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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

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healthcare financial management association

Healthcare Financial Management Association

Premier Health Partners & Scorpion Data Security

May 17, 2011

supply chain division who are we
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 division php cost breakdown
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 division php
Supply Chain DivisionPHP

Sourcing purpose / business foundation:


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.


Actions taken by Sourcing personnel that prevent increased expense from hitting the P&L for PHP.

supply chain division php1
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 division php2
Supply Chain DivisionPHP

How we achieve our goal:

  • PHP supply commitment.
    • Standardization – Achieve <10Th Percentile.


  • PHP supply global pricing.
    • All suppliers can work with PHP but at a global (ceiling) price – Achieve 10th-25th Percentile.
supply chain division php3
Supply Chain DivisionPHP

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 php5
What we need to do better……

Physician Preference items (~15% of PHP supply cost)


Clinical supplies

Non Clinical


Implementation process

Follow up / Feedback on products

Communication – no surprises.

Supply Chain DivisionPHP
supply chain division challenges today and tomorrow
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

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
Strategic Relationship ManagementThe Vendor’s Perspective…
  • Defining and identifying strategic accounts
  • Why is this ‘strategic’? Does “BIG” make it ‘strategic’?
  • Buying Influences
  • “The Approach”
  • Research
  • Buying Motives
  • Positioning “uniqueness's” as requirements
  • Strategic Relationship Behavior
defining a strategic account
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
Identifying Strategic Accounts
  • Database
  • Periodicals and Publications
  • Network
  • Referrals from Customers
  • Referrals from Advocates
  • The Internet
  • 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
the economic buyer
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
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
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 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
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
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
BATNABest 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
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
Motives and Requirements
  • Buying motives leads into conversations about REQUIREMENTS
the definition of winning
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
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 encounters1
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 encounters2
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 encounters3
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
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
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
Determining Buyers’ Wins


  • 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 results1
Sample “Results”
  • 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
Relationship Behavior : Relationship
  • Basic …
    • Product or service as commodity
  • Strategic …
    • Unique advantage is valued
  • Example …
relationship behavior operation mode
Relationship Behavior : Operation Mode
  • Basic …
    • Competitive bid
  • Strategic …
    • Flexible, agile, collaborative
  • Example …
relationship behavior capability
Relationship Behavior : Capability
  • Basic …
    • Fulfill to requirements
  • Strategic …
    • Ability to assist with market changes/demands
  • Example …
relationship behavior information sharing
Relationship Behavior : Information Sharing
  • Basic …
    • Limited – electronic
  • Strategic …
    • Direct linkage access to parts of company database
  • Example …
relationship behavior risk management
Relationship Behavior : Risk Management
  • Basic …
    • Contract penalties
  • Strategic …
    • Process management, shared risk/reward
  • Example …
relationship behavior planning horizon
Relationship Behavior : Planning horizon
  • Basic …
    • Current deal
  • Strategic …
    • No end point, joint strategic planning
  • Example …
relationship behavior nature of trust
Relationship Behavior : Nature of trust
  • Basic …
    • Confident in ability to fulfill contract
  • Strategic …
    • Shared vision, ownership of intellectual capital
  • Example …
relationship behavior metrics
Relationship Behavior : Metrics
  • Basic …
    • Compliance tracking
  • Strategic …
    • Business results; shared incentives
  • Example …
relationship behavior customer interaction
Relationship Behavior : Customer Interaction
  • Basic …
    • None to limited
  • Strategic …
    • Impacts major number of customers
  • Example …
contact info
Contact Info

Eric T. Joiner



Nick Lair

Vice President, Chief Purchasing Officer