Author’s note: About an hour after I finished writing this blog, I learned that my longtime friend and mentor Tom Hughes had died. I hope that this can serve as homage to one of the giants of the healthcare supply chain.
The COVID-19 pandemic has placed a new focus on the healthcare Supply Chain. The question of the day likely as not is, “Should we create a Consolidated Service Center or centralized warehouse?”
The C-suite, left to evaluate possibilities and hamstrung by shrinking or non-existent operating margins, often find themselves grasping for straws- anything that will bring them the answers they seek at a cost they can afford.
Understanding those constraints, the first groups to come forward often include the Group Purchasing Organizations (GPOs) and the major supply and pharmacy distributors. These organizations often have deep roots with C-suites and are quick to offer their services at either a very low cost or, more often than not, for free. They offer to send their “consulting” staffs into the organizations to “assess” their operations and provide recommendations for future courses of action.
What could possibly be wrong with such a sincere offer of help- for free, no less?
Several years ago, I was working as a consultant for one of the largest GPOs. Our general type of project was what was known as a Non-Salary Expense Reduction (NSER) engagement in which we came in, looked at contracts, inventory management, product standardization (now Value Analysis), utilization, alternative treatment approaches, etc. We sold our services as a value-add designed to provide the member with access to resources that were not normally available to them. We would often tell the member that, although we were employed by the GPO, our only interest was in finding the best solution for the member- regardless of whether or not it meant abiding to GPO contracts.
I was new enough as a consultant to actually believe that. One day, I discovered the error of my ways. We were making a presentation to our largest shareholder in the Upper Midwest. The presentation was so big that several of the GPO’s senior leaders were in attendance. When it came time for my presentation, I was going along swimmingly until I said, “We want you to know that although we are employed by —, your best interests are all that matters to us. If the best answer means choosing a non- — supplier, then we will tell you.” The bigwigs glared at me. My boss rolled his eyes and my boss’ boss silently pointed to the door. I finished my portion of the presentation and dutifully excused myself.
Seconds after I left, my boss’ boss was out the door as well. She took me into a small room and read me the riot act. “We only tell people that we are here to help them in spite of the GPO agreements when senior GPO leadership is not around. Are you really that stupid? If one of the senior leadership suits ever shows up to a meeting and you say something like that, I will fire you on the spot.”
I was naïve. Like Navin Johnson in The Jerk, I thought about it for a while and came to the conclusion that, “Ahh, it’s a revenue thing.”
Fortunately for me, within a few months, I received an offer from what had been Tom Hughes’ consulting firm, Concepts in Healthcare. To this day, CIH remains the best supply chain management consultancies I have ever known. Seven of its former employees have been inducted into the Bellwether League, the Healthcare Supply Chain Hall of Fame. Shortly before I came on board, Hughes had sold the firm to Becton-Dickinson, a supplier. The consulting arm was, in this case, totally independent of the manufacturing side, and its all-star staff produced stellar work.
A few years later, I went to work for Cap Gemini/Accenture, another pure consultancy. In a pure consultancy, you are bound to no one or nothing beyond the truth. Your agenda is always the same:
The only service the pure consultancy sells is the finished product agreed upon in the statement of work. GPOs and distributors, on the other hand, are already doing business- often big business- with the Healthcare Organization (HCO). GPOs and distributors face tough competition. The loss of a large Integrated Delivery Network (IDN) can be disastrous to either. Hence, the offer of free services.
GPOs and distributors are not the only organizations to offer “free” work. Transportation services, Linen companies, record storage services, transcription services and scores of others. The free work is generally a part of the sales process and, while many of the free offerings actually lead to opportunities identified, ALL are intended to lead to sales and compromise an objective due diligence process.
The current state is a critical one. More and more hospitals and systems are facing dire straits. Consequently, like Dire Straits, they find themselves trying to get their “money for nothing and their chicks for free.” The offer of a free assessment is seductive.
But ask yourself this: With your very survival on the line, can you afford the cost of a free assessment?
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If you find yourself interested in developing a post-pandemic supply chain strategy, please contact St. Onge. Our experts stand ready to take a look at your operation and find the opportunities you may have overlooked. You can reach me at firstname.lastname@example.org or call me at 563-503-1847.
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