In 2011 we made one of the best and most effective decisions for our 730-bed hospital: We set out to adopt risk-sharing partnerships with our suppliers.
The change stemmed from a place of necessity, as healthcare was moving from volume to value. Something was missing. All that was happening was price negotiation, and we'd be back every six months reviewing prices again. We realized we needed to partner with forward-thinking organizations that were willing to change the game.
After several meetings with clinical teams, we came up with the program, "Above the Line." It evaluates prospective vendors across selective inclusion criteria spanning four areas: Vendormate credentialing, MedApproved registration and use, a Price Competitive Index of 25% or lower, and meeting or exceeding our standards for outstanding service. Under the model, the supplier's compensation partly depends on the quality of the relationship—not the number of products sold.
The benefits so far are telling:
• The program has given a vocabulary to our clinical team on how better to relate when talking value analysis with suppliers. We have surgeons who are asking whether suppliers are above the line, and about their price index. That's a big win.
• Where there used to be mystery about preferred suppliers, the program makes preference more transparent, and both supplier and clinicians know the rules.
• It gives suppliers a benchmark, so we can collectively spend our bandwidth on the things that matter. Once a supplier is above the line, the conversation is raised to a different level, strategizing about unique representation models and quality improvement efforts. This resembles relationships that other industries have with their suppliers.
• It is a constant evaluation process. Every quarter we evaluate our list and determine if prices crept up and review any customer service companies. The vendors are being held accountable, and take steps themselves to remain "in the club." It's positive reinforcement, too. When they're above the line, they like to show us they're part of the club. They are motivated by it as well.