Observation Deck / Binding View Spring 2004

We’re Watching You

It’s fascinating to watch an industry in transition. This month’s article on the relationships between medical-surgical distributors and IDNs – as well as HIDA’s report on the Distributor of the Future – illustrate some of the changes taking place in healthcare contracting.

Right now, the industry is caught between old ways of behaving and new ones. The old ways are the tried-and-true techniques of contracting – tough negotiating, chipping away at price, trusting no one and taking no prisoners. It’s an approach that has worked for years. And for many, it probably will continue to do so.

But for the first time, buyers and sellers have a real chance to step beyond that model. Modern-day information systems allow distributors and IDNs to become fully engaged with each other in new ways. No longer does either side have to fall back on warm and fuzzy terms like “trust” and “partnership.” Don’t get me wrong. There’s nothing wrong with those words. But they have to be backed up by solid data. And today, they can be.

So rather than fall back on simplified techniques such as cost-plus contracting, distributors and IDNs can advance to more sophisticated costing models, such as activity-based costing. Such techniques hold both sides accountable, because results can be measured today.

There’s something else happening in the contracting arena. Those in the providers’ “C” suite are becoming more aware of the impact that the supply chain has on their institutions’ well-being. And isn’t that a change? Now, no one believes that every CEO is going to stop focusing on such things as payer contracts, community relations, fundraising and the like. But the supply chain is at least on their list of things to consider.

What’s the impact of that? Those in the administrative suite have a unique vantage point. They can’t afford to get bogged down in the details of pricing. But they can look at the big picture, and that can lead to creative contracting and relationship-building.

It’s a fascinating process to watch.

Speaking of watching, we really enjoyed researching our feature on “15 People to Watch in Healthcare Contracting,” the first part of which appears on page 14. How did we narrow it down to 15? We asked you, the readers of this magazine, and we solicited dozens of executives from all sides of the business. We took input, and we exercised some editorial judgment as well.

Whether or not you agree that these 15 deserve to be watched, we hope you at least read about their unique points of view. And if you’ve got someone you think belongs on our list, let us know. We’re going to be watching the industry for a long, long time.

About the Author

Mark Thill

Mark Thill is the Editor of The Journal of Healthcare Contracting and has been reporting on healthcare supply chain issues since 1985. He is a graduate of Dominican University in River Forest, Ill., and he received a master’s degree in journalism from Northwestern University in Evanston, Ill.