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Donít Go it Alone
AHRMM Conference emphasizes that success is achieved through strong relationships

TAMPA, FLA-Any doubts that the successful materials management professional must be a bridge-builder even more than a skilled negotiator or strategist were dispelled at the 47th Annual Conference and Exhibition of the Association for Healthcare Resource & Materials Management (AHRMM). The value - the necessity - of building and maintaining excellent relationships with clinicians, department heads and others in the IDN shone through, as materials management execs shared their success stories with peers. One of those stories involved the challenge of taking on a new clinic. A second involved establishing credibility in the capital equipment acquisition process.

Taking on a new clinic
Sometimes materials managers are called on to build bridges to new customers outside the four walls of the hospital. In her presentation "You are the proud owner of a new or slightly used Ö clinic," Kathi Pressley, director of materials management at Olympic Medical Center, Port Angeles, Wash., spoke about the challenges and opportunities that face supply chain executives when their facility or IDN acquires a clinic, physician office or ancillary service. Pressley spoke from experience, as Olympic has taken on 16 sites over the past 10 years. "This is about a journey where the materials management department has had to move out of the basement, and interface with other clinical providers and the community," she said.

Servicing offsite locations "goes beyond our normal realm and requires long-term commitment," said Pressley. "They wonít go away, and the work processes you set up will exist for a long time, so you want to do it right the first time." Doing so is complex, though, because it involves IT, lab, pharmaceuticals, etc. "Also, the demands are high. Itís high touch, because [these providers] have high expectations. These entities are different from hospitals, and we have to use a whole different set of skills."

Step One after getting the phone call about a new facility is what Pressley called "announcement, acquisition and assessment." "When the call comes, you have to mobilize all your resources," she said. "You have to hit the ground running."

She gets on the phone and then in the car to meet the key people face to face. By "key people," she means not just the physician(s) and office manager, but the nursing staff, buyer, managers and "the people who can drive change." Even if thereís goodwill on their part toward their new parent, some negativity may be generated by the potential change, she said. Pressley prefers to begin building bridges before that sets in.

"I tell them, ĎIím here to help with this transaction.í We have to set a standard for cooperation and collaboration. The relationship is two-way, with a cross-pollination of ideas and products between all entities."

The materials executive must make sure he or she understands the relationship of the new facility to the "parent" hospital or IDN. Are they an affiliate, in which case materials is called in on a consultative basis? Or are they owned and operated as a department, in which case materials will be expected to effect greater change?

After meeting the people, Pressley examines the inventory in the facility to see how much outdated material is on the shelves. She insists on looking at the past six monthsí invoices to examine purchasing patterns. She finds out what contracts the facility has written with vendors (e.g., water, waste management), and looks at the current purchasing process. "I like to mirror that as much as possible, so the disruption [for the offsite facility] is not seen as being so great," she said. She also checks out purchases of pharmaceuticals. "Then comes education," she said. The new facility is oriented to the medical centerís policies and procedures, as well as its product evaluation process.

The materials manager faced with the task of integrating a new facility may need to work with its staff on instrument processing, infection control procedures, emergency preparedness, environmental services and IT support, Pressley told her audience. "This is all about pollination of ideas. It canít be the hospital enforcing [its approach]. It has to be a give and take." The new relationship must be grounded on mutual respect and collaboration, she reiterated. "As long as I go in and seek to understand, the process will have a 95 percent chance of being successful."

Credibility in the capital process
Building relationships with clinicians and administration can really pay off when it comes to capital equipment acquisition. It did for Christiana Care Health System, Wilmington, Del., which has saved over $5 million since 2007, when it began revamping the process by which capital equipment is acquired in the two-hospital IDN. Of course, upsetting the status quo is never easy. Yet, through communication, marketing and persistence, the materials team has succeeded in doing just that.

In 2002, Director of Materials Management Mark McDermott and Purchasing Director Susan Gadonas were under pressure to assume more of a leadership role in reducing expenses. Capital equipment seemed like a logical place to focus at least some effort.

Prior to 2002, Christiana Careís purchasing department had lost an FTE, meaning that the purchasing director was spread too thin to devote her attention to anything other than the largest-dollar or highest-profile capital acquisition projects. Consequently, Christiana Care was missing many cost-savings opportunities. "Our ability to ensure a competitive environment existed, but was limited," said McDermott.

Physicians and clinicians often made agreements with vendors without involving purchasing. "We were always playing catch-up with these purchases," he said. "The sales rep would convince key clinicians what they needed. The equipment, while being state of the art, would match the vision of the sales rep, not the true needs of the organization, and I donít think the physicians realized that." In short, "our negotiating cards had already been played by the time we got involved," he said.

"We had many different processes out there. They were all well-meaning, but the absence of a truly workable process left money on the table and in the vendorsí hands."

Often, multiple departments purchased the same items (e.g., stretchers), but without someone overseeing the process, opportunities to bundle such purchases - and to achieve greater savings - were routinely missed. Department heads were frequently unaware that Christiana Care or its GPO had agreements in place, because purchasing was not involved; as a result, no one had brought it to their attention. Departments routinely missed savings opportunities when discussing service agreements with vendors.

Because the clinicians and physicians often worked with vendors on their own, even the technicians who would have to operate the new equipment were often excluded from decision-making until late in the process. Worse, "vendors knew our budget and clinical preference before purchasing became involved," said McDermott. "Yes, we had the latest and greatest equipment. But we paid more than we should have for it."

McDermott wanted to get the contracting department involved with capital acquisition at its earliest stages. Doing so would result in savings, involve more stakeholders, prevent "scope creep" (referring to situations in which a project expands to fill the budget), and free up funds for additional capital purchases. "And we wanted to validate actual savings and prove the value [to departments] of partnering with purchasing," he said. But doing so would mean hitting the brakes on the current process.

To bring about change, Christiana Care needed more FTEs in purchasing, concluded McDermott. So he and Gadonas laid out a well-constructed case to senior leadership for an additional three professionals in his department. "We projected, based on new equipment purchases alone, that we would save $700,000 the first year," he said. But even the best-laid plans sometimes go awry. The proposal was rejected.

However, McDermott had started a dialogue with the CFO, COO, senior vice president for administration and chief of surgery. When he resubmitted his proposal in 2005 for implementation for fiscal year 2006, it was approved - partially. Rather than three FTEs, McDermott was authorized to bring on a senior contract manager. And he did, recruiting Deborah Rey as senior contract manager for capital equipment and construction in November 2005. Her mission was to build a capital-acquisition process that would begin at the planning stage, facilitate collaboration between purchasing and key clinicians, and ensure that equipment was delivered in a timely manner.

First things first
The first thing Rey and the purchasing director did was get in front of the decision-makers. So they met with physicians, department directors, senior management and others. "The reps were going to the physicians and building relationships," said Rey. "We said, ĎWe need to build those relationships, get in front [of the clinicians] and let them know we want to develop a collaborative relationship." Purchasing designed a pamphlet to let the clinical staff know what expertise the department could bring to the table. They worked on a process for projects and purchases whose value exceeded $50,000, and shared that with the clinical staff as well.

Purchasing printed a pamphlet on "the best purchasing practices for the non-purchasing professional." "We asked them to allow us to ensure that the environment was a competitive one," said Rey. Ways to do that - as outlined in the pamphlet - included:
  • Call purchasing when contemplating a capital purchase.
  • Limit discussions with sales reps to clinical or functional specifications, not pricing.
  • Donít obtain bids without purchasingís approval.
  • Donít let the vendor know your budget.
  • Donít initiate trials before involving purchasing.
  • Donít negotiate pricing, options, terms and conditions.
  • Donít offer to trade in your equipment; purchasing may get a better return through a reseller.
  • Donít reveal competitorsí pricing.
  • Donít reveal your project timeline.
"We reassured them we wouldnít tell them what to buy, but that we would work to deliver their preferences to them," said McDermott. "At the same time, we reinforced that we are the paid professionals; we will deliver on time; we will prove our value." Even so, McDermott estimates that half the pamphlets found their way to the trash can. But that didnít stop Rey from moving ahead. She published a handout with contact information for the purchasing staff, and created an Excel spreadsheet showing actual savings achieved through the purchasing departmentís involvement.

Over time, the department did prove itself. For example, it was able to negotiate reduced-cost or no-cost education and training for its clinical engineering staff. Timeliness of capital acquisitions improved. And the dollar savings were dramatic: $1.38 million in FY07, $2.5 million in FY08, and $1.44 million in FY09. Whatís more, the time it takes to install equipment and provide inservicing has been reduced, said Rey. Equipment acquired by Christiana Care more closely matches the clinical need, and thereís better communication among staff members about pending acquisitions. In fact, the program has been so successful that it received Christiana Careís Focus on Excellence award two years ago - the first time a non-clinical department got the award.

"Our path forward is to continue to do more," said McDermott. His department continues to market its expertise by attending various committee meetings and sharing success stories with them. "We plan to expand our role in the capital budgeting process and help set realistic budget amounts for various pieces of equipment. That may reduce the savings we will realize later, but it allows administration to fund more projects out of the gate."

Four years after bringing in Rey, Christiana Careís purchasing department has enhanced relationships with department directors and physicians. Though the department experienced some pushback when the program was launched, that is largely a thing of the past. Part of that is due to the fact that some departments have actually gained unbudgeted capital funding due to the delivered savings that purchasing helped achieve on other acquisitions, said McDermott.

Collaboration is part of Christiana Careís culture today. "When we began this process, nobody would challenge the physician on what he or she said," noted McDermott. "Today, weíre all willing to challenge each other, no matter who that individual is. Christiana Careís process has fostered an environment of mutual respect and collaboration."

Editorís Note: Watch future issues of the Journal of Healthcare Contracting for more coverage of AHRMM sessions.

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