We all know that capital dollars are scarce for purchases of needed equipment and technology at all healthcare organizations. What if you could squeeze out, on average, 18% more capital dollars from your hospital’s budget that could then be made available for additional purchases? Would that help ease the strain on your capital budget?
Here’s how it works! Instead of bidding a capital item by its manufacturer’s name, product number and description, you would, in its place, bid the capital item by its functional specifications (i.e., wireless nurse call system for 22 nursing units to include staff emergency notification, call reports, corridor lights, egres alerts, and bed exits to staff pocket pagers.). You would then send this functional spec to all qualified nurse call system vendors, who will then provide you with their functional alternates as opposed to just one unchanged bid .
This is the missing element (functional approach vs. traditional bidding) in capital purchases that is holding back huge savings for hospitals, systems or IDNs! By accepting the specifications of your department heads and managers as immutable or unchangable, your healthcare organization is losing the opportunity to source new vendors that can provide you with equal or better equipment or technology at dramatically lower cost.
Another example of this powerful technique was recently brought to my attention by a client who was purchasing new patient room furniture (bedside cabinet, visitor seating and overbed tables) for their hospital, wherein they documented a saving potential of 26% by accepting the lowest qualified “functional” bidder as opposed to the furniture manufacturer that their nursing staff had recommended for this purchase.
Why isn’t everyone doing it? The one thing that is holding back hospitals, systems and IDNs from employing this “functional” approach to capital buying is that their department heads and managers don’t want to look at lower cost “functional” alternatives. They fear change of any kind, even if it obvious that they are paying more than they should for their capital purchases.
You can easily solve this challenge by bidding their spec and then a “functional” spec at the same time. This is exactly what our client did who was buying patient room furniture. Then they had their nursing staff evaluate the other vendors who bid on their “functional” patient furniture specifications. The result was that their nursing staff couldn’t, in good conscience, ignore a 26% savings for equal or better patient room furniture.
The secret to this “functional” approach to capital buying is to source lower cost alternatives to what your department heads and managers are recommending on their capital purchases requisitions. Once they see the savings, few if any of your customers will disregard them or reject them out of hand. Most, in fact, will accept them and applaud you for your efforts.
Robert T. Yokl
Chief Value Strategist
Strategic Value Analysis® in Healthcare