The importance of healthcare procurement

September 12, 2018

It often seems that no matter where you are the conversation can turn to healthcare reform. While this can be annoying, it isn’t shocking. In general, large systems are fertile ground for uncontrolled spending and healthcare is, unfortunately, no different in this regard.

While the exact figures are difficult to obtain due to the sheer size of these systems, research indicates that around a third of the total healthcare spending in the U.S. is wasteful. Annually, this amounts to hundreds of billions of dollars.

Now, you can attribute the lion’s share of this waste to unnecessary medical procedures and tests. Also, the subsequent treatment of preventable conditions is another major factor. However, addressing these problems requires large-scale reforms on a national level.

On the other hand, inefficient procurement of healthcare goods also plays a large part in wasteful spending. And unlike the aforementioned issues, this is something healthcare institutions can do a better job of controlling on their own.

Exploring alternative suppliers

When it comes to medical supplies and equipment, many physicians will have strong favorites they prefer to use. This can be due to the training they’ve received, force of habit, or an unwillingness to adapt to new procedures. In addition, large regional suppliers can also use their position to pressure certain products onto healthcare providers.

When faced with this kind of pressure from both internal and external sources, medical institutions and their management often succumb. When this happens, prices become of secondary importance and procurement costs soar.

However, the way to avoid this is to place greater emphasis on the procurement process and reach out to a wider network of potential suppliers. The truth is, there is a lot of competition out there. As such, many medical products have lower-cost alternatives.

And these savings would under no circumstances jeopardize the quality of patient care. Medical institutions could create RFPs that take all the nuances into account and end up with products that strike a perfect balance between cost and performance. In some cases, it might even be possible to improve patient care which should motivate doctors to make the switch.

Tail spend and healthcare

From spare parts for machines which suddenly break down to items which are not even directly connected to providing medical aid, it is easy for a healthcare institution to engage in unplanned spending. These transactions may not be particularly large individually, but they are unfavorable and they add up.

For that reason, medical institutions need to use data to identify tail spend and address it. By employing a centralized process which goes through the proper procurement channels, it is possible to get significantly better prices.


Because it is a large organization, a healthcare institution stands to gain a lot from an improved procurement system. A digital solution would provide better prices due to a greater selection of vendors and automate a lot of the repetitive work. In addition, easily accessible data is an invaluable tool in analyzing and managing tail spend.

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