Challenges and Opportunities in Procurement A Private ...
Transcript of Challenges and Opportunities in Procurement A Private ...
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Challenges and Opportunities in Procurement
A Private Hospital Perspective
Dr Simon Woods
Executive Director Cabrini Malvern
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Relationships
• Trust
• Multi - stakeholder
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Disclosures
• Salaried employee of Cabrini Health
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About Cabrini Health
• Not for profit private health group
• 2 acute hospitals – 500 and 100 beds
• 20 operating theatres
• Emergency Department
• 2 Rehabilitation sites
• Palliative Care and Aged Care facilities
• Integrated, home based care program (HITH)
• Technology and Linen divisions.
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Dr Simon Woods Executive Director Cabrini Malvern (General Manager) and Executive Director Cabrini Pharmacy
• 1979 – • Medical Practitioner
• 1985-2011 • General and Upper GI Surgeon
• 2007-2014 • Executive Director of Medical Services Cabrini Health
• 2013- • Executive Director Cabrini Pharmacy
• 2014- • Executive Director (General Manager) Cabrini Malvern
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Hospital Supplies – a less than perfect market • A large number of buyers and sellers
• No entry and exit barriers
• Perfect factor mobility
• Perfect information
• Zero transaction costs
• Profit maximization
• Homogeneous products
• Non-increasing returns to scale
• Rational buyers
• No externalities
• Da Vinci robot & other monopolies
• Technology ‘lock in’ TGA regulation
• Assets largely immovable
• Commercial in confidence
• We wish!
• Hospitals are price takers from health funds
• That’s not what vendors tell us!
• Economies of scale
• More on that later
• Massive regulation including prosthetic
schedule
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A transparent market
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Non transparent markets
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Price transparency
• Sellers market power • Patents, non-uniform pricing, complex contracts
• Preferences often not re-visited over long periods
• Target doctors individually
• Hospitals’ purchasing power? • Driven by doctors – surrogate buyer
• Volume variation between hospitals
• Ambiguous price information
• Difficult to source cost data from others
• Cost of price/product comparison and change
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Price transparency for medical devices
• Physicians often unaware (unconcerned) about absolute product price.
• Choices based on familiarity, brand, relationships, history, performance.
• Pricing often “blurry”
• Potentially divergent objectives; hospitals vs physicians
• Manufactures exploit this divergence • Loyalty, promotion, education, support
• Transparent pricing desirable, but currently impossible
Pauly M, Burns L. Health Affairs 2008. Price transparency for medical devices
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Pricing Awareness?
• 503 respondents
• Few orthopedic surgeons know the costs of the devices they implant. • Implants account for up to 87% of cost of procedure
• Three fold variation in prices paid by hospitals
• 80% rated knowledge of cost > moderately important
• 36% surgeons and 75% residents rated their knowledge as poor or below average
• Only 20% able to estimate cost (+/- 20%) correctly
Okike K, et al. Health Affairs. 2014;33
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Common Supply Pitfalls
• Not consolidating vendors • Utilisation/volume savings
• Efficient inventory management
• Poor contract compliance • Implement and monitor
• Underinvestment in Clinician Engagement • Vital to engage clinicians in product and vendor decisions
• Choices driven by desire for patient care
• Support of leadership committees is crucial
Rizzo E. Hospital Review 2013. The supply chain’s role in making or breaking hospitals’ margins, competitive edge.
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Setting the scene Engaging with the private clinican
• Patients and families are the focus of our care
• But: • Clinicians bring the elective procedural work
• Most of our clinicians are not employed by Cabrini • “secondary customers”
• They have alternative hospitals seeking their services
• Clinicians value safety, clinical outcomes and efficiency
• They have little knowledge of business and operate on high margins
• Mostly they value….
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Traditional idea of autonomy is changing
Clinician Autonomy
Clinical Governance
Regulatory Compliance
National Standards
Commercial Pressures
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Changing the paradigm
Doctor as customer
The compliant doctor
Engaged doctor as partner
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Engaging Doctors in the Health Care Revolution
• Doctors: • anxious and angry about transformation
• fear loss of autonomy, respect, and income
• grieve for the past – denial – anger
• Ambitious strategies they do not embrace are doomed.
• Hospitals must focus on what can be gained, positives.
Lee T, Cosgrove T. Harvard Business Review. Engaging Doctors in the Health Care Revolution. June 2014
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A common starting point
• >95% of clinicians and financial managers • Agreed that high quality services would only be affordable if clinical
and finance colleagues are properly engaged to achieve the desired outcomes together.
http://www.hfma.org.uk/publications-and-guidance/publications.htm?sort=1&keyword=clinical%20engagement&categories=info_8
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The top three barriers – according to Clinicians
• Lack of basic financial awareness/skills among clinicians
• Lack of robust cost data
• Poor presentation of financial and clinical data
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The top three barriers – according to Finance Managers
• Variability of cost and income data
• Lack of robust cost data
• Lack of basic financial awareness/skills among clinicians
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Why does engagement matter?
• Business viability
• Safety
• Quality
• Willingness to adopt and accept change
• Better communication
• Greater standardisation
• Reduced waste
• Opportunities for volume discounts and rebates
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Both groups agreed – good engagement requires…
• Availability of good data • Clinical
• Financial
• Clinical champions AND Finance champions
• Shared vision and culture.
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Doctors know the trends
• Reluctant to change some practices. • Often eager to adopt new (?sexy) innovations • But beware the enthusiastic early adopter
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Not all advice is evidence based
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Medical staff engagement. The risks of getting it wrong.
Poor Engagement + Underutilised Capital
“Why did you listen to him – he knows nothing!”
“Other hospitals
have much better….”
“You bought the wrong
equipment”
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How can doctors be engaged?
• Align goals of individuals and organisation • Demonstrate that you are running a business
• Hospital success is linked to their success and vice versa
• Provide information on specialty and individual performance
• Link financial outcomes to rewards/incentives (non financial)
• Involve doctors in decision making
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Organisational commitment to engagement
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Rational and emotional engagement. Both required to drive performance
..increased willingness to go above and beyond the normal job demands….
…managers are one of the strongest drivers of engagement….
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Bust the myths
• “But we are concerned with clinical outcomes”
• “Aren’t you not for profit?”
• “Aren’t you making plenty of money?”
• “Doesn’t the Catholic Church contribute to you?”
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Demonstrate you are running a business
• Talk about it
• Write about it
• Show them the financial reports
• Tell them your successes and failures
• Talk about the external environment • Health funds
• PBS reforms
• Pathology and Medical Imaging changes
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…just means that we spend money thoughtfully and mindfully.
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Clinical Costings – Providing information at Specialty and Individual level
• A single specialty, procedural financial data
Doctor Total Profit DirectCosts Indirectcosts Total Revenue Separations ALOS
Profit / Sep Ave Cost/ sep Ave Rev/ sep Ave Hours ICU Ave OT Mins Profit per OBD
A (-236,014) $ 542,466 $ 191,048 $ 497,501 143 1.87 (-1,650) 5,129 3,479 0.03 97 -$881
B (-148,075) $ 284,582 $ 108,409 $ 244,917 62 3.08 (-2,388) 6,339 3,950 0.00 106 -$775
C (-81,086) $ 278,939 $ 110,103 $ 307,957 95 2.16 (-854) 4,095 3,242 0.24 91 -$396
D (-54,262) $ 295,149 $ 96,399 $ 337,287 116 2.12 (-468) 3,375 2,908 0.00 74 -$221
E (-28,594) $ 70,365 $ 14,746 $ 56,517 29 1.17 (-986) 2,935 1,949 0.00 75 -$841
F (-16,936) $ 175,216 $ 45,346 $ 203,626 43 3.00 (-394) 5,129 4,735 0.49 115 -$131
G (-15,686) $ 155,335 $ 60,279 $ 199,929 77 2.05 (-204) 2,800 2,596 0.34 41 -$99
H (-11,527) $ 144,262 $ 38,381 $ 171,117 60 1.85 (-192) 3,044 2,852 0.00 62 -$104
I (-5,776) $ 103,395 $ 41,709 $ 139,329 70 1.76 (-83) 2,073 1,990 0.00 33 -$47
J (-3,140) $ 9,836 $ 2,802 $ 9,498 1 9.00 (-3,140) 12,638 9,498 0.00 260 -$349
K (-2,266) $ 8,675 $ 2,745 $ 9,154 2 1.00 (-1,133) 5,710 4,577 0.00 125 -$1,133
L 666 $ 226,109 $ 78,187 $ 304,964 163 1.36 4 1,867 1,871 0.00 34 $3
M 11,737 $ 319,022 $ 85,360 $ 416,119 127 1.99 92 3,184 3,277 0.20 64 $46
N 18,352 $ 146,763 $ 81,328 $ 246,445 112 1.99 164 2,037 2,200 0.00 31 $82
O 28,825 $ 133,660 $ 59,569 $ 222,056 108 1.44 267 1,789 2,056 0.00 28 $186
P 30,262 $ 331,169 $ 104,380 $ 465,812 133 2.74 228 3,275 3,502 0.00 34 $83
Q 108,008 $ 250,725 $ 122,409 $ 481,143 179 2.08 603 2,085 2,688 0.42 29 $290
R 203,563 $ 830,412 $ 297,014 $ 1,330,993 477 2.22 427 2,364 2,790 0.49 28 $192
Total (-201,948) $ 4,306,082 $ 1,540,214 $ 5,644,363 1997 2.07 (-101) 2,928 2,826 0.21 49 -$49
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Incentives – do they work?
What’s in it for me? • Tickets, dinners, trips – short term, trivial
• Financial sharing arrangements – difficult to administer
• Sustained improvements to productivity – meaningful, win-win • Increased theatre efficiency improvement
• Unit/division secretarial support
• Data manager, IT support
• New equipment
• HFMA round table – physicians more interested in efficiency gains than direct rewards
https://www.ecri.org/Documents/MDPT/Implant%20roundtable.pdf
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Greater Standardisation
• Reduce waste
• Reduce inventory
• Reduce work
• Reduce risk
• Reduce unit price
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Greater standardisation
• Why did we stock every brand and every type of orthopaedic cement?
• Why did we have 5 brands of antiembolic stockings?
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Match clinicians to the issue to be considered
• Avoid one or two “Clinician Representatives” providing token representation on Equipment Committee
• Only ask doctors about decisions related to their specialty
• Don’t waste more of their time than is necessary
• Schedule meetings out of hours
• Beware unilateral strong advocates
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Involve doctors in decision making
• By groups or elected representatives • Avoid self appointed opinion leaders
• Let them evaluate but not negotiate with vendors
• Involve them in meetings with vendors
• Show them business cases and invite comments
• Tell them the price differentials in the offers • not absolute price which may be confidential
• Ask them to prioritise CAPEX requests
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Laparoscopic trocars
• High volume
• Multiple providers
• Little difference in functionality
• Proposition to consolidate
• Consultation re preferred device
• Consensus achieved
• Major savings due to volume discount
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Rebatable items • Wide choice in pacemakers &
defibrillators
• No preferred provider
• Frequent change in clinician preference
• Implications for patient safety – tracking of devices
• Offers made to major companies to provide proposal to become preferred supplier
• Clinicians advised which company to prefer – if devices therapeutically equivalent
• Major consolidation to one provider
• Cardiac data manager funded from savings
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Engagement doesn’t always save money • Laparoscopic equipment
tender • 5 vendors trialled • 2 rejected by clinicians • Vendor A preferred but
substantially more expensive than close second choice vendor B
• Clinicians elect for vendor B as relatively ambivalent when shown price difference
• Fibreoptic endoscopy tender • 2 major suppliers • Vendor A significantly more expensive • Universal user preference for Vendor A • Vendor A chosen despite cost in view
of clinician preference
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Clinician engagement in summary
• Clinician engagement is feasible
• Make finances transparent
• Work to align organisational and individual goals
• Make them accountable to their peers for decisions
• Involve clinicians from the outset
• Always stress that changes must not be at expense of quality and safety
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Future opportunities
• Improved costings • RFID tagging of consumables
• RFID tracking of patients – assists with measurement of time in OR etc
• Appointment of clinical leaders
• Seek evidence based decisions
• Encourage clinician attendance at management meetings eg. cardiac, perioperative, maternity • Not just specialty group meetings.
• Insight into broader issues.
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Relationship vs Transaction
Transactional Relationship
Solu
tion
P
rod
uct
Complex – one off New theatre fitout
Straight rebuy Gloves Cleaning chemicals
Complex – long term Imaging equipment IT dependent purchase
Recurrent – evolving Stents Laparoscopic consumables
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Who do you market to?
Hospital Straight Rebuys
Clinician Novel Procedures
Modified Rebuys
Keep us informed re
emerging technology
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Thank you. Questions?