The Transformation of Healthcare Purchasing

The days of physicians saying, “I want this” are fading fast, if not gone, in many locations, as hospitals restructure purchasing around committee decision making and formal processes.

Collaborative approach 

In a 2017 whitepaper on hospital leadership, the healthcare market research company SK&A described greater collaboration than in the past on clinical and administrative decisions, including a transformation in decision-making processes, more complex supply chains and less face-to-face time with vendor “influencers.”  

Frances Charlton, MBA, MHA, RN, NE-BC, has made similar observations based on changes she’s observed since her days as a nurse on the front lines of care through nearly two decades in administrative roles at Duke University Medical Center in Raleigh-Durham, N.C., and Inova Health System in Fairfax, Va., as well as the past seven years as the director of nursing and clinical operations at Wake Forest Baptist Medical Center’s (WFBMC) Heart and Vascular Center in Winston-Salem, N.C.

“It used to be a lot more common that a physician would say, ‘I want this. Can you order this equipment?’ and somebody who had the authority to make purchases would say OK,” Charlton explains. “Today [at WFBMC], we have a committee of physicians, members of our resource management team and other clinical leaders, and there is a process we work through [before purchasing] to ensure that we really need equipment or that it will benefit patients.”  

The shift to a standardized, collaborative purchasing approach is one that Charlton believes many hospitals are making. “Especially in larger centers, it’s definitely part of the organizational culture,” she says. “We all are facing the exact same challenges. Reimbursement continues to shrink. Medicaid may not be funded. We are all being asked to cut costs.” 

In the following excerpts from a conversation with Cardiovascular Business, Charlton explains how the process works at WFBMC and its impact. 

What prompted the shift from individually driven purchasing to the collaborative approach? 

The driving force was probably economic. Cardiology devices are very expensive. But it’s also an attempt to standardize what we’re using. Early in my career, we would sometimes have a wider variety of equipment in use because physicians preferred specific brands  even though the devices did the same things. So, we had potential competency issues. The staff had to learn multiple types of equipment. It put more pressure on them. 

The other difference is that the quality has changed, and some devices have become commodities. Quality is our top priority, so we always evaluate  how pieces of equipment compare. Today, the quality of devices, at least in cardiology, doesn’t differ much. A stent is a stent is a stent. That may not have been true 10 years ago, but it is true today. So, we can look at other things instead, including cost. 

How often are your purchasing decisions triggered by user requests?

The majority of the time purchasing decisions are prompted by requests, usually from our physicians, who are always looking at the cutting edge of technology. But sometimes we need to replace old equipment or devices; that's the minority of cases. 

Once you get a request, how does the decision-making process work?

The physician who wants to bring in the new device or equipment usually will present to the purchasing committee. He or she will explain the benefits, predicted volume and so on. The committee then completes a worksheet, answering a variety of questions, and finally, the group decides whether to support the purchase. It’s a formal process. 

We’re trying to be good financial stewards. We want to make sure we get paid for the things we do, where we possibly can. But there are times when we purchase an item that we’re not going to make money on, but it is in the best interest of the patient. That’s where it’s good to have the business people as well as the clinicians at the table—to understand both concepts.

What are the key questions you consider? 

Quality, by far, is number one. Even though something may cost a lot of money and we may not recoup the expense, the decision to purchase will be yes if it’s in the best interest of our patients. That might mean less recovery time; fewer side effects; or decreased lengths of stay—which ultimately benefits the organization as well as the patient. In fact, there have been things we wanted to purchase that weren’t yet approved for reimbursement but we thought coverage would come down the road. We knew it might be at least a year, but because it was so beneficial for the patient, we went ahead. 

Beyond quality issues, it comes down to the business case. Will the volume of procedures be such that we at least break even? Those are some of the conversations the committee has.  

So, quality first and then the business case around it. Other things include what will we do differently with this item than we have with a similar device, what type of education will be needed and how many people will need to be trained. There are a lot of questions we answer.  

How much of a sticking point is interoperability? 

If there is an IT component, then we bring in our IT colleagues. We describe what we’d like to use and ask if it’s doable. We have to talk about those issues upfront. Especially with capital requests, questions about IT and software can trigger another set of questions to work through with our IT partners. It’s not necessarily a showstopper, but it certainly could be. 

Does anyone have veto power over the committee’s decision?

Technically yes, but it doesn’t work quite that way. It would go up to our senior vice president over resource management. But he wouldn’t say, “Sorry, you can’t buy it.” He would come back to us and ask for more information. And if our physicians felt very strongly that it was in the best interest of the patient, I don’t see it getting vetoed.

Do you ever have situations where physicians are disappointed because, for example, their preferred brand isn’t selected? 

Oh, yes, although it’s less common than in the past. Physicians understand that it’s part of business today. But you might have a physician who has been here a long time and has always used a certain device, but now we’re going to change because the quality is the same and it’s financially prudent. Then you have concerns. We do consider those preferences, but it’s not the driving force behind a decision. 

Where does the vendor fit in the process? 

We usually know what we want, but we work with resource management. They do all of our contracting around devices and equipment. Sometimes they work with the vendor, and sometimes we do as well. But we usually go to resource management, describe what we want, discuss our options and whether it will require future updates, especially if there will be software updates. In cardiology, we work very closely with resource management, maybe more so than other areas.

Our interactions with vendors are much more stringent today. I can remember when vendors could just walk into your hospital, approach a physician and say, “I’ve got this great product I’d love to show you,” and the physician might say yes. Products would get into the system because of relationships like that, but no one else knew about it, and then you’d have a piece of equipment on a patient and the nurses might not know how to care for it. Today, vendors must have an appointment with someone. They have to check in, put their information into a kiosk, get a nametag and so on. 

Is the process and committee different for device vs. capital purchases? 

It can be. The capital purchasing process often involves a lot more money and there are different questions to address. For example, I’d work with different people to replace our cath labs vs. buy a new pacemaker. There’s always overlap, but some new people may participate in larger purchases. For example, if you need to consider IT components or facility renovations, some of the players would be different. 

How would you describe the impact of the committee approach to purchasing?  

In my experience, it’s been a good thing. Yes, we might have to jump through more hoops than in the past, but it has reduced the amount of waste that we might have seen once upon a time.