Eight Tips for More Strategic Sourcing in Healthcare
One problem with bringing digital transformation and other positive change to strategic sourcing in healthcare is knowing where to start. That's even more of a challenge for new supply chain leaders. When it comes time for an important contract renewal, they have to start the project with questions like these:
- What did we have when I started?
- What are we going to get while I'm here?
- Can I prove it?
The answers are out there. It’s a matter of finding them.
Real-World Success in Strategic Sourcing Transformation
One new vice president of supply chain successfully launched a strategic sourcing transformation, starting with a new joints contract. He was part of a large nonprofit health system serving over 80 communities from over 400 locations. The system’s physicians collectively do thousands of joints, representing millions in implant spend.
The rest of this blog covers the problems the health system faced with the joints contract and how they overcame them. You’ll find eight good tips for strengthening your strategic sourcing practices around implants and medical devices. The recommendations are based on the real-world experiences of this healthcare system.
Outdated Sourcing Workflow, Staff Bandwidth Cause Problems
The supply chain faced lots of challenges when it came to revamping the clinical spend process. For one thing, the joints contract hadn’t been renewed in three years, and last time it didn't go very well. That experience left the supply chain apprehensive about sharing data with busy physicians and making practice-impacting recommendations.
There were other problems as well:
- Turnover left SCM poorly equipped for data management, analysis and engagement.
- Historically the SCM department lacked good information about their current state.
- Siloed thinking and cultures created roadblocks across their facilities.
- Suppliers had the upper hand in engagement with clinical staff.
The eight best practices described below helped turn the strategic sourcing problems around.
Tip 1 - Sourcing services for staffing gaps, data for knowledge gaps.
Health systems that need to renew a contract, but don’t have the staff for it (either due to lack of skills or lack of bodies), have a couple of options. The supply chain leader might choose to extend the renewing contract as is, but a more effective option is to outsource to strategic sourcing services to professionally manage the renewal.
In this case, the organization chose to partner with external strategic sourcing experts who in turn worked with Curvo enriched data and spend management platform.
Tip 2 - Walk before you run. Start with item master basics.
For supply chain VPs, directors, managers, analysts and others, the most important thing is to have the facts straight about your medical device parts. You might not get a second chance with skeptical clinician audiences if poor data trips you up.
This means building and maintaining a clean, current item master with these basics:
- Correct department numbers
- PO dates
- Unit prices
- Unit of measure
- Facility identifiers
- Surgeon names
Before doing anything else in a contract renewal, someone must gather this information and make sure it’s correct. That’s another reason Curvo Data Enrichment was part of the contract solution for this healthcare enterprise.
Tip 3 - Data enrichment vital for constructive, actionable insights.
The vice president turned to Curvo for enriched data and an established consultant to put data to work to implement the contract. (This model allows data enrichment consistently at scale for the many implant and PPI contracts SCM must do in a year.)
Cleansed data relevant to the joints contract brought insights like these together in one place:
- The dollar value of hardware per case or hip seen as a total hip
- Average cost for a given construct or hips as a grouping of supplies
- Colors representing suppliers to compare their share
Tip 4 - Think of sourcing outreach as building political capital.
Whether outsourcing a contract renewal or managing the process in-house, the product information has to be reliable because it generates political capital for the project. You want to create an appetite for change, and that means you’re relying on a trade. You're giving clinicians something in return for them caring about the data-driven clinical spend story.
In the case with this healthcare system, a “report card” showed doctors insights about how they actually used certain implant devices, and the physicians valued this information. The doctors wanted to know if they were $1,000 higher than the average doctor in their hip joint implant, and they wanted to know why. They also wanted to know what to do to fix it for the good of the organization.
Download a copy of this case study to share these strategic sourcing best practices with your colleagues.
Tip 5 - Set data-driven goals.
“When I set an 80% outreach goal for the red vendor (a specific device supplier), it was because I knew we would have to pound them,” said the supply chain leader. “We can really take it down into those very detailed levels of knowing.”
In this case, the vice president soon learned:
- Who were his top 10 surgeons by device use
- Which entities were better performing and aligned around contracts
- Which needed more resources, support or convincing
Tip 6 - Be motivated by positive engagement.
Taking what he’d learned, the executive met with every chief medical officer, chief nursing officer and surgeon group performing these procedures – all within a two-month timeframe. Why? Because he believed in the story the data told.
The Supply Chain VP wasn’t just motivated by the fact that he saved his organization $4 million, and that the number one device supplier was locked out as a sign of solidarity. He cared that hospitals in the health system felt someone was paying attention to them, and that they were getting something back. Some hospitals and doctors said no one had ever reached out. The physicians backed him because they had faith in the information.
Tip 7 - Be a confident presenter.
To be honest, some clinicians may be dismissive of the data no matter what, and supply chain leaders should expect a little of everything from clinician responses. That makes it even more important to be fully confident in your story and to reach out to as many clinicians as you can.
Being assured starts with trusting your data, but it also requires a solid presentation. This valuable advice comes from those who have been through it: Rehearse your contract renewal story. Although presenting to a skeptical group can be one of the toughest parts of the SCM job, the payoff is worth it in so many ways.
Tip 8 - Invest in the accuracy of your data-driven story.
By investing in the accuracy of the contract story, and telling it professionally and with clarity, the supply chain leader reaps organizational benefits that include:
- Greater entity response
- Stronger staff enthusiasm
- Productive physician engagement
- Leverage with supplier community
- Tighter contracts that don't leak
If it’s time to really get serious about strategic sourcing and data enrichment, start with a Curvo test drive.