How providers are cutting supply costs postmerger

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Keeping doctors happy in the wake of a merger can pose a challenge. Image: iStockPhoto

Editor’s note: The following is an excerpt from the FierceHealthFinance eBook, Managing Purchasing and Accounts in a Changing Provider Landscape.

It’s the cardinal rule of managing hospitals or healthcare systems: Keep revenue-generating doctors happy. It’s always been and always will be a challenge. But in the wake of a merger or acquisition it can be doubly difficult.

When healthcare organizations merge, they must take advantage economies of scale to cut costs and improve efficiency. When medical implants can cost five and sometimes six figures a pop, it makes fiscal sense to switch suppliers to reap those savings.

But doctors are creatures of habit. If the pacemaker, screw or sponge they’ve been using for years suddenly disappears from the supply formulary, you’re all but guaranteed vocal pushback.

Joe-Colonna-Piedmont-Health
Joe Colonna

“Physicians are used to having a specific set of instrumentation, and there can be vast differences between items that do exactly the same thing,” says Sindi Kelly, a consulting director for group purchasing organization Vizient.

There’s also another layer built in: Physicians often have close professional relationships with medical device sales representatives. That means an often delicate interaction with doctors about making changes.

“I’m a believer that you should always consult the end users,” said Joe Colonna, vice president of supply chain for Piedmont Healthcare in Atlanta.

Colonna learned that the hard way early in his career, when he made a change to a group of medical appliances from blue to mauve. The appliances were otherwise the same. After negotiations, the group agreed to a gray tint that still saved money.

“I learned that it never hurts to ask,” Colonna says.

Counterintuitively, telling might be the best way to discuss the approach with doctors. Since they’re trained as scientists, providing them with hard data as to why a change should be made can often be successful.

“You can manage through meaningful data and evidence,” says Jeffrey Porubcansky, a national director with Cardinal Health.

Data analytics can play a big role in getting doctors to change their preferences, particularly when cost and overall quality is involved.

Porubcansky recalled a time when a physician, conferring with a supply chain director, had the bar code for an implantable device he was fond of scanned into the hospital’s point of sale system. When the price came up “the doctor was horrified,” he says. “It was three times the cost of a comparable item.”

As a result, the doctor made the switch to the less expensive alternative without reservations.

To read more about best practices and case studies from healthcare organizations for managing today's complex supply chain and accounts payable processes, download our free eBook, Managing Purchasing and Accounts in a Changing Provider Landscape.