Strategic Procurements 10 Commandments for Managing the Hospital Buying Process

As strategic procurement gains more power, authority and influence within hospitals and health care systems they are gradually educating non-procurement personnel within the hospital on how “to engage and not engage” with sales professionals.

We call this education performed by procurement within their hospital “Procurements 10 Commandments for Managing the Hospital Buying Process”. These are the tactics that we have seen most commonly used by procurement within their hospitals. We placed these into a comprehensive list for ease of review.

Procurements 10 Commandments

  1. Always call procurement first before having any initial discussions with suppliers.

Reason: Procurement has standardized on its current suppliers for several reasons: think price, delivery, product quality etc. For these and other reasons, procurement needs to control the entire process of identifying potential suppliers and the entire sourcing process to get the right product at the right price to the right place at the right time. They must be the focal point that brings in other potential suppliers as required.

  1. Discuss only the clinical and functional specifications required for new products with suppliers.

Reason: Suppliers will attempt to gather as much information as possible to position themselves to win the business. Clinicians should only discuss the clinical and functional requirements for new or replacement products. This is your area of expertise. Don’t venture into other areas such as pricing in which you are not an expert. Help us help you.

  1. Do not obtain bids or pricing without procurements’ approval.

Reason: The solicitation of bids or pricing should only come from procurement. In most cases, we have the capability to data mine pricing through third-party sources and compare it locally, regionally and nationally.

  1. Do not begin any product trials without procurements’ approval.

Reason: Beginning a product trial tells the supplier that they are a viable choice to earn your business. It tells them they have made the short list. It also provides them with an opportunity to talk to several staff members and influence them when they are doing in-services, checking back for questions about how the trial is going, your experience etc. Let procurement define the product trial start and end date, location, types and number of patients in the trial, evaluation process, training required and access they will be allowed etc. You are busy enough performing your daily duties, let us handle the planning and details.

  1. Do not discuss pricing, options, warranties, terms or conditions with a supplier.

Reason: With a supplier everything is negotiable. It’s procurements job to get the best deal for the hospital. We have the skills and training in negotiation to get the product required at the best price and with the best terms and conditions available.

  1. Do not reveal your budget or product preference to a supplier.

Reason: Once a supplier knows your budget, they know the price point they need to achieve to win your business. They will adjust their product offering to meet your budget.

  1. Do not reveal your purchase timeline to a supplier.

Reason: When you reveal your timeline, you make it more difficult for procurement to negotiate. If suppliers know that you need a product, service or solution by a given date they will negotiate harder with us on price. We want to negotiate with suppliers with leverage i.e. at their end of their month, quarter or fiscal year end and by understanding their pricing strategy with other customers in other markets and their competitors pricing.

  1. Do not offer to trade-in your old equipment.

Reason: If a trade-in is available, let procurement determine it and explore the options. We will know the depreciable and market value of the asset and be in the best position to determine if it is in the best interests of the hospital to do a trade-in. We will work in concert with each department director if this is an option.

  1. Do not reveal your product preference to a supplier.

Reason: Never, ever reveal your product preferences. Once a supplier knows their product is preferred they will negotiate tougher on pricing. By not revealing product preferences, many suppliers will sweeten their product offering to us because they feel they are only “acceptable and not preferable”. This is especially true if it’s their end of month, end of quarter or end of year.

  1. Do not reveal the competition to a supplier.

Reason: Never tell the supplier what other alternatives you are considering. All suppliers want to know which of their competitors you are considering so they can adjust their messaging to you to their advantage. By not revealing the competition, you keep the supplier guessing and they provide more information to you. This helps you make the best and most well informed decision.

Parting Thoughts

Selling a product, service or solution to a hospital today is increasing in difficulty each year. As a result of Medicare cuts and penalties for poor quality, hospitals are increasingly looking to procurement to cut costs consistently, dramatically and if necessary ruthlessly. Strong procurement departments are using the 10 Commandments to decrease supplier leverage with clinicians and other buying influences. Savvy sellers need to recognize the signals that one or more of these 10 Commandments is in play and develop strategies to mitigate them.