Chapter 17:
Health Care Purchasing
and Supply Management
Purchasing and Supply Chain Management
3rd edition
Purchasing and Supply Chain Management, 3rd edition, Copyright © 2013, W. C. Benton Jr., All rights reserved.
Purchasing and Supply Chain Management 3rd edition, Copyright 2013 W.
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Content
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Inventory control
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The DRG System and Operating Cost
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Health Care Supply Chain
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Group Purchasing Organization (GPO)
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Opportunities in Health Care Supply Management
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Process Overview of Capital Equipment Acquisition
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Purchasing and Supply Chain Management, 3rd edition, Copyright © 2013, W. C. Benton Jr., All rights reserved.
The Health Care Industry
•
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Hospitals are complex organizations providing services
including:
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Inpatient treatment (nursing units), surgery, radiology, pharmacy,
laboratory
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Dietary, housekeeping, physical plant engineering, administration
Outlook
•
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Expected to grow and consume an even greater share of GNP
Challenges
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Uncontrollable nonsalary costs and declining profits
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Purchasing and Supply Chain Management, 3rd edition, Copyright © 2013, W. C. Benton Jr., All rights reserved.
Inventory and Health Care
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Inventory control
•
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An important component in supporting the objective of providing
patient care
The 2 primary functions of inventory (in the hospital
setting):
1.
To maximize supply service consistent with maximum
efficiency and optimum inventory investment
2.
To provide a cushion between the forecasted and actual
demand
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Purchasing and Supply Chain Management, 3rd edition, Copyright © 2013, W. C. Benton Jr., All rights reserved.
Complicating Factors Unique to Health Care
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Inaccurate demand estimations
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Complex patterns of the length of stay and patient mix (types of
patients and diagnoses)
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More accurate forecasts could be made by using DRG or CPP
related practices
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Communication is vital between:
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The practitioners (medical staff)
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The supply management function
However, communication has traditionally been difficult
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Hospitals as a set of “little fiefdoms”
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Purchasing and Supply Chain Management, 3rd edition, Copyright © 2013, W. C. Benton Jr., All rights reserved.
Complicating Factors Unique to Health Care
(cont.)
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Safety Stock
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High cost of stock outs unique to healthcare
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Classification of the stockout tolerances:
1)
Uselocation urgency
2)
Facilitylocation urgency
3)
Regionallocation urgency
4)
No urgency
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Purchasing and Supply Chain Management, 3rd edition, Copyright © 2013, W. C. Benton Jr., All rights reserved.
Operating Cost in Hospitals
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The DRG system
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A reimbursement system
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Flat rate reimbursement based on a patient’s diagnosis
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Based on specific diagnosisrelated groups (DRG)
Regardless of the associated costs
Under the DRG system, reduction of hospital operating
cost has become extremely important
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Purchasing and Supply Chain Management, 3rd edition, Copyright © 2013, W. C. Benton Jr., All rights reserved.
Hospital Supply
Management Trends
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Training and education have become a key priority
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Reduction in inventory levels is becoming less important
•
•
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More of the supply managers report to VPlevel upper
management
Including physicians in the materials acquisition process
has shown to reduce costs
More hospitals are establishing a corporate supply chain
management department
Eliminating nonmoving supplies by implementing a
stockless distribution service
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Purchasing and Supply Chain Management, 3rd edition, Copyright © 2013, W. C. Benton Jr., All rights reserved.
Health Care Supply Chain
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Characteristics:
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A prolonged costbased reimbursement system
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High buyer’s switching cost and dependence on a supplier
because of many buyers and few suppliers
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The performance criteria is based on hospital value for patients
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There are a variety of organizations that bridge the suppliers and
the hospitals
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e.g., group purchasing organization (GPO)
An oligopolistic environment with a relatively small number of
GPOs dominate the market
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Purchasing and Supply Chain Management, 3rd edition, Copyright © 2013, W. C. Benton Jr., All rights reserved.
Group Purchasing Organization (GPO)
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An organization created to leverage the purchasing
power of its member hospitals to obtain discounts from
suppliers
Current trends:
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Approximately 96–98% of hospitals utilize GPO contracts
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On average, 2~4 GPOs per facility
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Annually, more than $175 billion is spent through a GPO
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Purchasing and Supply Chain Management, 3rd edition, Copyright © 2013, W. C. Benton Jr., All rights reserved.
Money Flows Related to GPOs
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Purchasing and Supply Chain Management, 3rd edition, Copyright © 2013, W. C. Benton Jr., All rights reserved.
Opportunities in Health Care Supply
Management (cont.)
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Areas of opportunity in supply management:
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Supply chain planning
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Product management
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Sourcing and contracting
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Distribution and inventory management
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Technology enablement
Supply management must be elevated to an integral
component of the hospital executive management team
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Purchasing and Supply Chain Management, 3rd edition, Copyright © 2013, W. C. Benton Jr., All rights reserved.
Capital Equipment Acquisition Approval
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Factors and Decision Rules
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If two projects are judged to be of equal financial worth, the
project which better satisfies the following factors should be
chosen:
a)
Community need
b)
Marketability
c)
Hospital business objectives
d)
New technology
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Purchasing and Supply Chain Management, 3rd edition, Copyright © 2013, W. C. Benton Jr., All rights reserved.
Technological Assessment Process
1.
Priorities must be set beforehand
2.
Form subcommittees (interdepartmental planning) including:
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Medical personnel who use the equipment
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Physicians
Make the committee tour the facility and become familiar with the
equipment on hand
3.
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Look into the possibility of upgrading current equipment
Conduct interviews of the personnel who use the equipment
4.
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Rank the needs within and among the departments
Enter information into a database
5.
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Develop a comprehensive database
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Purchasing and Supply Chain Management, 3rd edition, Copyright © 2013, W. C. Benton Jr., All rights reserved.
The Supplier Selection Process
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The process:
Develop a list of functional specifications
1)
Each specification is to be categorized as a:
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Necessary feature
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Desirable feature
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A characteristic that is irrelevant or even undesirable
2)
Establishing a bid list/initial base of qualified suppliers
3)
Arrange a prebid conference
4)
Receive bids
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Purchasing and Supply Chain Management, 3rd edition, Copyright © 2013, W. C. Benton Jr., All rights reserved.
Questions?
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Purchasing and Supply Chain Management, 3rd edition, Copyright © 2013, W. C. Benton Jr., All rights reserved.