Purchasing critical for healthcare organisations
MANAGING a world-class healthcare organisation does not only require medical expertise but also business expertise. Within the healthcare organisation, the purchasing function is increasingly important.
In fact, a significant part of the healthcare costs can be directly linked to the effectiveness of the purchasing function.
Professionalisation of the purchasing function is therefore essential in a more efficient organisation of hospitals, specialist centres, elderly homes, disability care, general practitioners, dentists, etc.
However, what I often discover about healthcare organisation is that there is a lot of untapped potential in saving purchasing costs and improving purchasing organisation.
Purchasing in healthcare organisation is generally not well structured, category management and inventory management practices are ineffective, synergy advantages not exploited, and supplier management inefficient. Let’s explore this in more detail.
Although many healthcare staff are in one way or the other involved in purchasing, purchasing in healthcare organisations is often not well structured in terms of purchasing policy, purchasing process, purchasing methods and procedures, purchasing organisation, information systems and performance measurement.
The above components are often not well-defined or show serious shortcomings.
Category management should be a critical focus area for a healthcare organisation, which looks at standardisation of the goods purchased. A rationalisation of a category in direct consultation with the respective healthcare specialists reduces the number of suppliers, inventory levels and purchasing costs.
Today, healthcare organisations throw away millions of ringgit of medicines and other consumables every year as they passed their expiry date. This wastage can be significantly reduced, with less different articles kept in storage against lower inventory levels.
There is a lack of horizontal and vertical collaboration in purchasing with other healthcare organisations.
Horizontal collaboration, collaboration with similar organisations, can be achieved through collaboration on project basis (eg, in case of a national epidemic or disaster), selective collaborative purchasing in certain disciplines (eg, certain expensive equipment and medicines), or a joint purchasing organisation.
Synergy advantages are achieved in terms of reduction of purchasing costs, but also better purchasing conditions, or consolidating pressure to suppliers comply with important needs, such as halal. In case collaboration with competitors is too sensitive, a separate healthcare purchasing organisation could play this role.
Vertical collaboration, collaboration within your own healthcare chain, like collaboration between hospitals and nursing homes, allows for faster flow between hospital and nursing homes with less bed stay in hospitals.
Hospital stays are less cost-effective than nursing home stays. Collaboration can therefore reduce healthcare costs in a big way.
Better supplier management is beneficial with a reduction of invoices from suppliers and the in- troduction of purchasing automation to support especially the administrative purchasing process.
In summary, purchasing in healthcare organisation need further professionalisation.
Massive cost reductions are possible in healthcare without affecting the quality of healthcare in government and private healthcare organisations. Annual reporting and benchmarking on purchasing performance of government hospitals as well as private hospitals could be an effective instrument to enhance awareness of the importance of the purchasing performance of healthcare organisations.
With an ageing population by 2035 and increase of non-communicable diseases, such as heart disease and diabetes, purchasing excellence in healthcare is not just a luxury for Malaysia but a pure necessity.
Today, healthcare organisations throw away millions of ringgit of medicines and other consumables every year as they passed their expiry date. This wastage can be significantly reduced, with less different articles kept in storage against lower inventory levels..