Pur­chas­ing crit­i­cal for health­care or­gan­i­sa­tions

New Straits Times - - Business World - marco@lb­bin­ter­na­tional.com The writer is founder and CEO of LBB In­ter­na­tional, which pro­vides lo­gis­tics di­ag­nos­tics, sup­ply chain de­sign and so­lu­tions and mar­ket re­search in Asia, Europe and the Mid­dle East.

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..

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