I don’t need to tell you that your healthcare organization’s capital dollars have precipitously shrunk over the last two years due to the effects of the great recession. A recent survey by Premier stated that, “Sixty-nine percent of healthcare representatives responding to the(ir) survey indicated that (their) capital budgets for 2010 remained flat or increased (somewhat) compared to 2009. Overall, 42 percent of respondents suggested an increase in spending versus 32 percent suggesting a decrease. For those whose budgets decreased or remained unchanged from last year, approximately 66 percent scaled back projects already in process specific to new construction/renovations and the acquisition of clinical and information technology.” As you can see from these statistics there is a slight thaw in capital expenditure buying this year, but capital expenditures haven’t risen to the levels that we were experiencing before the great recession. There is still not enough capital dollars to spread around!
That’s why I believe that supply chain professionals need to reinvent their capital equipment purchasing model so they can squeeze even more dollars out of their capital budgets to have additional dollars available to spread around. One way to do so is to reinvent your capital purchasing model. Instead of the conventional approach to capital buying, we advise our clients to go beyond traditional bidding to employ a functional approach to their capital equipment buying, which can increase their savings by 18% to 33%.
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, etc.). You would then send this functional specification 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 little known secret to obtaining better pricing on capital equipment!
The “Functional Bidding Model” is all about identifying ALL sources for your capital bids, not just the ones that your department heads specify on their capital requests. When you open up the door wide to all known and unknown bidders you immediately reap the benefits of lower pricing, better competitive intelligence and enhanced sourcing. This isn’t a theory, but a best practice utilized by hospitals in 42 states for thousands of capital equipment transactions annually, thereby sqweezing the last dollars out of their capital purchases. Isn’t it time that you too consider reinventing your capital bidding model to experience these big budget intensifying benefits?
Robert T. Yokl
Chief Value Strategist
Strategic Value Analysis® in Healthcare