Executive Insights

Healthcare providers (IDNs) buy and suppliers sell. That’s the way it has always been. At face value, they are at odds with each other. However, if we look at the “end game” both providers and suppliers want to create value for their customers and make more profit. If they learn to work together, both can benefit. This is called synergy and is done through partnerships.

The difficulty in achieving this synergy is that both providers and suppliers need to change their behavior and expectations. They need to trust each other and know how to work with each other effectively.

A partnership is a business relationship based on mutual trust, openness, shared risk and shared rewards that results in performance greater than they would have achieved without a partnership.

You must choose your partners carefully. Here are some of the characteristics of a good partner:

Considered a high-performing, hassle-free supplier
Trust that pricing is both logical and fair
Relatively large spend
Capacity and willingness to innovate with limited risk to the customer
Capacity and willingness to work with the customer on cost reduction initiatives

A partnership needs three steps:

Identification of needs
Matching the needs with the partner
Measurement of benefits and results (Benefits must be mutual)

Supplier performance metrics should cover cost, quality, and service dimensions.

“Total cost” is driven by demands on quality and service such as price, transportation costs, inventory costs, etc.
“Quality’ should be defined so both the supplier and customer know what it costs such as rejection rates, utilization, etc.
“Service” levels drive cost such as on time deliveries, purchase cycle time, supplier responsiveness, etc.

10 years ago, it was much harder to create value out of partnerships in healthcare due to the size of the industry, the high number of suppliers and providers, and the lack of trust between them. Today, there are more examples of partnerships in the industry to learn from. It can and does happen.

My challenge is to see the value in supplier partners by viewing them as extensions of our own business. We need to know how to create value from our best suppliers and share in the benefits between both parties. It’s a best practice. Developing partnership synergy adds value to the industry.