The Healthcare Hub

GHX provides a wide range of perspectives on how greater collaboration and visibility across the supply chain can improve both clinical and financial performance in healthcare.

Thursday, September 13, 2012

Suppliers Willing to Pay for Better Customers

There was more evidence this week that suppliers recognize the value in helping hospitals and healthcare systems become better customers. In fact, some are even willing to pay for it, a point that has not gone unnoticed by some savvy healthcare providers.

Take Ed Hardin for example. Vice president of supply chain management at Christus Health, Hardin told an audience at the Fall IDN Summit about a new partner advisory board his system has established. The 15 carefully selected vendors, some of whom are competitors, have been given three specific and rather unique assignments:

  1. To help draft Christus draft vendor management policies and procedures
  2. To collaboratively develop proposals for new ways of doing business with Christus 
  3. To help Christus understand how to be a better customer and business partner

On that last point, Hardin admitted, his system is not always the easiest to do business with, and that can cost suppliers. His hope is that if he can help a vendor reduce operating costs, maybe that vendor will share some of the savings with Christus.

This concept worked for BJC HealthCare when it welcomed Cook Medical into its facilities to find out what happens to Cook’s products after they arrive at BJC. One outcome was improvements to packaging to reduce product breakage. With the changes, Cook was able to lower its costs and did just what Hardin envisions for his own organization: Cook shared some of the savings with its customer.

I was also surprised to find out that paying for better customers is not necessarily a new concept, just one that seems to be catching on. Buddy Bradley, VP of Corporate Accounts for Owens & Minor (O&M), says his company rewards customers for incorporating business practices that the distributor has determined lower its costs to do business: things like placing orders electronically vs. manually, increasing the number of lines per order, and reducing the total number of purchase orders. Like most distributors, O&M charges customers on a cost plus basis, but if customers adopt the best practices, they can lower their overall distributor payments. Bradley says approximately 300 IDNs participate in the program, which has been around for 15 years.

Finding new ways of doing business was high on the list of topics discussed, both formally and informally, at the IDN Summit, which concluded today. The semi-annual event is best known for its Reverse Expo, where, instead of suppliers setting up booths and hoping hospitals will stop by, providers staff the booths, giving suppliers a willing but captive audience. Supply chain had a prominent place on the agenda, with nearly half of the first days’ breakout sessions focusing on, or at least referencing, the supply chain. That’s just further testament to the rising stature of the supply chain among the nation’s leading healthcare delivery systems. 

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Karen Conway

Vice President, Healthcare Value