Ray Collis

Taking Hospital Procurement To The Emergency Room

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Before examining some of the strategies to tackle hospital procurement, let’s examine what makes hospital procurement different. 


The Special Requirements of Hospital Procurement

1. Few physicians see procurement as a key success factor for their hospital or practice.

Indeed procurement probably comes with a set of negative associations in many hospitals – bureaucracy, administration and obstruction.  Changing attitudes towards procurement and winning trust is a key first step.

2. Physicians are not business men – few have any formal business training and fewer still have a profit sharing scheme that rewards them for saving their hospitals money.

Changes in procurement must be explained before they are enforced.  Collaboration and communication are key.

3. Hospital supplies are bought differently.  That means in a way that maximises availability when needed as opposed to managing the cost of inventory or purchase price.  That is because physicians, nurses and others:

– Want the best medicines for their patients
– Read the research papers and want to adopt the latest techniques and apply the latest treatments
– Are also subject to vendor marketing and persuasion (f0r good and for bad)!

4. Buying hospital supplies is complex.  It is not just about cutting budgets and hard-balling suppliers for the lowest prices.

The objective as Schneller and Smeltzer put it has to be ‘to provide their patients with the best products at the best prices for the best outcomes’.

That means procurement must take a broader view of requirements to ensure:

  • Clinical efficiency
  • Design standards
  • Safety for patient and physician
  • Regulatory compliance
  • Patient outcomes
  • Ethical standards.

5. Spending Is Growing Fast

Procurement is all the more important because spending on drugs and devices is growing fast – indeed within 20 years it is expected to surpass the total spending of the entire healthcare system in the US say the authors.

Growth in hospital spending

Poor procurement within the hospital system is unsustainable.  As the authors point out ‘if we are ever to manage healthcare costs we must address the issue of the supplies that doctors and nurses order and use in treating patients.’

6. Hospitals don’t see their supply inventories as assets. 

They don’t see it the same way as a company like Dell for example which sees the efficiency with which it buys inputs and converts them into outputs (ie. computers) as being at the core of its business model.  This requires a mind-set change marrying quality of care with efficiency in terms of materials used.

So, hospital procurement is different and its special requirements must be recognized and appreciated.  However, the challenges it presents are not unique and it can learn from other sectors.

Take for example procurement, supply chain and inventory management for the aviation industry, where having the right parts in the right place at the right time is key to keeping planes in the air.

With that in mind let’s examine what principles of best practice procurement can be applied to the hospital value chain.


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