Editor’s Note: Hospitals and health systems continue to extend into ambulatory settings to achieve cost savings, maintain stakeholder satisfaction and achieve growth. As they do so, contracting executives are learning that the acute and non-acute markets are very different. Each has unique capabilities, rules for success and requirements for distribution, alignment/coordination, products, contracting, inventory management, technologies, support and geography. This article series aims to highlight the experiences and insights of health systems executives in this growing and important market.
John Frain has some advice for supply chain professionals whose hospital or IDN has just acquired some physician practices: Set yourself up for success.
“We try to focus on areas that are in our control,” says Frain, director of purchasing for Weill Cornell Medical College in New York. In other words, Frain’s team works to get those newly acquired practices the best pricing they can on products the physicians already use, rather than trying to force those practices to standardize on some product that is used in Weill Cornell’s acute- or other non-acute-care sites. “It’s enough for some of these practices to come under the Weill Cornell umbrella,” he says. “It’s a big step to tell them what products they should use.”
Standardization may occur…but later.
Bringing practices into the fold
Frain joined Weill Cornell two years ago after holding a variety of non-healthcare procurement, operations and revenue management roles with companies such as IBM, logistics company Purolator Courier, and media company Merisel. “I’ve got a diverse background,” he says. Coming to healthcare, Frain was quick to observe one thing: “Compared to the corporate world, there are many more vendors servicing the same space. That’s not efficient for the vendor or the customer.”
Weill Cornell has approximately 22 physician practices spread across New York, primarily in Manhattan. They employ about 1,135 physicians. “We’ve been acquiring practices and opening new facilities,” he says. “We’re definitely growing.”
When a new practice is brought on, a team from supply chain visits the doctors and staff to smooth the transition, he explains. They handle the outfitting of any needs the practice has, and they introduce the practice to the IDN’s prime vendors, in medical/surgical, office supplies, pharmaceuticals (e.g., vaccines), etc. Weill Cornell uses different prime vendors for acute and the non-acute settings to maximize physician satisfaction and reduce the “total cost” of product (i.e., cost of goods, cost of delivery, unit of measure and service to a given site of care).
Frain and his team know that consistency of products drives volume and lessens uniqueness. “Uniqueness costs money,” he says. “Having many different brands for the same commodity means higher costs for us and may lead to higher costs for the vendor, who has less volume and higher stocking costs if they are not accustomed to serving the physician office.” Even so, Frain knows that to drive standardization among newly acquired physician practices might be too much and lead to alienation.
For that reason, the purchasing team focuses on driving better prices for the myriad of products currently in use among Weill Cornell’s physician practices. “We’re not qualified to tell them what products they should use, but we are qualified [to get better prices] for the products they already use. That’s the first step. The second step is to get all the doctors to agree on certain commodities. That will bring additional savings.”
Weill Cornell is growing, and with that growth comes additional negotiating power, says Frain. “We’re acquiring practices,” he says. “And we just opened a new, 18-story research building. We have the power to negotiate great prices on products.”
Leveraging volume requires knowledge of product usage. That means gathering and understanding current purchases and prior usage history. “We want to get in front of that,” says Frain. Often, that is accomplished in partnership with non-acute suppliers who have been servicing the business. Knowledge and data are powerful, and having access to that data is critical, especially since the physician office space is different than what Cornell has been accustomed to on the acute side.