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Transforming health care through research and education.

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Making and Enacting Strategic Decisions in Hospitals and Health Care Delivery Systems: Orchestrating

Eugene S. Schneller, PhD, Arizona State University
Kathleen Montgomery, PhD, Arizona State University
Amber Coan, Research Assistant, Arizona State University

As hospitals strive to achieve savings by standardizing product SKUs and/or prices, some achieve more success than others.  What factors are important in the successful management of physician preference items?

As the costs associated with materials and the broader hospital and system supply chain continue to escalate, pressures to achieve savings through standardization have intensified.  In a study focusing on implantable items in the specialties of cardiology (pacemakers) and orthopedics (hip implants), researchers investigated the factors associated with successful materials standardization efforts, including the role played by physician trust.  After conducting interviews with key members of five different systems and with representatives of two major group purchasing organizations, researchers found that hospitals and systems that achieved consensus on standardization had much in common.

  • Success was frequently related to physicians recognizing that the institution brought value to their practice and that they could contribute to the organization by consistently working to serve their mutual interests.  These physicians appeared to trust that their involvement in product evaluation would lead to good-faith behavior on the part of management when purchasing materials.  A number of organizations also reported a specific incident, such as a clinical service being placed at risk, that helped bind physicians to participation in the product selection process and made them appreciate the contribution of product not only to the success of the organization but to their own practice.
  • Successful hospitals and systems acknowledged that their physicians had strong preferences based on long-standing experience with brand-name products and on service provided by manufacturer representatives and the broader sales force.  These organizations managed such relationships through formal, clearly stated policies and procedures specifying which contracted and non-contracted materials were permissible and describing the conditions for payment for non-contracted goods.  Informants also reported success when vendors were carefully managed by individuals with a strong understanding of both the clinical and supply environment.
  • Formal value analysis teams were the principal avenue through which hospitals and systems achieved standardization.  Informants told researchers that such teams were either committed to specific item categories (such as orthopedics or cardiology) or were ad hoc teams that came together “as necessary” to consider specific products.
  • Successful organizations offered incentives for involvement in the standardization process.  These included stipends for attending meetings, promise of better facilities, and increased staffing to improve productivity.
  • Successful hospitals and systems carried out extensive scrutiny of products and involved clinical leadership in the product evaluation process.  They used value analysis to assess new technologies and to determine equivalencies among competing technologies.  During the selection process, they invited competing vendors to represent products.  Data regarding products were made available at the patient/procedure level, and pricing comparisons were transparent.

The study’s authors note that as supply costs associated with typical discharges continue to grow, this is an especially important time for senior management to understand the issues associated with product selection and standardization.  In addition, gainsharing (providing physicians with a distribution of funds saved in the process of care) now challenges hospitals and systems to evaluate their alignment of incentives with medical staff and to assess the extent to which gainsharing will support their ongoing standardization strategies.

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