How Saint Francis Health System leverages enterprise-wide coordination and data-driven insights to improve purchasing, streamline operations, and free hospital space for clinical care.
Centralized contracting is gaining traction across health systems as organizations look to better manage costs, standardize purchasing and align decisions across increasingly complex networks. At one Oklahoma-based IDN, leaders say the shift has been both deliberate and transformative over the past three years.
Phillip Smith, Executive Director of Supply Chain at Saint Francis Health System, said decentralized contracting often leads departments to make decisions in isolation, without considering enterprise-wide impact. That approach can limit negotiating power and obscure opportunities tied to scale.
“When departments contract independently, they often don’t consider the health system as a whole,” Smith said. As systems expand through mergers and acquisitions, like Saint Francis’ network that includes multiple hospitals across the Tulsa region, coordinating purchasing becomes even more critical.
Smith noted that individual departments typically lack access to sophisticated benchmarking tools or deep contract analysis capabilities. As a result, negotiations may rely on historical pricing rather than current market conditions. Centralized contracting teams, by contrast, can aggregate data across the enterprise and benchmark against national standards to secure more favorable terms.
Tools and data sources, such as those offered by GPOs, can further strengthen this approach by providing visibility into pricing trends and performance benchmarks. Smith emphasized that without reliable data, organizations risk negotiating without a clear understanding of achievable rates.
Balancing centralization with local flexibility remains a key consideration. Smith said successful models pair contracting expertise with clinical insight by embedding supply chain professionals alongside physicians and departmental leaders. This collaboration ensures that decisions reflect both financial goals and clinical realities.
“Contracting staff must participate in physician meetings and surgical strategy sessions to understand the key players,” he said, adding that aligning physicians across multiple sites can be one of the most difficult aspects of centralized contracting. Sole-source agreements often yield the best pricing, but achieving consensus among physicians on standardized products can be challenging.
Value analysis has also evolved into a more strategic function under centralized models. Rather than focusing solely on individual contracts, teams are engaging physicians in broader discussions about utilization, product standardization and cost-saving opportunities. Smith cited examples where introducing alternatives – such as disposable scopes in certain procedures – can influence vendor pricing and drive more favorable agreements.
Physician engagement, he added, is generally positive when approached collaboratively. Employed physicians, in particular, tend to be receptive when presented with data-driven strategies that demonstrate both cost savings and alignment with clinical outcomes.
Overall, centralized contracting is enabling health systems like Saint Francis to move beyond transactional purchasing toward a more coordinated, data-informed strategy that supports both financial performance and clinical priorities.
Reclaiming space for clinical use
Alongside centralized contracting, Saint Francis Health System has also rethought how it manages inventory and distribution, culminating in the development of an off-site distribution center designed to improve efficiency, resilience, and space utilization.
Smith said the decision was driven by limitations within the system’s original infrastructure. “When I joined Saint Francis, we had limited on-site storage – a few days’ supply in a 10,000-square-foot basement warehouse for a 1,000-bed hospital,” he said. In his view, that constraint made it difficult to maintain adequate inventory, particularly as expectations for supply resilience increased following the pandemic.
“Hospitals don’t have the luxury of excess space,” Smith added. “That space is better used for patient care.” By moving distribution offsite, the organization was able to expand its storage capacity while freeing up valuable hospital real estate for clinical functions such as dialysis services and simulation labs.
The transition required investment in logistics, including transportation and staffing, but Smith emphasized that the long-term benefits outweighed the costs. “The value of reclaiming hospital space far outweighed the cost of running the warehouse,” he said. The off-site model also supports better inventory continuity and positioning across the health system’s facilities.
From a supplier standpoint, Smith said the shift did not create friction. “Supplier relationships didn’t change at all,” he noted. “Off-site distribution actually consolidated receiving and improved efficiency.” He added that the broader industry has largely moved in this direction, with many vendors already equipped to support outsourced warehousing models.
Many distributors provide off-site distribution services, sometimes operating facilities more cost-effectively than hospitals can internally.
Looking ahead, Smith said the next step is to determine which other Saint Francis facilities can be supplied from that warehouse. Eliminating the on-site storeroom in other smaller hospitals will continue to add efficiency to the system. “We can carry more product, reduce touches and save on freight by storing product in bulk as much as possible,” he said.
At a broader level, Smith pointed to ongoing challenges shaping supply chain priorities across the industry, including cybersecurity threats, vendor backorders, and supply disruptions. “Maintaining strong vendor relationships is critical,” he said. “You have to ensure surgeries – the hospital’s revenue engine – aren’t interrupted.”
He also noted that workforce stability remains a key concern. Retaining skilled supply chain professionals requires a combination of competitive compensation, flexibility, and opportunities for professional growth. Meanwhile, emerging technologies, including artificial intelligence, are beginning to play a larger role in contract intelligence and operational optimization.
“Across everything we’re doing – centralized contracting, off-site warehousing, and vendor consolidation – the goal is the same,” Smith said. “Be proactive, stay efficient, and support the clinical mission without interruption.”