User departments like the operating room, radiology and respiratory care decided what to purchase, who to purchase it from, and signed their own contracts with suppliers. Purchasing could not change the supplier even if they could get the exact same item from a different source at a better price. Other departments such as maintenance and housekeeping bypassed the purchasing department completely.

Over time supply chain departments have assumed control for the contracting and purchasing of virtually all supply items. Where they don’t have full control, they usually have at least some influence. This has led to significant cost containment, better supplier relationships, lower total costs and other benefits to the organization.

Through the use of value analysis teams (another best practice), they have bridged the gap between clinician and non-clinician, between departmental specialist and purchasing professionals. No one would like to return to the past. All acknowledge that the current system is far superior to the old.

While supply chain has made great progress in gaining control over supplies, the same cannot be said for services. That is not to say that supply chain departments have no involvement in services.

Many do have some influence and even control over some common services. Many participate in negotiations and sometimes sign the contract for services like biohazard waste, biomedical equipment service contracts, pharmacy and lab distribution, shredding, etc. But only the best practice supply chain operations have true control over the majority of services purchased by the organizations. In most organizations the situation with services is very similar to the practice with supplies years ago: Departments pick their own providers, negotiate their own deals and sign their own contracts.

Some common outcomes of departmental control of services include:

• Lack of competition. Departments often become comfortable with the supplier of a service and will make no effort to seek out other providers who might provide as good or better services at a lower price.

• Lack of knowledge regarding market prices. When the pricing of a service is not tested from time to time there is little way to determine if the cost is reasonable for the service and the market.

• No contracts. Without purchasing involvement many services are provided over long periods of time without any supporting contract. This allows the company to change pricing without notice. It is not unusual, upon investigation, to find that current pricing is far higher than the original agreement and often well above market rates.

• Poorly written contracts. If there is a contract it is usually the supplier’s. This will be written to protect the supplier and have little benefit for the organization. Many of these contracts will include evergreen clauses which can bind the organization for long periods of time.

• Lack of performance standards in the contract. Without these standards it is difficult to hold a service provider accountable for the level of service they are providing.

From recent experience in a number of organizations I can point to several services that are frequently not handled by the supply chain operation. These include:

• Transcription. This has become a very competitive service. [Health information management] directors tend to be very reluctant to change suppliers. Investigation may reveal that there are many small companies providing the service to various components of your organization.

• Banking services. Changing banks is not a simple move. However, different banks will charge different fees – sometimes none at all – for services. They also treat excess funds differently, some paying interest and others not.

• Insurance. Many organizations use brokers to help them get competitive rates. Unfortunately, using a broker does not guarantee that you are getting the best rates. Further, broker fees themselves can be negotiable. Without supply chain encouragement few organizations will challenge their current broker to do better.

• Landscaping. Once the facilities department finds a landscaper they like doing business with they tend to stay with that provider. This is another area where there are usually many good providers who would be pleased to add you to their client list.

• Cleaning services. Many organizations now have numerous buildings outside the main campus including outpatient centers, physician offices, etc. Often these buildings are cleaned by small companies. There may be little consistency in cost or services provided.

• Acute dialysis. This is a service where there is surprising room to negotiate pricing and terms. Unless supply chain becomes involved, this negotiation rarely happens.

David S. Kaczmarek, FAHRMM, CMRP, is a Derry, NH-based director at Wellspring Partners, a Huron Consulting Group Practice, Chicago. Kaczmarek has more that 25 years experience in healthcare administration and materials management, including director positions at several hospitals and systems. He can be reached via e-mail at dkaczmarek@huronconsultinggroup.com.