices.” – Healthcare Supply Chain Association (HSCA)
GPOs are playing an increasingly critical role in controlling hospital purchasing costs. With GPOs saving hospitals billions of dollars annually, it is no surprise that 96 to 98 per cent of hospitals now use GPO contracts to facilitate their purchases. As noted by the HSCA, GPOs offer a number of valuable services that extend beyond volume discounts. They include the following:
- GPOs help hospitals navigate through an increasingly complex purchasing system
- They help eliminate medical errors by promoting equipment standardisation and product education
- GPOs provide a means by which doctors and other providers can evaluate new products and share feedback
With nearly every hospital in the U.S. now reaping the benefits of GPO memberships, suppliers have responded by adjusting their sales tactics. Specifically, they are proactively working with hospitals to standardise their equipment, offer package discounts, and help hospitals streamline their purchasing processes. Capital budgeting software should include a catalogue of capital equipment indicating whether an item is on contract to encourage leveraging GPO pricing.
The Key to Future Supply Chain Excellence
Building a collaborative VAC enables hospitals to ensure that stakeholders are able standardise equipment throughout a hospital. Hospital systems are constantly increasing scrutiny on cost efficiency, which is correctly driving systems to streamline their procurement systems.
The key to maximising cost efficiency is to introduce a user-friendly, software platform that can transform a hospital into a model of efficiency. This can be done by bringing together a single system so equipment planners, hospital systems, suppliers, and GPOs can successfully request capital equipment through a digital process such as with Attainia’s BUDGET software.