An editorial by Tom Derrick, co-founder and senior VP of OpenMarkets

There’s no denying that inefficiency is present in the health care supply chain. This inefficiency is what’s attracting Amazon and billions of dollars of Private Equity investment to the industry. Where there’s waste there’s opportunity.

Nowhere is inefficiency more obvious than in the $30 billion equipment segment of the health care supply chain. With an average SG&A of 51 percent, it’s simply expensive for suppliers to sell equipment to providers. This drives up costs and is the core of waste.



So what are we doing about the waste?

Let’s take a look at a few organizations innovating on the front lines.

Can the supply chain perform a miracle?
On August 1st, 2017 the CEO of CHRISTUS Sulpher Springs Hospital in Texas was facing a dilemma: it was time to buy a new C-arm, but cash was tight and there was no shortage of pressing capital needs.

CEO Paul Harvey turned to the supply chain team asking them to perform a miracle.

CHRISTUS Trinity Mother Francis, the health system Sulpher Springs Hospital is a part of, has employed a proactive capital process since 2015. Led by Todd DeRoo, AVP of the Supply Chain, this capital process gives department directors a simple way to submit and justify capital requests. This allows the supply chain team to easily vet requests for aggregation and contracting opportunities. This also allows them to better work with suppliers.

This proactive process allowed DeRoo to work seamlessly with the hospital’s surgical team on the C-Arm project.

“[The surgical team] was able to seamlessly communicate to our team in Tyler, Texas, what their clinical needs were,” DeRoo said. “Our strategic contracting team, in partnership with OpenMarkets, was able to find several suppliers able to offer a solution for the department. Ultimately the department gave us direction on the supplier of choice, as well as the latitude to find the most effective way to get the equipment into the hospital.”

The lesson here? A proactive, data-oriented capital process can put a supply chain team in position to create cost-avoidance miracles.

Buying two imaging tables for the price of one
Kettering Health Network of Dayton, Ohio, and Oakworks Medical, a Pennsylvania-based manufacturer of medical tables, patient positioning devices and more, recently teamed up online to start collaborating on a transaction for imaging tables.

This meant the Oakworks team didn’t have to send a rep out to Kettering.

By engaging each other on the OpenMarkets platform, the supply chain team at Kettering was able to quickly evaluate Oakworks and several other suppliers at once. Once engaged, the Oakworks team and their distribution partners seamlessly provided the insight and information the Kettering team needed to purchase imaging tables for a non-acute facility. As it turns out, the total value proposition delivered by Oakworks to Kettering was attractive enough that Kettering doubled their planned order.



When the cost-of-sale went down for Oakworks, so did the price for Kettering. “This kept our cost-of-sale down and eliminated waste,” said Brian Emmer, VP of Sales at Oakworks. “And this turned into better pricing for the hospital.”

In this case the organizations cut enough waste that the hospital doubled their order. That’s disruption in action.



Saving money on routine equipment purchases
Mt. Graham Regional Medical Center in Stafford, Arizona is nearly three hours from the nearest major airport. This makes it expensive for suppliers to send a team out for demos and meetings, especially if you’re a small business.

Harloff, a made-in-the-USA small business manufacturer of medical carts, was able to keep sales costs in check by working with the Mt. Graham team online. Late last year the director of emergency services and the supply chain director at the hospital needed to jointly evaluate cast carts. Although the equipment itself is not that complicated, selling anything to a hospital is.

Mt. Graham has recently begun moving equipment research and quote gathering online. This saves time for both suppliers and the hospital team, and in this case the Harloff team was able to fully collaborate and coordinate the purchase of orthopedic casting and splinting carts online.

The result? A lower cost-of-sale for Harloff and a lower cost-of-acquisition for Mt. Graham.

“Make it easy”
James Waldrop, controller at Bryton Corporation, another made-in-the-USA small business manufacturer, had never before worked with Granville Health System, before collaborating on the OpenMarkets Exchange.

“Granville made it easy for us to work with them,” said Waldrop. “Zeb Barnette, (the hospital’s clinical value analysis expert) was very responsive to working with us online. We received his communication and sent back our most competitive pricing in a streamlined way. It worked for him and it worked for us. We cut out waste together.”

James is referring to a recent transaction between the two organizations for an OR hand table. Barnette and the Granville team knew they had a need for the table and wanted to vet multiple suppliers in an easy way. Instead of calling together a vendor fair and multiple product demos, they simply reached out on the Exchange to several suppliers at once. STERIS, Ganim Medical, Alimed and others were competing side-by-side with Bryton.

After being pushed together online, the Bryton and Granville teams jumped on the phone to iron out the final details. The end result was a quicker, more efficient transaction.


About the Author: Tom Derrick is a co-founder and senior vice president of OpenMarkets. He may be reached at tderrick@openmarketshealth.com