Effective procurement for group of large hospitals through reverse marketing

Background
Almost half the total cost of hospitals in the Netherlands are due to purchased goods and services. Suppliers typically make solid to very good margins on their sales to hospitals. There are many reasons for that. Generically it is strongly driven by the fact that the sales and marketing of suppliers are stronger than the ability of hospital organizations to manage volumes, set specifications and credibly negotiate and control contracts. Organizing a counter-force as ‘reverse marketing’ can be highly effective and bring substantial savings. We have done this for several hospitals, most recently for a large group of hospitals

Why we became involved
Hospital management, knowing that we have experience in the private sector in seeking maximum profit for sophisticated services and product companies, asked us to help organize the counter force against the marketing power of their suppliers. Goal and explicit purpose of hospital management was to reduce costs by better purchasing and invest these benefits in enhanced care activities. This was pivotal in securing the full support of both medical and other staff.

What we did
First we made the total annual purchase (all €€€ paid) transparent by supplier and type of purchase. Then for the large categories and product-types we reviewed how volume and specs were determined and what alternatives for lower levels could be envisioned. Cost reduction ideas were generated jointly with the key professionals involved. Subsequently new volume and spec levels were agreed upon and entered into the negotiations. In parallel we reviewed price levels paid: internal and external benchmarking provided insight for lower realistic price targets.
Armed with new targets for volume, specs and price we assisted hospital management in entering renegotiations with the largest suppliers. We also helped involve doctors and other professionals to take an active role. The savings were well above 10% of the total purchasing volume of the various hospitals.

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