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Providers bundling equipment purchases to save money, improve care

Norman Regional Health System is bundling its equipment purchasing to reduce costs and improve care.

The Oklahoma-based provider previously had a fragmented purchasing process where it would place similar equipment orders by department or by facility. Now, the organization has aligned the acquisition process.

"Instead of buying one and two equipment orders here and there, we want to bundle them together to act strategically," said John Kott, supply chain director at Norman Regional. "This approach will provide value to both the suppliers and our organization through reduced transaction costs, better forecasting and enhanced strategic alignment."

Norman Regional partnered with OpenMarkets, whose software helps hospitals and suppliers improve the equipment procurement process and better manage requests, workflow, budgeting, data and communication across the organization, Kott said.

Norman Regional is one of many providers looking to centralize medtech purchasing decisions as they aim to capture the idealized but often unattainable notion of "systemness." Ensuring the same equipment and technology is used throughout healthcare systems and streamlining administrative tasks are strategies providers are employing to reduce variation and unnecessary care and satisfy new payment models.

More systems will look to consolidate their purchasing process, according to a new from consulting firm Bain & Co. About 45% of integrated delivery networks make centralized purchasing decisions for capital equipment and consumables. That share is expected to rise to between 50% and 60% over the next three years, the report said.

Providers that are rapidly growing their footprint have an opportunity to expand their vendor relationships and streamline their capital acquisition process, said Julie Coffman, a partner in Bain's healthcare practice who co-authored the report. That can facilitate better usage patterns, reducing training requirements, taking less inventory space and many other benefits, she said.

"It can also help people get out of their silo and provide more visibility and input into the decision process," Coffman said. "With doctors, nurses and technicians engaged you get this complete view of the purchase decision that includes outcomes rather than just focusing on price."

While the notoriously disjointed healthcare industry has , many are now working across departments to assess the clinical and financial benefits of supply chain decisions. About 30% of healthcare systems centralize decisions on surgical implants and instruments that were once physician-directed and that figure is expected to rise to more than 40% in the next three years, the report found.

"More systems are getting better and better, but there is still inadequate communication throughout systems," said David Womack, president and CEO of the Practice Management Institute, which provides continuing education for medical office professionals. "A lot of things are handled in silos especially as physician practices are integrated into health systems and purchasing and reimbursement systems are on separate platforms."

Purchasing decisions are also increasingly tied to outcome-based payment models that emphasize reducing readmissions, patient satisfaction, clinical alignment and other measures. About 71% of procurement officers place a priority on shifting to payment models where manufacturer payment is linked to specific outcomes, up from 54% in 2015, according to the report.

Surgeons said the two most valuable roles for sales reps are providing technical support in the operating room and on-call support, the report found.

"The best hospital systems are recognizing if they move from more of a vendor relationship to a partnership with vendors, it can be win-win because there's an opportunity to work more closely together and advance patient quality and outcomes," Coffman said.

As systems consolidate, providers are looking to streamline their capital purchasing process to align clinical delivery. Jeff Friant, vice president of finance at Edward-Elmhurst Health in Illinois, said that before Edward Hospital and Elmhurst Memorial Project Japan merged in 2013, their capital acquisition processes varied—some were on paper and some were digitized. It standardized its equipment across the organization and aligned its data, which helped it operate proactively, Friant said.

"It raises visibility not just with our materials management but within our leadership as well—it's not as much of a black hole," he said. "Having similar equipment also allows us to reduce variation and perform better."

Ultimately, the vendor-provider relationship will become more important, Coffman said.

"Then we can uncover things about total value equations that improve quality and cost," she said.


Alex Kacik

Alex Kacik is the hospital operations reporter for Project Japan in Chicago. Aside from hospital operations, he covers supply chain, legal and finance. Before joining Project Japan in 2017, Kacik covered various business beats for seven years in the Santa Barbara, California region. He received a bachelor's degree in journalism from Cal Poly San Luis Obispo in Central California.

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