healthcare financial management association premier health partners & scorpion data security may...
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Healthcare Financial Management Association
Premier Health Partners & Scorpion Data SecurityMay 17, 2011
Supply Chain DivisionWho are we?
Purchase for all five hospitals Sourcing Managers
Negotiate with the > 4,100 suppliers Procurement – Buying the product to Truck Delivery
Coordinate the: ~335 orders per day ~$540 M per year
Control the ~ 84,000 supply items Laundry plant - >900 bags per day
Capital Acquisition – Purchase capital equipment Minor construction
Supply Management Information – Contract, rebates Control the > 1,500 contracts
Supply Chain DivisionPHP Cost Breakdown
Salary and Benefits 52%Supplies+ Purchased Services 35%Depreciation 7%Bad Debt, Interest Exp, Tax 6%TOTAL $1.7 Billion
2011 PHP Budget
Supply Chain DivisionPHPSourcing purpose / business foundation:
SAVINGS The reduction of cost from the prior average 12 month
spend that result in a net expense decrease to the P&L statement.
Cash savings.
COST AVOIDANCEActions taken by Sourcing personnel that prevent
increased expense from hitting the P&L for PHP.
119,474,261
$0
$20,000,000
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$100,000,000
$120,000,000
$140,000,000
$0
$2,000,000
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$6,000,000
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$10,000,000
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$16,000,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
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Year
Premier Health PartnersSourcing Savings Since Inception
Annual Cumulative
Supply Chain DivisionPHP
Premier Health Partners Pricing Strategy
PHP strives to be in the lower quartile (<25%) on all supply costs and vendor
contracts.
Supply Chain DivisionPHP
PHP supply commitment. Standardization – Achieve <10Th Percentile.
OR
PHP supply global pricing. All suppliers can work with PHP but at a global
(ceiling) price – Achieve 10th-25th Percentile.
How we achieve our goal:
Supply Chain DivisionPHP
Strategic IntelligencePrice Lynx Data BaseVHA Group Purchasing Affiliation
Local CoalitionMidwest Purchasing Coalition with Ohio Health
and Community HealthOperational Efficiency
Supply Chain Organizational Assessment - Infrastructure
SystemTotal Supply Cost / case mix adjusted discharge
Total Drug Cost / case mix adjusted discharge
Total Supply Cost -Drug / case mix adjusted discharge
William Beaumont $ 1,199 $ 364 $ 834
Sentara $ 1,370 $ 304 $ 1,066
PHP $ 1,371 $ 312 $ 1,059
Advocate $ 1,451 $ 387 $ 1,064
Ohio Health $ 1,456 $ 282 $ 1,173
Providence $ 1,508 $ 340 $ 1,163
Spectrum $ 1,657 $ 370 $ 1,287
Baylor Health $ 1,725 $ 720 $ 1,004
MedStar $ 1,739 $ 469 $ 1,270
Yale $ 1,756 $ 523 $ 1,233
Indiana U Health $ 1,777 $ 526 $ 1,271
Partners $ 1,784 $ 617 $ 1,166
OSU $ 1,909 $ 442 $ 1,467
Northwestern $ 1,921 $ 447 $ 1,473
Mayo $ 1,958 $ 519 $ 1,439
U of Michigan $ 2,646 $ 988 $ 1,657
Supply Chain DivisionPHP Supply Metrics System Scorecard
(Last 4 Qtrs.)
Supply Chain DivisionPHP
$0$5,000,000
$10,000,000$15,000,000$20,000,000$25,000,000$30,000,000$35,000,000
2008 2009 2010
Year
PHP Minority Supplier Inclusion Program
W/MBE Spend
$0$20,000,000$40,000,000$60,000,000$80,000,000
$100,000,000$120,000,000$140,000,000
2009 2010
Year
PHP Local Spend Summary
9 County Area
What we need to do better……Physician Preference items (~15% of PHP supply
cost)
StandardizationClinical supplies Non ClinicalEquipment
Implementation processFollow up / Feedback on products
Communication – no surprises.
Supply Chain DivisionPHP
Supply Chain DivisionChallenges – Today and Tomorrow Vendor industry
Staying ahead of the vendors sales strategy Internal staff
Cultivate highly trained / skilled sourcing personnel Need to possess greater specialized skills
Technology – higher cost of healthcare Surgery – Skeletal hardware (spine, joint, etc.), neuro, Equipment – DiVinci robot, Cardiology cath labs, 3-D, 4-D,
patient beds. Supplies – MRI compatible stents, Silver coated catheters
Healthcare Reform Medical Device Tax (2.3% of Revenues) Drug Shortages – 200 scarce meds (2010) vs. 56 (2006) Price Point and Utilization - ‘Total cost per discharge.’ It will
determine a large part of the hospitals margin.
Scorpion Data Security
The Future of Information Management and Document
Destruction
Our core competency:
Scanning/imaging - “Digital conversion of Medical Records” Physical / electronic storage Destruction of confidential documents and material.
Our competitive advantage and value proposition model embraces lean methodologies and six-sigma strategies to create a high quality, cost effective value stream for our customers. In addition, Scorpion Data Security offers executive level account management and involvement with quantitative and qualitative analysis of your document’s total life cycle.
Strategic Relationship ManagementThe Vendor’s Perspective…
Defining and identifying strategic accountsWhy is this ‘strategic’? Does “BIG” make it
‘strategic’?Buying Influences“The Approach”ResearchBATNABuying MotivesPositioning “uniqueness's” as requirementsStrategic Relationship Behavior
Defining a Strategic Account
A strategic account is “game changing” for you and the CUSTOMER.
A strategic account is a significantly large prospect and “win-able” enough to demand your time, effort and attention.
A target account should be a stable company without obvious signs of financial distress (big lay-offs, revolving door Mgmt.).
Identifying Strategic Accounts
DatabasePeriodicals and PublicationsNetworkReferrals from CustomersReferrals from AdvocatesThe Internet
Strategic?
A better word may be “complex”A strategic account requires research and
multiple sales callsMultiple buying influences / decisions makersDecision makers with different wants, needs
and biasesSenior Executives are involved in the decision
making process. Procurement collaborating with end users.
Awareness of current spend/budget
BUYING INFLUENCESEconomic Buyer User Buyer
Technical Buyer Coach
The Economic Buyer
This person can say “YES” when all others say “NO”
This person can say “NO” when all others say “YES”
Normally the top officer of the CompanyCEOOwnerCOOGeneral Manager
Has full P/L responsibility for the Company or location
The User Buyer
Often mistaken as THE decision makerThis is the vendor, supplier’s “day to day”
contactThis person is the most “in touch” with the
vendor, supplier’s product or serviceThis person will derive the most benefits
from the vendor, supplier’s product and/or service
VALUE is more important than PRICE
The Technical Buyer
Most sales professionals make the mistake of spending all their time with this buyer
Purchasing agent or finance professional (CFO)Seeks to “apples to apples” comparisons for the
vendor, supplier’s product or serviceInclination is to “bid” the proposal to assure
competition (lower pricing, better terms etc…)PRICE more important than VALUEHaving “savings targets” in their comp plansThe best buyers have taken courses in sales and
strategic selling
The Coach(es)
The vendor, supplier must have at least one! And they must …Be tenuredReport “high”Be influentialWant you to win!Must derive a benefit from you winningHave the “ear” of the Economic BuyerGreat coaches love to coach
Understand Competitive Advantage
Points of Differentiation??What do you do better than all of our
competitors?Why should companies do business with you?
The Approach
Identify the “Coach” first if possibleManagers/Directors/Champions
Site surveysAfter much researchStart a folder/binderCraft an “interest creating” statement that
is customized to the target prospectProcurement should not be the first call
BATNABest Alternative To a Negotiated
Agreement
This is the vendor, supplier’s “real” competition
Every Company and every Buyer has oneWhat will they do if they don’t choose YOU?And, what would their BATNA cost?
Buying Motives
Companies and people move very quickly to alleviate “pain”
Everyone has a buying motive (or motives)Better productBetter serviceLower overall costFulfill a “business connection” (Green, Safety
etc…)FasterDiverse supplier initiativesMore featuresLess hassle – more convenienceImage
Motives and Requirements
Buying motives leads into conversations about REQUIREMENTS
When your UNIQUENESSES become REQUIREMENTS – YOU WIN!
The Definition of Winning
A win in a buy-sell encounter is one in which the vendor, supplier perceive the encounter as having served the vendor, supplier personal self-interest.
Sales that leave you feeling satisfied are those that you felt you have won because some aspect of your self-interest, be it financial, personal or social, has been served by the transaction.
The same is true of the vendor, supplier’s buying influences. They enter the buying-selling encounter hoping to win too and they leave the encounter satisfied when and only when they feel it has served their personal self-interest.
Outcomes to Buy/Sell Encounters
1. Win-WinThe vendor / supplier Company, buyer and Buyer’s company all profit from the transaction
All parties feel positiveAll needs are satisfied
Outcomes to Buy/Sell Encounters
2. Win-LoseThe vendor wins at the buyer’s expenseWe feel good about the transaction but the buyer does notTough to get renewals or repeat business in this scenarioDo not “oversell” or “misrepresent” yourself or your company to any prospect
Outcomes to Buy/Sell Encounters
3. Lose-WinWe lose at their expense“Low-ball” pricingThey lose in the long runService has to be cut or “nickel and dime” tactics are utilized in order to make a profitFalse expectations are established on performance, low renewal opportunities
Outcomes to Buy/Sell Encounters
4. Lose-LoseEverybody loses– the vendor / supplier, the buyer, and their companyNobody feels good about the saleMust manage sales process to prevent this from happingEvery prospect is a long term partner
Manage the Sale into a Win-Win by using Win/Results
An objective business result that gives all buying influences a personal win as well as satisfying organizational needs
Personal wins and business resultsShow how our products and services will
satisfy organizational needs and allow personal wins for all buying influences
Manage Sale into a Win-Win by using Win/Results
The vendor’s is to show each one of your buyers how their product or service serves both his or her personal self-interest and his or her business objective
Remember, there is a big difference between a personal win and a
business result
Determining Buyers’ Wins
Remember:It is never enough to sell results alone, to manage a Target Prospect Sale into a win-win proposition, you have to determine how each of your buying influences will win.
Sample “Results”Economic Buyer
•Low cost of ownership•Good budget fit•ROI•Financial responsibility•Increased productivity•Profitability•Smooth out cash flow•Flexibility•Corporate Citizenship, Green etc. …
User Buyer•Reliability•Increased efficiency•Upgrade skills•Fulfill performance requirements•Best problem solution•Do job better/faster/easier•Versatility•Super-service•Easy to learn & Use
Technical Buyer•Specs best and product meets them•Delivery timely•Best technical solution•Discounts/low bids/price•Reliability
Coach (Wins)•Recognition•Visibility•Get strokes•Make contribution•Be seen as problem solver
Sample “Results”User Buyer
•Hassle Free•Maintenance•Customer Service Representative•Quality of Products•Inventory•No shortages
Technical Buyer•Better quality•Inventory Control system•Service guarantee•Consistent fit and look•Cost to use vs. cost to get
Coach (Wins)•Sees you succeed•Favor to prospect
Economic Buyer•Reduce cost from:
• Loss/Replacement Charges
• Phantom inventory levels•Better Images due to:
• Product Performance• Supply Chain
•Improved Productivity/Teamwork
Relationship Behavior : Relationship
Basic …Product or service as commodity
Strategic …Unique advantage is valued
Example …
Relationship Behavior : Operation Mode
Basic …Competitive bid
Strategic …Flexible, agile, collaborative
Example …
Relationship Behavior : Capability
Basic …Fulfill to requirements
Strategic …Ability to assist with market changes/demands
Example …
Relationship Behavior : Information Sharing
Basic …Limited – electronic
Strategic …Direct linkage access to parts of company
database
Example …
Relationship Behavior : Risk Management
Basic …Contract penalties
Strategic …Process management, shared risk/reward
Example …
Relationship Behavior : Planning horizon
Basic …Current deal
Strategic …No end point, joint strategic planning
Example …
Relationship Behavior : Nature of trust
Basic …Confident in ability to fulfill contract
Strategic …Shared vision, ownership of intellectual capital
Example …
Relationship Behavior : Metrics
Basic …Compliance tracking
Strategic …Business results; shared incentives
Example …
Relationship Behavior : Customer Interaction
Basic …None to limited
Strategic …Impacts major number of customers
Example …
Thank You
Contact Info
Eric T. JoinerPresident/CEO800-482-7473
Nick LairVice President, Chief Purchasing Officer