Baxter International promotes its supply-management services as a sure-fire cost-cutting tool.
Johnson Controls markets its energy-management services with the same message: Its experts can help hospitals save money.
In fact, these days it seems nearly every vendor is willing to take a whack at customers' operating costs.
Many of their proposals trigger interest among materials managers but also a certain amount of skepticism.
One reason is the din of vendors' sales pitches. "You hear all this posturing from vendors about aligning their motivations with hospitals and about partnerships. You've got to sift through to see who's just talking," said Phil Church, director of materials management at 232-bed Salinas (Calif.) Valley Memorial Hospital.
Another reason for caution is that vendors' own restructurings are taking a toll on hospitals.
For example, Deerfield, Ill.-based Baxter rearranged its sales force last year partly to make it easier for hospitals to work with the giant supplier (Nov. 22, 1993, p. 3). Its move, however, left 214-bed Holy Family Memorial Medical Center in Manitowoc, Wis., without a Baxter sales representative for six months. Baxter's service has improved, but Holy Family Memorial now does more business with other distributors, said Tom Brull, director of materials management.
Unstable times."This turnover of sales reps, this changing of buying group contracts, it doesn't give you the stability you need for a closer relationship," Mr. Brull said. "Vendors have got to prove to me that they've mastered the nuts and bolts of service first."
There is also a sense that some vendor offerings can't be all they're cracked up to be.
Years ago, prepackaged kits of disposable supplies for the operating room were convenient, popular commodities-until hospitals started clamoring for cheaper alternatives, said William McFaul of the Trenton, N.J.-based consulting firm McFaul & Lyons. Mr. McFaul makes a living teaching hospitals how to use products properly and acknowledges that vendors now want to do the same thing. Nevertheless, today's offerings, from more customized kits to risk-sharing deals, deserve scrutiny, he argued.
"I would be very concerned about sharing money with a vendor if I could save it myself," Mr. McFaul said. "If those deals are the lowest-cost solutions, so be it. But if not-and your competitor is doing it alone-you're not the lowest-cost provider and you lose."
That's not to say vendors can't produce savings for their customers. Three hospitals that recently entered into partnerships with vendors said they're better off for it.
Joint venture.At Jamaica Hospital in New York,"vendors sometimes have solutions I'm not aware of," said James McNeila, vice president of support services at the 315-bed hospital. One example is the hospital's venture with Milwaukee-based Johnson Controls, Mr. McNeila said.
Johnson Controls is financing $1.5 million in new plant equipment for the hospital and guaranteeing annual savings of $300,000 from improved energy use. The hospital will keep about $100,000 each year after it pays back the company for the equipment, Mr. McNeila said. "In this case, it really is a matter of expertise," he said.
At Group Health Cooperative of Puget Sound in Seattle, Robert Schuweiler, director of materials management for the 500,000-enrollee HMO, explained, "We can't do it all. I've always felt that sales representatives had the potential to be our consultants."
Group Health recently signed an unusual agreement for capitated supply purchasing. Under a five-year, $60 million contract, it will pay Richmond, Va.-based Owens & Minor a set fee per enrollee per month for medical-surgical products (Oct. 10, p. 14). The more products Group Health uses, the less money Owens & Minor makes, so the companies will work together to make sure products are used cost-effectively, Mr. Schuweiler said. "Owens & Minor came forward with this, and we said, `Bingo!"'
Pinning down costs.Meanwhile, a new Baxter program is saving 308-bed White Memorial Medical Center in Los Angeles about $30,000 in annual inventory holding costs and $44,000 in labor. The greatest advantage, however, is that the program forced the hospital to decide what supplies it needs for a procedure and to pin down supply costs, said Ron Adams, its executive director of materials management.
Under Baxter's "procedure-based delivery system," the company supplies products used in a given surgical procedure in a single package for a fixed price. Baxter and the hospital pick the products in the package.
"You could do it by yourself, but it might take longer," Mr. Adams said. "Our best approach, whether it's Baxter or another supplier, is to work with them."