Healthcare Financial Management
Association
Premier Health Partners & Scorpion Data Security
May 17, 2011
Supply Chain Division
Who 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 Division
PHP Cost Breakdown
 Salary and Benefits
 Supplies+ Purchased Services
 Depreciation
 Bad Debt, Interest Exp, Tax
TOTAL
2011 PHP Budget
52%
35%
7%
6%
$1.7 Billion
Supply Chain Division
PHP
 Sourcing 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 AVOIDANCE
 Actions taken by Sourcing personnel that prevent increased expense from hitting
the P&L for PHP.
Premier Health Partners
Sourcing Savings Since Inception
$16,000,000
$140,000,000
119,474,261
$14,000,000
$120,000,000
$12,000,000
$100,000,000
$80,000,000
$8,000,000
$60,000,000
$6,000,000
$40,000,000
$4,000,000
$20,000,000
$2,000,000
$0
$0
2000
2001
2002
2003
2004
2005
2006
2007
Year
Annual
Cumulative
2008
2009
2010
2011
Cumulative Savings
Annual Sourcing Savings
$10,000,000
Supply Chain Division
PHP
Premier Health Partners Pricing Strategy
PHP strives to be in the lower quartile (<25%) on all
supply costs and vendor contracts.
Supply Chain Division
PHP
How we achieve our goal:

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.
Supply Chain Division
PHP
 Strategic Intelligence
 Price Lynx Data Base
 VHA Group Purchasing Affiliation
 Local Coalition
 Midwest Purchasing Coalition with Ohio Health and Community
Health
 Operational Efficiency
 Supply Chain Organizational Assessment - Infrastructure
Supply Chain Division
PHP Supply Metrics System Scorecard
(Last 4 Qtrs.)
System
Total 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 Division
PHP
PHP Local Spend Summary
PHP Minority Supplier Inclusion
Program
$35,000,000
$30,000,000
$25,000,000
$20,000,000
$15,000,000
$10,000,000
$5,000,000
$0
W/MBE Spend
2008
2009
Year
2010
$140,000,000
$120,000,000
$100,000,000
$80,000,000
$60,000,000
$40,000,000
$20,000,000
$0
9 County Area
2009
2010
Year
Supply Chain Division
PHP
 What we need to do better……
 Physician Preference items (~15% of PHP supply cost)
 Standardization
 Clinical supplies
 Non Clinical
 Equipment
 Implementation process
 Follow up / Feedback on products
 Communication – no surprises.
Supply Chain Division
Challenges – 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 Management
The Vendor’s Perspective…
 Defining and identifying strategic accounts
 Why is this ‘strategic’? Does “BIG” make it ‘strategic’?
 Buying Influences
 “The Approach”
 Research
 BATNA
 Buying Motives
 Positioning “uniqueness's” as requirements
 Strategic 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
 Database
 Periodicals and Publications
 Network
 Referrals from Customers
 Referrals from Advocates
 The Internet
Strategic?
 A better word may be “complex”
 A strategic account requires research and multiple sales calls
 Multiple buying influences / decisions makers
 Decision makers with different wants, needs and biases
 Senior Executives are involved in the decision making process.
Procurement collaborating with end users.
 Awareness of current spend/budget
BUYING INFLUENCES
Economic 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 Company
 CEO
 Owner
 COO
 General Manager
 Has full P/L responsibility for the Company or location
The User Buyer
 Often mistaken as THE decision maker
 This is the vendor, supplier’s “day to day” contact
 This person is the most “in touch” with the vendor, supplier’s
product or service
 This 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 service
Inclination is to “bid” the proposal to assure competition (lower
pricing, better terms etc…)
PRICE more important than VALUE
Having “savings targets” in their comp plans
The 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 tenured
 Report “high”
 Be influential
 Want you to win!
 Must derive a benefit from you winning
 Have the “ear” of the Economic Buyer
 Great 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 possible
 Managers/Directors/Champions
 Site surveys
 After much research
 Start a folder/binder
 Craft an “interest creating” statement that is customized to
the target prospect
 Procurement should not be the first call
BATNA
Best Alternative To a Negotiated Agreement
 This is the vendor, supplier’s “real” competition
 Every Company and every Buyer has one
 What 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 product
Better service
Lower overall cost
Fulfill a “business connection” (Green, Safety etc…)
Faster
Diverse supplier initiatives
More features
Less hassle – more convenience
Image
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-Win
 The vendor / supplier Company, buyer and Buyer’s company
all profit from the transaction
 All parties feel positive
 All needs are satisfied
Outcomes to Buy/Sell Encounters
2. Win-Lose
 The vendor wins at the buyer’s expense
 We feel good about the transaction but the buyer does not
 Tough to get renewals or repeat business in this scenario
 Do not “oversell” or “misrepresent” yourself or your company
to any prospect
Outcomes to Buy/Sell Encounters
3. Lose-Win
 We lose at their expense
 “Low-ball” pricing
 They lose in the long run
 Service has to be cut or “nickel and dime” tactics are utilized
in order to make a profit
 False expectations are established on performance, low
renewal opportunities
Outcomes to Buy/Sell Encounters
4. Lose-Lose
 Everybody loses– the vendor / supplier, the buyer, and their
company
 Nobody feels good about the sale
 Must manage sales process to prevent this from happing
 Every 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 results
 Show 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 selfinterest 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. …
•
•
•
•
•
Technical Buyer
Specs best and product meets them
Delivery timely
Best technical solution
Discounts/low bids/price
Reliability
•
•
•
•
•
•
•
•
•
•
•
•
•
•
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
Coach (Wins)
Recognition
Visibility
Get strokes
Make contribution
Be seen as problem solver
Sample “Results”
Economic Buyer
• Reduce cost from:
• Loss/Replacement Charges
• Phantom inventory levels
• Better Images due to:
• Product Performance
• Supply Chain
• Improved Productivity/Teamwork
•
•
•
•
•
Technical Buyer
Better quality
Inventory Control system
Service guarantee
Consistent fit and look
Cost to use vs. cost to get
•
•
•
•
•
•
User Buyer
Hassle Free
Maintenance
Customer Service Representative
Quality of Products
Inventory
No shortages
Coach (Wins)
• Sees you succeed
• Favor to prospect
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. Joiner
President/CEO
800-482-7473
eric@scorpiondatasecurity.com
www.scorpiondatasecurity.com
Nick Lair
Vice President, Chief Purchasing Officer
499-8427
jnlair@mvh.org