Who Cares About Total Cost of Ownership?

Feedback from attendees at the recent Healthcare Supply Chain Association’s annual Expo, “Fostering Partnerships and Cooperation Throughout the Supply Chain,” has been overwhelmingly positive. Attendees appreciate speakers, panelists, and presentations that provide at least one nugget of important information that attendees can take home, share and put to use as soon as they get back to work.

Although the Expo was reportedly the last big industry meeting of the year, overall attendance was up, especially among first-time attendees, and the sessions were very well-attended.

The opening session highlighted the ways in which HSCA has partnered with the Healthcare Industry Supply Chain Institute (HISCI) and others to create opportunities to accelerate the healthcare contracting process through collaboration. For example, HSCA and HISCI completed work on a Best Practice “roster,” which a majority of GPOs now have posted on their websites. The model roster includes uniform terms, information, and numbering that helps suppliers and distributors track sales in a more accurate, efficient, timely, and cost-effective manner. Both groups plan to continue working together on additional aspects of the roster in the coming year.

HSCA’s Committee on Healthcare e-Standards (CHeS) played a prominent role at the Expo, and helped deliver the message that GS1 holdouts are now in the minority. Through the work of the Committee and others, the number of hospitals ready to transact business using GS1 standards has dramatically increased, from 500 in July 2011 to 3,771 in 2012. This number is expected to continue to rise, and CHeS will begin reaching out to suppliers to increase their uptake in 2013.

Keynote speaker Senator Bill Frist, MD, former U.S. Senate Majority Leader, predicted a revolution in the healthcare industry within the next 10 years. “The revolution will be consumer-driven, powered and dominated by consumers, and enabled by unprecedented connectivity,” said Frist.

Additional Expo sessions included: “The State of the Industry: Perspectives from GPO Executives,” “Accountable Care Organizations,” “Exploring GPO Sectors: Trends, Issues and Best Practices,” “Contract Administration and Data Standardization,” “An Updated Outlook from IDNs,” “Washington: An Insider’s Look,” “Supply Chain Snap Shot,” and “Meet the Press.”

The big question
The final session, “Strengthening Ties Between GPOs and Suppliers,” included an instructive exchange about total-cost-of-ownership between a GPO representative and a supplier during the question-and-answer period.

“When you’re a supplier with a new product and you try to sell [total cost of ownership], eyes quickly glaze over and the conversation inevitably erodes into a discussion about price and price trumps [total cost of ownership],” said the supplier.

“Suppliers need to know that from where [GPOs] sit, product benefit claims made by new suppliers are a dime a dozen,” responded the GPO representative. “We hear it every day.

“If I were a supplier, I would be doing everything in my power to build a highly differentiated value proposition – something designed to get our attention. Something novel that recognizes that I see salesmen hawking ‘the latest and greatest’ everyday. [P]erhaps a creative presentation – which provides me with clear, concise, documented evidence of [total cost of ownership] vs. the typically well-intended, but unsubstantiated claims – would be a great start. Perhaps an actual plan that spells out the sought-after collaboration vs. a commitment to figure it out later.

“As discussed earlier today, we can’t even get some of our would-be suppliers to complete our standard-issue RFP,” the GPO rep said.
The exchange was truthful, insightful and maybe worth the price of admission.


Curtis Rooney is president of the Healthcare Supply Chain Association, www.supplychainassociation.org.

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