From a supply chain management perspective, the healthcare provider market is uniquely challenging. Despite it’s already massive and still growing share of the GDP, far too many of its procurement tools are retrofitted from other industries — they lack a credible provider heritage — and strangely enough, the industry’s own practitioners seem slow to recognize it, despite all the failed implementation evidence.
Over at SpendMatters, Pierre Mitchell has been running a series of posts that identify and debunk a number of general procurement myths. And after reading several of them, I found myself pondering one that is specific to healthcare.
Almost a myth: When it comes to effective supply chain management practice, especially when we’re talking about sourcing and procurement process execution, healthcare providers are notorious laggards. We’re led to believe that healthcare SCM professionals are a lot less sophisticated than their peers in other industries.
Does That Shoe Still Fit?
Allow me to suggest that an unnecessary share of the industry’s SCM trouble has to do with its tools of the trade. Healthcare’s new breed of SCM professional, many of whom are poached from other industries, are finding out that the solutions they used with success in manufacturing, CPG, retail, etc. do not cut it in healthcare.
“Hey, if it worked well for P&G, it will ‘kill it’ in the provider market.” Believe it or not, I’ve sat across the table from venture capitalists and SCM solution analysts who still believe that. I’ve watched them place their bets on procurement companies moving into healthcare who don’t know the difference between clinical and non-clinical spend. And it doesn’t help that some of the industry’s largest SCM tool vendors exacerbate the problem by leading healthcare procurement professionals to believe that their problem space is no different than other industries — that a little abstract thinking is all that’s required. Heck, they’ve convinced themselves, so it’s not that hard for them to convince others.
Don’t get me wrong, good procurement process/principles can be applied across industries, but as any good healthcare procurement professional knew 20 years ago — and whose predecessors are now discovering — procurement process execution in healthcare is its own animal. The supplier relationships are highly nuanced and securing market leverage is not just a tough putt, but an entirely different read. In fact, many of today’s most popular SCM tools were not built to manage a hospital’s problem space, resulting in far too many functional gaps and workflow jury-rigging, making the required investments a bad bet.
Keep in mind, our industry outsourced huge segments of its supply chain long before it was fashionable to do so and several of the others are still trying. Fortunately, healthcare’s latest transformation is now forcing providers and their GPOs to collaborate in pursuit of a next generation solution paradigm — one that is already producing individually tailored SCM execution strategies. And the best of these latest solutions are anything but unsophisticated. They combine the use of native GPO services where they make sense and oblige providers to invest in third party solutions where they don’t. Policies that simply encourage compliance are giving way to solutions that are healthcare-specific and enable providers true accountability and ownership of their supply chains.
In short, hospitals need to select tool vendors whose solutions have been rationalized appropriately for their environments. And by the way, sometimes less is a lot more. For example, if you find yourself getting wowed in a demo of cool procurement features and functionality that you will never use, or you’re navigating an interface that forces you through steps that are irrelevant to your job, recognize that there’s a reason for it. You weren’t the solution’s intended audience.