Last week I watched a presentation by one of the largest IDNs in the southeast. Its vice president of supply chain was answering questions from the audience, and I was intrigued by one response. When asked what he considered his most important role in the hospital, he replied without hesitation: "Diplomat. I spend most of my time convincing others to follow my lead."
Actually, this VP's answer makes a lot of sense to me, and it highlights an opportunity that is being missed by too many health organizations. With physician preference items representing as much as 60% of a hospital's supply expense, supply chain executives have tenuous (at best) control over the majority of spend going through their purchasing departments. High visibility involvement with value analysis teams and physicians, concurrent with the support of the executive team, is key. Ultimately, if they can't persuade clinicians to cooperate with them to control costs, their influence becomes limited to commodity items.
Unfortunately, not everyone agrees. According to a poll published in the December 2008 issue of Materials Management in Health Care, when supply chain executives were asked to rank the importance of developing cooperative relationships with physicians to optimize product selection, they rated it number one. However, when CEOs were asked the same question, they rated the diplomat role for their supply chain staff as a relatively low priority.
The divergence over this point is telling. We see supply inflation outpacing reimbursement and tell our supply chain executives to take control of it. But when it comes to preference items we send the message that that isn't really their turf. This thinking is expensive and it's wrong. The job of supply chain executive is all about negotiating productive relationships with suppliers and providing excellent service to their hospital customers. These same skills are ideally and uniquely suited to working with value analysis teams and physicians.
I want you to invest in your supply chain leaders. Delegate roles to them for which they are, in fact, ideally suited. Make them full partners in protecting the financial viability of your healthcare organizations. Make it clear to the rest of the organization that they have your support. Once "credentialed" by you, insist that they keep you closely attuned to their ongoing contribution to the hospital's profitability. As has been my theme in these CEO letters, I am convinced your trust and active support of your supply chain leaders will be rewarded.
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