Straight Talking

One contracting executive is upfront with his vendors – and he expects the same of them.

Tim Ingram makes no promises to his vendors, except this: He’ll talk straight with them.

The director of materials management at Longmont United Hospital (Longmont, Colo.) is adamant about maintaining open lines of communication and being honest with vendors. “For us, the biggest issue is building collaborative partnerships with our vendors,” he says. “We have plenty of vendors to work with, but only a few partners.” By partner, he’s referring to vendors that are willing to be flexible and adapt to an ever-changing market. “Things change, so we need vendors that can be fluid,” he explains. “Every patient is different, and it’s difficult to monetize each one.” This makes it especially important to sit down with vendors and negotiate items, particularly the high-priced, complicated orthopedic and other physician preferred devices, he points out. “These items comprise about 45 percent of our total spend,” he adds.

Ingram manages $34 million in spend for Longmont. He handles all of the hospital’s contract management and data analysis, and he oversees customer analysis, cost comparisons and requests for proposal. He also manages inventory for three departments, including the O.R.

Great vendor relationships rest on great relationships between the materials management department and Longmont United’s physicians and surgeons, nursing staff and department directors, Ingram says. “One of the biggest mistakes [contracting executives] make is not being honest with their surgeons and vendors,” Ingram continues. “The more I associate with surgeons, nursing staff and vendors, the more I can see they look for this. I think the fact that my vendors see I keep my word has contributed to reduced supply costs.” Sometimes standardizing products is a good way to go, he adds. But, when surgeons, nurses and clinicians strongly believe certain products deliver the best care, he accommodates them. Indeed, Ingram sees his role in the care team as “maintaining a sense of relevancy” by keeping abreast of new technology. “If you stop learning, you can’t lead,” he points out.

It’s all in the data
Without accurate data, it can be difficult for contracting executives to gauge whether they are spending too much on products and supplies. If this was at one time a problem for Ingram, it no longer is. About a year ago, he and his team began using VHA’s PriceLYNX™ for both contract and noncontract items, he says. “We provide VHA with our spend, whether contracted and not,” he explains. The software program benchmarks the prices Longmont United Hospital pays for different items against that of about 900 other acute care facilities, enabling Ingram to better understand market values. In addition, he can:

  • View price performance by vendor, manufacturer and/or UNSPSC.
  • Evaluate weekly updated pricing information to identify cost-saving opportunities.

“By breaking down the information provided by the program, we can see how our spending compares with that of other hospitals about the same size as ours,” he continues. Because the program doesn’t provide the names of hospitals in its database, it does not violate any transparency rules, notes Ingram.

“Sometimes the vendors we work with are surprised to learn that we are paying so much for certain items,” he says, noting that the program has enabled him to catch several overcharges. In one case, a vendor wrote Longmont United Hospital a check for $120,000, which more than paid for the PriceLYNX program, he points out. Better data means better negotiating tools, he explains. Indeed, the program has enabled Ingram to whittle down some costs by as much as 20 percent – a savings of as much as $3 or $4 million over the life of a contract.

“When we first began using PriceLYNX, we were one of the worst spenders,” he admits. Today, Longmont United is substantially more proficient at contracting, he notes.

Working in real time
Ingram has discovered ways to boost internal efficiencies as well, saving his hospital substantial inventory costs. In fact, one of the most rewarding projects he has tackled in the last year has been to convert the hospital’s O.R. inventory from a manual one to an automated one. For an inventory valued at $1.5 million, it didn’t make sense not to make the transition, he notes. And, yet, it was clear to Ingram that Longmont’s O.R. inventory was overstocked with the wrong products.

With the old system, “we were challenged by running out of supplies, [managing] Fed Ex deliveries and working with vendors,” Ingram recalls. “So, I had the hospital materials manager help [convert the O.R. inventory] into a perpetual system and brought in two full-time staffers to manage it. Our goal has been to reduce the O.R. inventory value by 25 percent. Any time you have a manual inventory system, you overstock.”

Indeed, the new system helps materials management be more proactive in tackling challenges, such as unscheduled procedures, and avoiding stock outages, says Ingram, noting that he looks forward to integrating the operating room’s information system with that of materials management. Once that’s accomplished, “when they pull case carts in the O.R., the O.R. system will automatically track this and my system will automatically reorder supplies,” he says. By comparison, the old process requires a couple of days for users to punch in the data and re-order products, he points out.

“The most rewarding part of [the system conversion] was that everyone involved understood how this could positively affect the hospital’s bottom line and improve their efficiency,” says Ingram. “It’s been a genuine collaboration.” In essence, the new system allows everyone to focus on the job they are trained to do, he adds. “Now that we are working in real time, I’m confident that we will get our stock levels down,” he says. “It’s our goal to have this completely manageable by the end of 2011.”

The healthcare landscape continues to change as contracting executives look for new ways to reduce costs, notes Ingram. Solutions such as VHA’s PriceLYNX and automated inventory systems are two options, he points out. But, more and more, “I see regional purchasing coalitions (RPCs) growing and becoming stronger,” he says. “RPCs are becoming more defined and compliance-oriented.

“They [enable contracting executives] to promise vendors market share, which does give them more leverage,” he continues. “[Providers] can move from the 50th percentile down to the 10th percentile. Purchasing coalitions will be especially helpful to small hospitals such as mine.”

About the Author

Laura Thill
Laura Thill is a contributing editor for The Journal of Healthcare Contracting.