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Starting with Price Parity with Physicians

In hospitals and health systems everywhere, supply chain is often tasked with identifying areas of potential savings within the realm of clinical spend. It’s an important area, but one where the prevailing technologies are excruciatingly manual and stuck in the past.

Of course, having the right technology is only part of the equation. Supply chain teams also need to achieve buy-in from clinicians and physicians. And that can be a tough task to accomplish. Most of these items fall into the category of physician preference items, or PPI. How exactly should supply chain teams engage physicians and better collaborate about the economic impact of their preferences in relation to PPI?

It’s a great question, and one that our team at Curvo has seen a number of successful approaches to accomplish this challenge. The approach we’re highlighting today is one we heard about from Debbie Schmidt, Director of Supply Chain Services at Carle Foundation Hospital. Debbie shared how she used price parity to build a relationship with clinicians and gain buy-in for savings during a webinar for Capstone Health Alliance members.

Debbie has achieved significant savings in PPI with the help of physicians by using Curvo to negotiate with medical device vendors. She started with price parity, earned trust from clinicians, and gradually worked towards changing vendors in some categories. In this article, we’ll explore exactly how she accomplished this feat.

The Problem: Vendor and Clinician Pushback

In any cost savings initiative, physicians and clinicians are likely to give some pushback. Whether or not the supply chain team is using Curvo, they will eventually identify a clinically equivalent item that would provide the hospital system significant cost savings.

The sticking point for clinicians may be that they genuinely prefer one product over the other. In some cases, there are clear advantages to the more expensive product and clear reasons to continue using it. But another common issue is the relationship between vendors and clinicians. When supply chain calls up a vendor and informs them of an upcoming switch, the vendor immediately calls the physician and starts up a sales pitch: our item is better, it’s the only one that truly does the job, and on it goes.

So supply chain gets grief from the vendors as well as from the clinicians. Worst case scenario, the savings opportunity withers.

The Solution: Start with Price Parity

Debbie Schmidt’s approach worked because she didn’t start by asking physicians to switch products. Instead, she sidestepped the switching question by focusing on repricing for price parity.

Practical Lessons From Debbie

First, schedule meetings with the physicians to share what you’re doing. Explain that you’re not trying to force clinicians to change from their preferred products. Rather, your team is just trying to get the best price from your current vendors.

At this point, it’s important to understand your audience. Physicians tend to be a competitive group. They want to succeed, so when you can show a huge discrepancy in the numbers, they often respond. Show them the same benchmark insights you discovered as well as the price they are paying for an item and how it compares to what their peers are paying at similar hospitals. Show them how their price compares to the market for physicians that do similar volume or deliver similar market share to that vendor.

When you use real data in this conversation, physicians will see the opportunities for savings. Most will find these opportunities compelling. And since you’re not yet asking physicians to switch vendors, buy-in is often very high.

Additionally, help your physicians understand that when you talk to a vendor about repricing, the vendor’s first phone calls will be back to the physicians in an effort to keep the status quo. Work to get your physicians on your team in regard to these phone calls.

Here’s where the story got interesting for Carle Foundation Hospital:

Debbie promised her clinicians that if they would back her up in those vendor conversations, she wouldn’t make them switch to new products. She asked the physicians to reply to those vendor phone calls with something like, “Yes, I’m aware of what supply chain is trying to do. And I agree: I think our hospital should get a better price!”

It turned out to be a smart move.

By getting out in front of a known problem, she turned her clinicians into allies. Instead of the physicians coming back to supply chain up in arms about a potential change, the physicians helped achieve real cost savings.

That’s price parity. Instead of going after immediate vendor changes, physicians and supply chain worked together to negotiate for better pricing – price parity – on the physicians’ preferred items (PPI).

The Follow-up: Keep Showing Data

Once you have your clinicians on board using price parity strategies, you’ll have a much more engaged audience for the more challenging conversations surrounding switching vendors.

Clinicians who are already engaged in the price parity process are ready for insights into price performance that go beyond a single pie chart. They want to see more than just the big picture, holistic price performance. They want to see the details, and the hospitals showing that type of data are winning the savings game.

Supply chain teams that start with price parity earn the opportunity to recommend strategic vendor changes that impact savings. They have earned trust. They continue earning that trust by continuing to show data.

The key to successfully navigating vendor changes is to present the options. Show physicians the ramifications of those options, and the data will often do the work. Savvy supply chain leaders like Debbie and others do this. They show the impact of multiple decisions on savings. They show a conservative option with repricing, one that doesn’t require changing vendors. They then follow that up with one or two more aggressive savings options that involve changing vendors.

Not surprisingly, competitive surgeons who have already seen success through price parity efforts typically choose the more aggressive savings options. Once you achieve clinician buy-in on price parity initiatives, it becomes much easier to achieve it on more aggressive vendor changes. Once clinicians get a taste of budgetary success, they tend to want more.

By leveraging Curvo data to present to clinicians, savvy supply chain leaders often find their clinicians select the most aggressive savings option presented.

Starting with Price Parity with Physicians

The Problem: Vendor and Clinician Pushback

The Solution: Start with Price Parity

Practical Lessons From Debbie

The Follow-up: Keep Showing Data

Further Reading and Discussion