2023-2024, Block 5 GW4009MV. Healthcare Procurement & Value Chain Management
WEEK 14 & 15
Inhoud
Lecture 1. Introduction to healthcare purchasing & supply management (5-4-2024)......................................3
PSM in care = PSM of care + PSM for care....................................................................................................3
Purchasing for care.......................................................................................................................................5
Classification of hospital purchases..........................................................................................................6
Purchasing ratios.......................................................................................................................................7
Formal definition of purchasing....................................................................................................................8
3 important models....................................................................................................................................10
The purchasing wheel.............................................................................................................................10
Six-stage purchasing maturity model......................................................................................................13
The Kraljic model: “From Purchasing to Supply Management”..............................................................14
Stages of purchasing sophistication....................................................................................................14
Conclusions.................................................................................................................................................16
Workshop 1: Comparing health systems (9-4-2024).......................................................................................17
Notes of the presentation by RSM students:..............................................................................................17
Principles of the Dutch healthcare system..................................................................................................20
Foundation of the healthcare system.....................................................................................................20
1. Health Insurance Act (Zorgverzekeringswet)...................................................................................20
2. Long-Term Care Act (Wet langdurige zorg)......................................................................................20
3. Social Support Act (Wet maatschappelijke ondersteuning)............................................................20
4. Youth Act (Jeugdwet)......................................................................................................................20
Health system performance (indicators).....................................................................................................20
The Euro Health Consumer Index.......................................................................................................21
Lecture 2. Value-based procurement (by H. Bax) (12-4-2024)........................................................................22
Trends and Challenges in Purchasing for Care – Procurement’s role to unlock VBHC.....................................22
Purchasing FOR care – the setting...............................................................................................................22
The Wheel of Purchasing........................................................................................................................23
Procurement structures..........................................................................................................................24
3 hot topics in Procurement.......................................................................................................................25
1. Availability of goods............................................................................................................................25
2. Price and TCO reduction.....................................................................................................................25
3. Sustainability / ESG.............................................................................................................................25
1
,2023-2024, Block 5 GW4009MV. Healthcare Procurement & Value Chain Management
Hierarchy of Procurement objectives......................................................................................................26
Contemporary health systems & public procurement................................................................................27
We need a new Procurement paradigm.....................................................................................................29
From Volume-Based to Value-Based Procurement.................................................................................30
Examples.....................................................................................................................................................34
Literature........................................................................................................................................................39
For lecture 1:...............................................................................................................................................39
I. Kraljic (1983). Purchasing must become Supply Management............................................................39
Supply Strategy...................................................................................................................................39
4-stage approach to shape supply strategies......................................................................................40
II. Lichtenberger et al. (2010). How sourcing excellence can lower hospital costs..................................44
Sourcing Excellence – 3 phases of evolution.......................................................................................44
Sourcing Excellence – 3 organizational enablers.................................................................................46
III. Prada (2016). Value-based procurement: Canada’s healthcare imperative.......................................47
Value beyond cost savings..................................................................................................................47
Implementation of value-based procurement....................................................................................48
For workshop 1:..........................................................................................................................................49
IV. Van Ginneken (2015). Perennial Health Care Reform – The Long Dutch Quest for Cost Control &
Quality Improvement..............................................................................................................................49
For lecture 2:...............................................................................................................................................50
V. Robinson (2008). Value-Based Purchasing for Medical Devices..........................................................50
Value-Based Purchasing (VBP)............................................................................................................50
VI. Den Ambtman et al. (2020). Analysing actual prices of medical products – a cross-sectional survey
of Dutch hospitals...................................................................................................................................53
VII. Stanberry et al. (2021). Using the MEAT VBP Framework to analyse and understand the value of
surgical gloves: an explanatory case study..............................................................................................55
Value-Based Procurement Models......................................................................................................55
The Cost, Quality and Outcomes (CQO) Movement........................................................................56
The MEAT Value-Based Procurement (VBP) Framework.................................................................56
2
,2023-2024, Block 5 GW4009MV. Healthcare Procurement & Value Chain Management
Lecture 1. Introduction to healthcare purchasing &
supply management
(5-4-2024)
Preparation: Read the mandatory articles (listed in the literature section).
PSM in care = PSM of care + PSM for care
Slide 5
You really do need to know the difference between purchasing OF care and purchasing FOR care! So
purchasing in care is the combination of the two.
This basically describes any healthcare system in a developed
economy, where there is a ‘purchaser-provider’ split.
Providers are e.g. hospitals, physiotherapist clinics, pharmacies. Here,
when we talk about provider we talk about an organization! Otherwise,
we will talk about ‘healthcare professional’.
Sometimes, we have to directly pay the provider, but often we don’t,
because we have the healthcare purchaser/payer. They pay for the
healthcare I consume. In the NL, the purchaser is the insurance company. I pay premiums to them and they
pay the bills of the provider.
So a triadic relationship: patient – provider – purchaser.
This triad also goes for the UK. There the purchaser is the NHS. Citizens pay taxes and from those taxes the
whole healthcare system is financed. The NHS is then a commissioning body that decides on the payments.
There is always some government regulation! The USA has the least government regulation, since they
believe very much in market forces. In contrast, in the UK the NHS is accountable to the government.
This is what we will call purchasing OF care (= zorg-inkoop), because these purchasers are negotiating about
the healthcare, the service, itself.
But of course, these providers also depend on purchasing processes with other actors, the suppliers.
Examples are a cleaning company or Philips with its imaging equipment. And this is purchasing for care, this
is purchasing we need in order for healthcare to be provided to patients.
There is also ‘subcontracting’ of healthcare. You see more and more that insurers want to purchase
integrated care, they don’t want to contract with all the providers separately but want to make one provider
accountable for the integrated care. But that provider can’t do that all by themselves, so they need other
healthcare providers to contract with (‘the subcontractors’) so that they can indeed have integrated care
presented to the insurance company.
E.g. patients with diabetes need care from a GP, a dietician, a podotherapist, etc. But the insurance
company might say that they want to purchase integrated care from the GP-office, instead of having to deal
with all the specialisms behind it. So then the GP-office has to contract the dietician, the podotherapist, etc.
But: why is there no direct line between the purchaser and the supplier? E.g. with pharmaceutics.
You do see some insurance companies get involved with purchasing FOR care. But if such interference
occurs, then you see some parties become apprehensive and defensive. But it does happen!
3
, 2023-2024, Block 5 GW4009MV. Healthcare Procurement & Value Chain Management
Slide 6
This is a picture of the UK, of the NHS.
Source: Allen et al, 2009
Where do you see “purchasing for care”?
Which box relates to purchasing FOR care?
The bottom 2 boxes. So the procurement
department purchasing from the suppliers.
Where do you see “purchasing of care”?
The Health Service Commissioner is the
purchaser negotiating with the hospitals (=
the delivery organizations, the providers).
4
WEEK 14 & 15
Inhoud
Lecture 1. Introduction to healthcare purchasing & supply management (5-4-2024)......................................3
PSM in care = PSM of care + PSM for care....................................................................................................3
Purchasing for care.......................................................................................................................................5
Classification of hospital purchases..........................................................................................................6
Purchasing ratios.......................................................................................................................................7
Formal definition of purchasing....................................................................................................................8
3 important models....................................................................................................................................10
The purchasing wheel.............................................................................................................................10
Six-stage purchasing maturity model......................................................................................................13
The Kraljic model: “From Purchasing to Supply Management”..............................................................14
Stages of purchasing sophistication....................................................................................................14
Conclusions.................................................................................................................................................16
Workshop 1: Comparing health systems (9-4-2024).......................................................................................17
Notes of the presentation by RSM students:..............................................................................................17
Principles of the Dutch healthcare system..................................................................................................20
Foundation of the healthcare system.....................................................................................................20
1. Health Insurance Act (Zorgverzekeringswet)...................................................................................20
2. Long-Term Care Act (Wet langdurige zorg)......................................................................................20
3. Social Support Act (Wet maatschappelijke ondersteuning)............................................................20
4. Youth Act (Jeugdwet)......................................................................................................................20
Health system performance (indicators).....................................................................................................20
The Euro Health Consumer Index.......................................................................................................21
Lecture 2. Value-based procurement (by H. Bax) (12-4-2024)........................................................................22
Trends and Challenges in Purchasing for Care – Procurement’s role to unlock VBHC.....................................22
Purchasing FOR care – the setting...............................................................................................................22
The Wheel of Purchasing........................................................................................................................23
Procurement structures..........................................................................................................................24
3 hot topics in Procurement.......................................................................................................................25
1. Availability of goods............................................................................................................................25
2. Price and TCO reduction.....................................................................................................................25
3. Sustainability / ESG.............................................................................................................................25
1
,2023-2024, Block 5 GW4009MV. Healthcare Procurement & Value Chain Management
Hierarchy of Procurement objectives......................................................................................................26
Contemporary health systems & public procurement................................................................................27
We need a new Procurement paradigm.....................................................................................................29
From Volume-Based to Value-Based Procurement.................................................................................30
Examples.....................................................................................................................................................34
Literature........................................................................................................................................................39
For lecture 1:...............................................................................................................................................39
I. Kraljic (1983). Purchasing must become Supply Management............................................................39
Supply Strategy...................................................................................................................................39
4-stage approach to shape supply strategies......................................................................................40
II. Lichtenberger et al. (2010). How sourcing excellence can lower hospital costs..................................44
Sourcing Excellence – 3 phases of evolution.......................................................................................44
Sourcing Excellence – 3 organizational enablers.................................................................................46
III. Prada (2016). Value-based procurement: Canada’s healthcare imperative.......................................47
Value beyond cost savings..................................................................................................................47
Implementation of value-based procurement....................................................................................48
For workshop 1:..........................................................................................................................................49
IV. Van Ginneken (2015). Perennial Health Care Reform – The Long Dutch Quest for Cost Control &
Quality Improvement..............................................................................................................................49
For lecture 2:...............................................................................................................................................50
V. Robinson (2008). Value-Based Purchasing for Medical Devices..........................................................50
Value-Based Purchasing (VBP)............................................................................................................50
VI. Den Ambtman et al. (2020). Analysing actual prices of medical products – a cross-sectional survey
of Dutch hospitals...................................................................................................................................53
VII. Stanberry et al. (2021). Using the MEAT VBP Framework to analyse and understand the value of
surgical gloves: an explanatory case study..............................................................................................55
Value-Based Procurement Models......................................................................................................55
The Cost, Quality and Outcomes (CQO) Movement........................................................................56
The MEAT Value-Based Procurement (VBP) Framework.................................................................56
2
,2023-2024, Block 5 GW4009MV. Healthcare Procurement & Value Chain Management
Lecture 1. Introduction to healthcare purchasing &
supply management
(5-4-2024)
Preparation: Read the mandatory articles (listed in the literature section).
PSM in care = PSM of care + PSM for care
Slide 5
You really do need to know the difference between purchasing OF care and purchasing FOR care! So
purchasing in care is the combination of the two.
This basically describes any healthcare system in a developed
economy, where there is a ‘purchaser-provider’ split.
Providers are e.g. hospitals, physiotherapist clinics, pharmacies. Here,
when we talk about provider we talk about an organization! Otherwise,
we will talk about ‘healthcare professional’.
Sometimes, we have to directly pay the provider, but often we don’t,
because we have the healthcare purchaser/payer. They pay for the
healthcare I consume. In the NL, the purchaser is the insurance company. I pay premiums to them and they
pay the bills of the provider.
So a triadic relationship: patient – provider – purchaser.
This triad also goes for the UK. There the purchaser is the NHS. Citizens pay taxes and from those taxes the
whole healthcare system is financed. The NHS is then a commissioning body that decides on the payments.
There is always some government regulation! The USA has the least government regulation, since they
believe very much in market forces. In contrast, in the UK the NHS is accountable to the government.
This is what we will call purchasing OF care (= zorg-inkoop), because these purchasers are negotiating about
the healthcare, the service, itself.
But of course, these providers also depend on purchasing processes with other actors, the suppliers.
Examples are a cleaning company or Philips with its imaging equipment. And this is purchasing for care, this
is purchasing we need in order for healthcare to be provided to patients.
There is also ‘subcontracting’ of healthcare. You see more and more that insurers want to purchase
integrated care, they don’t want to contract with all the providers separately but want to make one provider
accountable for the integrated care. But that provider can’t do that all by themselves, so they need other
healthcare providers to contract with (‘the subcontractors’) so that they can indeed have integrated care
presented to the insurance company.
E.g. patients with diabetes need care from a GP, a dietician, a podotherapist, etc. But the insurance
company might say that they want to purchase integrated care from the GP-office, instead of having to deal
with all the specialisms behind it. So then the GP-office has to contract the dietician, the podotherapist, etc.
But: why is there no direct line between the purchaser and the supplier? E.g. with pharmaceutics.
You do see some insurance companies get involved with purchasing FOR care. But if such interference
occurs, then you see some parties become apprehensive and defensive. But it does happen!
3
, 2023-2024, Block 5 GW4009MV. Healthcare Procurement & Value Chain Management
Slide 6
This is a picture of the UK, of the NHS.
Source: Allen et al, 2009
Where do you see “purchasing for care”?
Which box relates to purchasing FOR care?
The bottom 2 boxes. So the procurement
department purchasing from the suppliers.
Where do you see “purchasing of care”?
The Health Service Commissioner is the
purchaser negotiating with the hospitals (=
the delivery organizations, the providers).
4
