Summary healthcare procurement & value chain management
Week 1
Lecture 1 – Introduction to healthcare purchasing & supply management
PSM = Purchasing & Supply Management = procurement = sourcing
Give us an example of PSM is a potential exam Q.
PSM in care = PSM of care + PSM for care
Providers are always organizations, healthcare professionals are about individuals
Triad between healthcare purchaser, provider and user so a triadic relationship
- USA: not much government regulated, so small government bodies that regulate
- UK: much government regulated
Purchasing OF care: inkoop van zorg (negotiation with insurers)
Purchasing FOR care: in case of suppliers of certain resources like furniture or beds, there is
purchasing for care. So certain stuff that needs to be bought for healthcare to be provided.
Where is ‘purchasing for care’?
Suppliers of healthcare products Purchasing/procurement
department (ondere 2 boxes)
Where is ‘purchasing of care’?
Health service commissioner primary healthcare delivery
organizations
Purchasing for care
What does purchasing cover?
“Anything for which you receive an invoice/factuur” (prof. Jan Telgen)
It covers:
- Goods and services
, - Direct (“bill-of-materials”) and indirect spend (Volkswagen: everything that ends up in the
Volkswagen car is direct spend, indirect is electricity or machinery)
- Incidental (“one-off” so once in ten years or just once) and highly routine purchases
(weekly/monthly)
- Customized (designing together) and standard (“off-the-shelf”) products
(The term “product” is often used to mean physical goods as well as services)
Is a professor part of the expenses of university? It depends if you are employed and receive salary
or are independent and sent invoices to university.
Direct – medical – patient-related spend
Examples: gloves, pills, verband, bloeddrukmeter, etc.
Most money goes to the direct spends, more customized, some machines are expensive, has
impact on QoC, doctors want to be involved here.
Indirect – non-medical – non-patient-related spend
Examples: stopcontact, pens and notes, cleaners, etc.
More standardized spending, you can hire cheap cleaner so costs can be kept lower more easily.
Capital expenditure (CAPEX), investment goods
A third kind of spend that has to be done once every ten years like innovations/investing in a new
building/buying new machinary (related to afschrijving).
High-preference clinical have to work more closely together with clinicals, want to have a big say
in what is bought like the color of the glasses they wear VS. low-preference clinical.
Price differences between care providers
Products are the same, hospitals pay different price in the end leading to high price variation for
same products, due to negotiations with purchasers (reasons for this are buying big volume and
getting discount, bad negotiators, purchaser strategy, delivery time, sustainability)
Purchasing ratio
Purchasing costs can vary from 10-85% of total costs of an organization (called: “purchasing
ratio”)
Not everything the university pays for is purchasing but they do have costs like for personnel.
Outsourcing: Apple phones are not made in an Apple factory, but somewhere in China.
, Healthcare is a service
Purchasing ratios in healthcare
- Purchasing ratios collected by former ZoMa/HCM students:
o 1-8% (GP, obstetrician, physio)
o 13-22% (care homes)
o 23-36% (hospitals, care homes, home care, psychiatric homes; majority of
healthcare providers)
o 40-65% (some hospitals)
o 66-75% (pharmacies)
Purchasing ratios in four Dutch care sectors (data 2017)
35-40% of hospital costs are purchasing costs
Formal definition of purchasing
“The design, initiation, control and evaluation of activities within and between organizations aimed
at securing inputs from suppliers at the most favorable conditions.”
Based on Van Weele (2010), Wynstra (2006)
Obtaining inputs securing inputs: because healthcare is not obtained but secured, you cannot just
ask for a certain surgery but there are negotiations about products/surgeries.
“Favorable conditions”
A generic list from purchasing in industry, so about what supplier delivers:
- Price (per unit)
- Other costs (delivery costs, printer: product is relatively cheap but ink is expensive)
- Quality (conformance, durability, functionality, safety)
- Delivery (reliability like delivering within 24h, speed)
, - Flexibility
- Technology (innovation)
- Sustainability
Are these applicable as well to:
Purchasing for care (supplier)?
Purchasing of care (zorginkoop)?
The 6-step purchasing process
Internal customer: doctor, who uses a certain product
Expedite & monitor: chasing the supplier when they are late/monitoring (characterizing for Van
Weele)
Operational purchasing: day-to-day process
The purchasing wheel
The 6-step model is much alike this model
Invoices give us an insight into what purchasing it about
The purchasing wheel (top half)
Week 1
Lecture 1 – Introduction to healthcare purchasing & supply management
PSM = Purchasing & Supply Management = procurement = sourcing
Give us an example of PSM is a potential exam Q.
PSM in care = PSM of care + PSM for care
Providers are always organizations, healthcare professionals are about individuals
Triad between healthcare purchaser, provider and user so a triadic relationship
- USA: not much government regulated, so small government bodies that regulate
- UK: much government regulated
Purchasing OF care: inkoop van zorg (negotiation with insurers)
Purchasing FOR care: in case of suppliers of certain resources like furniture or beds, there is
purchasing for care. So certain stuff that needs to be bought for healthcare to be provided.
Where is ‘purchasing for care’?
Suppliers of healthcare products Purchasing/procurement
department (ondere 2 boxes)
Where is ‘purchasing of care’?
Health service commissioner primary healthcare delivery
organizations
Purchasing for care
What does purchasing cover?
“Anything for which you receive an invoice/factuur” (prof. Jan Telgen)
It covers:
- Goods and services
, - Direct (“bill-of-materials”) and indirect spend (Volkswagen: everything that ends up in the
Volkswagen car is direct spend, indirect is electricity or machinery)
- Incidental (“one-off” so once in ten years or just once) and highly routine purchases
(weekly/monthly)
- Customized (designing together) and standard (“off-the-shelf”) products
(The term “product” is often used to mean physical goods as well as services)
Is a professor part of the expenses of university? It depends if you are employed and receive salary
or are independent and sent invoices to university.
Direct – medical – patient-related spend
Examples: gloves, pills, verband, bloeddrukmeter, etc.
Most money goes to the direct spends, more customized, some machines are expensive, has
impact on QoC, doctors want to be involved here.
Indirect – non-medical – non-patient-related spend
Examples: stopcontact, pens and notes, cleaners, etc.
More standardized spending, you can hire cheap cleaner so costs can be kept lower more easily.
Capital expenditure (CAPEX), investment goods
A third kind of spend that has to be done once every ten years like innovations/investing in a new
building/buying new machinary (related to afschrijving).
High-preference clinical have to work more closely together with clinicals, want to have a big say
in what is bought like the color of the glasses they wear VS. low-preference clinical.
Price differences between care providers
Products are the same, hospitals pay different price in the end leading to high price variation for
same products, due to negotiations with purchasers (reasons for this are buying big volume and
getting discount, bad negotiators, purchaser strategy, delivery time, sustainability)
Purchasing ratio
Purchasing costs can vary from 10-85% of total costs of an organization (called: “purchasing
ratio”)
Not everything the university pays for is purchasing but they do have costs like for personnel.
Outsourcing: Apple phones are not made in an Apple factory, but somewhere in China.
, Healthcare is a service
Purchasing ratios in healthcare
- Purchasing ratios collected by former ZoMa/HCM students:
o 1-8% (GP, obstetrician, physio)
o 13-22% (care homes)
o 23-36% (hospitals, care homes, home care, psychiatric homes; majority of
healthcare providers)
o 40-65% (some hospitals)
o 66-75% (pharmacies)
Purchasing ratios in four Dutch care sectors (data 2017)
35-40% of hospital costs are purchasing costs
Formal definition of purchasing
“The design, initiation, control and evaluation of activities within and between organizations aimed
at securing inputs from suppliers at the most favorable conditions.”
Based on Van Weele (2010), Wynstra (2006)
Obtaining inputs securing inputs: because healthcare is not obtained but secured, you cannot just
ask for a certain surgery but there are negotiations about products/surgeries.
“Favorable conditions”
A generic list from purchasing in industry, so about what supplier delivers:
- Price (per unit)
- Other costs (delivery costs, printer: product is relatively cheap but ink is expensive)
- Quality (conformance, durability, functionality, safety)
- Delivery (reliability like delivering within 24h, speed)
, - Flexibility
- Technology (innovation)
- Sustainability
Are these applicable as well to:
Purchasing for care (supplier)?
Purchasing of care (zorginkoop)?
The 6-step purchasing process
Internal customer: doctor, who uses a certain product
Expedite & monitor: chasing the supplier when they are late/monitoring (characterizing for Van
Weele)
Operational purchasing: day-to-day process
The purchasing wheel
The 6-step model is much alike this model
Invoices give us an insight into what purchasing it about
The purchasing wheel (top half)
