Tuesday October 27, 2015
While I enjoy the game, I do not get out golfing as much as I would like these days. When I do it is usually with my father who is an avid golfer. We enjoy the time together and certainly the friendly competition!
I have finally realized though why he continually beats me; we are focused on two very different strategies. My dad steps up to hit his first shot and drives it straight down the middle for 150-175 yards. I step up in the tee box, swing hard, crush my drive and (when it stays in bounds) my ball flies way past where his ball has landed. It is a great feeling driving the cart to his ball first and giving him a hard time about how much further my ball went past his. My dad always takes it in stride, giving me big high fives and excessive compliments on the hit.
He never seems stressed or worried about losing the hole despite the advantage it appears I have. I now realize why! The drive is only one shot, and while important, it might not even be the most important hit on the hole. In fact, what usually happens is he quietly walks off the green, celebrating a par on the hole, while I am walking off frustrated that despite my early advantage I somehow got a double bogey! My dad gets what is really important; while I was having fun talking about my big drive, he focused his strategy on the total score and did not need to have the farthest drive to achieve that.
I believe our hospital supply chain strategies need to evolve like my Dad’s golf game. I have had the privilege to negotiate many contracts over the years and sit on national supply chain committees with many of our industry’s supply chain leaders. What I have realized from my experiences and conversations with these other leaders is that too often we are focused on the “long drive” and not the total score. Our “long drive” is our strategy to continually focus on the lowest price and not the lowest total cost. Some become very protective and unwilling to share their pricing while others can be heard bragging about having the lowest contract price, when maybe the price, like my long drive, is not even what’s most important.
What my Dad’s golf game can teach us is that negotiating to have the lowest price alone does not automatically mean we will achieve our end goal of lowering total supply chain costs for our health system. I have worked with a hospital who had converted trocar manufactures based on price savings only to have their total cost per procedure increase every month thereafter because their product mix was changed. I have seen hospitals have the lowest price on commodity items per unit, but at the same time have one of the highest total spends per patient day in the same category.
I go to the driving range to practice my drives but my average score does not change. The reality is I spend very little time practicing my putting and chipping, which is why I owe my Dad drinks after each round. In healthcare supply chain, product price is important, but is it the most important? I would argue that if you have the best price on a device, but you are overusing it, misusing it, or even wasting it then no matter how good your contracted price is, you are spending too much for it. Now think about where we spend most of our time and our resources, on negotiations and renegotiations of the price of commodity products. Maybe it is time to focus on the total score, and help our hospital systems not only save on price, but also sustain their savings by lowering their total cost of use.
If you enjoyed reading this, check out more stories in this series.
Mark is the President for Blue.Point Supply Chain Solutions. For the past six years Mark and the Blue.Point team have focused on helping hospitals and their value analysis committees identify variance in product usage through utilization benchmarking, driving significant savings for their customers. Mark is passionate about collaborating with clinicians to focus on total cost and best practices, versus price points alone.