How healthcare sourcing compares to industry
By Tyler Loeb
This past November marked my five-year work anniversary at Jefferson Health, all within the supply chain group. I have now been in the workforce for 10 years, in somewhat varied roles, but all with a focus on contracting and sourcing. The time has been split evenly in and out of healthcare, with the five non-healthcare years spent sourcing restaurant supplies and on-board airline products. Ten years seems like a good time to reflect and think about some of the similarities and differences of the two.
Here are five observations of mine based on the five years I have spent in healthcare.
No. 1: Everybody in healthcare really cares about patients
Physicians, nurses, and clinicians are known for their hearts. Empathy for patients is what connects healthcare workers across disciplines. (Moudatsou et al.) What I found surprising when I transitioned into healthcare, and what I continue to see today, is the level of concern that everyone has for patients, not just those in patient-facing roles. Across all departments, patients come first.
Connecting the dots from supply chain to patients is straight-forward. The devices we source and procure are used by clinicians directly for patient care. Every dollar we save through RFPs can be invested elsewhere to ensure high quality patient care. The devices we cut purchase orders for, receive into the storeroom, and pay bills on are used to better the lives of our patients.
Nowhere is healthcare empathy more on display than now, during the COVID pandemic. Health systems across the country have come together to solve problems and treat patients in an unbelievably challenging environment. Frontline healthcare workers are rightly regarded as heroes. They are finally getting the recognition they deserve for the risks they have taken and hardships they have endured. But they are not the only staff putting in Herculean efforts. Countless supply chain staff have been fully immersed in the COVID fight, putting in long hours to ensure the healthcare heroes have the supplies they need. The empathy for patients shines bright in their efforts as well.
It is nice to come to work in pursuit of such a noble purpose. Undertaking sourcing initiatives to improve the in-flight experience or to bring innovative kitchen equipment to market just does not provide the same internal motivation for me. The scholarly research is clear that when work is connected to a larger purpose, employees are more motivated. (Zhang) As much as possible, we should link the patient factor to what we do in as a strategic sourcing/supply chain function.
No. 2: Supply chain and strategic sourcing require “range”
The book Range by David Epstein was published in 2019. It describes the concept of a “wicked world” where problems are not repeatable and the skills that are rewarded within organizations are those that connect concepts together. Things are changing so fast that it is almost impossible to find yourself in a “steady state” at any given time. Employees with range connect issues together and come up with creative solutions. More and more, technology is doing the technical and tedious work for us and it is up to the humans to be creative and draw connections between disciplines. (Epstein)
The wicked world certainly applies to the healthcare industry. In the past four years Jefferson has grown from three hospitals to 14. Our supply chain teams have come together into one department. The needs of our clinician stakeholders evolve. The vendor marketplace is constantly changing with new devices and companies. All these changes pose both challenges and opportunities for those in the healthcare supply chain. It is helpful to have wide experiences to draw from to put issues in context and to solve them.
Supply chain and strategic sourcing departments, both in and out of healthcare, naturally demand range from their employees. They sit in the center of all sorts of activities of a firm. We are involved in, and need skills for, contract negotiations, supplier relations, finance, operations, stakeholder management, distribution and warehousing, specific device knowledge (backorders!), and project management. No wonder Supply Chain Dive recently discussed how supply chain is an area with over-arching views of the enterprise that provide the right training for the C-Suite. (Mansoor)
No. 3: Value analysis is valuable
While Strategic Sourcing can drive incredible change on its own, it is most effective when it is able to leverage a formal, multi-disciplinary product review and decision-making committee that has the authority to approve or deny requests known as ‘Value Analysis’. The overall goal of Value Analysis professionals, according to the national Value Analysis organization AHVAP, is to serve as the primary investigators and facilitators of major product and practice changes. (AHVAP) This is an important function, and the relationships built through the VAC process support Strategic Sourcing role in driving standardization and managing cost
The process brings together stakeholders of the many varied departments that keep a hospital running. They all want the hospital to succeed, but sometimes have different views on how that should be done. Their focus and point of view are necessarily different. The VAC is where they come together, talk things over, and come to a decision- often serving as the “room where it happens.”
In my previous positions, the decision-making process was done by a group in name only. We had one or two people that needed to be convinced, and what they wanted was what happened. Well run value analysis committees follow a process that builds consensus. Concern for patients is the over-riding theme that guides the attempts to balance both the clinical and financial aspects of each decision.
The VA process supports network building, sometimes in simple ways, and the relationships and trust built through regular engagement with key clinicians pay off in the long run. I had an instance where I showed a physician how to submit a request to VAC. It did not take much time, but showing them how to submit requests on their own empowered them to proactively make additional requests. The physician was then prepared to show others in the department and support them. This interaction paid off on a future Strategic Sourcing effort where we were looking to standardize devices as part of an RFP. Because we had built a relationship over the VAC submission process, we trusted each other during the sourcing project and eventually had a successful outcome.
Apple has what they call a “functional organization”, where each function of the business reports directly to CEO Tim Cook, rather than separate business units divided by product or geography. The Apple method is described as “experts leading experts.” Each function has control over what occurs in their function, and the groups work collaboratively to make decisions. Leaders require deep expertise, immersion in the details, and a willingness to collaboratively debate. (Podolny and Hansen) This model seems to fit what Value Analysis Committees are trying to do. The members of the VAC represent wide and varied professions, each dedicated to the process, collaborating to make decisions. When the process is done well it can pay off in a big way for health care systems.
No. 4: Project management is communication
My previous roles did not include much project management. When we decided to sell a new cookware product, we set par levels for each of our warehouses and stores, determined the price points, and placed orders. Implementing a new product for the airline industry mainly consisted of working with the manufacturer to make sure they had enough production capacity and lead time to meet the demand needs. Healthcare is much different, with strategic sourcing and supply chain in the lead on most implementation projects. Coordination with internal logistics teams, distributors, manufacturers, clinical education, infection control, sterile processing, and the clinicians themselves puts supply chain in the middle of the action.
For the sake of our patients, no step in the implementation process can be overlooked or bypassed. Evidence is paramount for all healthcare decisions, and that carries over into the product implementation process. Stakeholders need to know how, when, and why something will be changing. Any changes need to be signaled well ahead of time and articulated in a way that makes everyone comfortable with the change.
Chip and Dan Heath are psychologists that have studied how to get people to change. Specific directives, including finding the bright spots of what is working, scripting the critical moves, and pointing to the destination play significant roles. Effective communication is at the heart of all of these. (2010)
A useful process and tool that we developed to build trust, engage stakeholders, and ensure strategic alignment for sourcing initiatives is a pre-RFP category review. These are quick presentations that communicate the important information needed to get a sourcing event started the right way. We bring all the necessary information together in one place so that we can have fruitful discussions and avoid misunderstandings among stakeholders. A typical presentation will include a current market-share breakdown, clinical and value analysis information, contract status, and benchmark pricing. After this information is communicated, the conversation undoubtedly turns toward RFP strategy and tactics, allowing stakeholders a chance to engage and take ownership for successful projects.
No. 5: Sales rep relationships are important
Dealing with manufacturer representatives are a fact of life for all sourcing managers. Healthcare seems to be a unique beast, however. The Institute for Supply Management certainly discusses good supplier relationship management techniques, (ISM) but those relationships are amplified in healthcare.
The differentiating factor for healthcare is that many reps are needed for procedures. They have intimate knowledge of their devices and assist clinicians in times of need. Clinicians have a willing ear if they happen to mention a new or upgraded device. Additionally, many times, the reps have more knowledge of hospital administrative processes than clinicians, giving them an outsized influence on the decision-making process.
At the restaurant supply company, I made recommendations for which products to purchase, and the ultimate decision was made by the president of the company. At the airline company, sales reps could lobby the on-board experience decision-makers, but since everything was customized per airline, it was difficult to have a plug-and-play product. Both scenarios make it harder for reps to influence the process.
We recently ran into a situation where a device company came out with a new, upgraded device. The device was smaller, lasted longer, and was easier to deploy – wins for both the patient and the clinician. As a sales tactic, company reps fanned out across our hospitals and showed the new device to our physicians without first talking to sourcing. Excitement for the new device put us in the awkward position of explaining to the physicians why the devices were not already approved, and how to gain approval. The reps pitted VAC and sourcing against the physicians, causing headaches for everyone involved.
With clear expectations and open communication, however, sales reps are a big help. During the implementation phase of a recent project, the reps were instrumental in educating staff and answering clinical questions, comforting those making the change. We lean on the reps to act as an extension of the sourcing team whenever we need to make a change. Collaboration benefits all.
For the most part, sourcing is sourcing – what changes are the products you are looking at. Stakeholder engagement, project management, negotiation skills, financial acumen, and supplier relationship management come into play in any industry. Healthcare is unique though, with nuances not seen in other industries. Taking time to reflect on the similarities and differences is a good way to remind myself why I chose healthcare and how I can look to improve.
- Association of Healthcare Value Analysis Professionals. 2018. AHVAP. 5 Jan. 2021 www.ahvap.org
- Epstein, David. Range: Why Generalists Triumph in a Specialized World. New York: Riverhead Books, 2019.
- Heath, Chip, and Dan Heath. Switch: How to Change Things When Change is Hard. New York: Broadway Books, 2010.
- Institute for Supply Management. CPSM Study Guide 1 Ed. Robert Handfield. Tempe: ISM, 2011.
- Mansoor, Shariq. “Talent Wars: Why the Supply Chain is the New Pathway to CEO.” Supply Chain Dive 1 March 2017. 6 Jan, 2021 www.supplychaindive.com/news/talent-supply-chain-success-CEO-COO/437092
- Moudatsou, M., Stavropoulou, A., Philalithis, A., & Koukouli, S. (2020). The Role of Empathy in Health and Social Care Professionals. Healthcare (Basel, Switzerland), 8(1), 26. https://doi.org/10.3390/healthcare8010026
- Podolny, Joel M., and Morten T. Hansen. “How Apple Is Organized for Innovation” Harvard Business Review Nov.-Dec. 2020: 86-95. Zhang, Kimberly. “How to Empower Your Employees to Do Their Best Work.” Entrepreneur 21 June 201