Internal Customers, Physician Preference Items, and Standardization
Physicians are both participants and customers of the health care supply chain.1 While the patient is the ultimate recipient of hospital products, the physician, or clinician decides which product to use.1 Physicians; because of their strong preferences, create up to 61 percent of total supply chain expenditures, and drive 80 percent of hospital expenditures.1, 2 Physicians possess a lot of power, and at times do not align with hospital management in respect to curtailing rising specialty supply costs. Instead, it has been noted that physicians are more aligned and have stronger relationships with vendors.3 As such; hospital supply chain management has been forced to seek cost-effective strategies that can decrease the ever-rising costs of physician preference items (PPI). Product standardization efforts that take into consideration value-based decision-making techniques are proposed as a method to increase supply chain management efficiency, as well as, maintaining quality and safety of care. Physicians provide services for their patients in hospitals, and utilize resources that the hospital supplies. In fact, the hospital has even been described by economist Mark Pauley as the “doctor’s workshop”. 1 Individual physicians have specific preferences for devices that are generally high-cost, high-quality items.3 These devices or supplies are termed physician preference items (PPI), and are concentrated in cardiovascular, orthopedic, and surgical departments. These items are very costly to hospitals, and also account for a large percentage of hospital revenues and earnings. 3 Thus, management of device and supply choices is central to the hospital’s supply-chain efficiency and financial well being. 3 While the physician decides which device to utilize, he is often not aware of, nor concerned with the economic effects of his choice. 3 Physicians are more concerned with other factors. Price and hospital contracts rank low on the list, while clinical results, reproducing results, ease of use, familiarity with product, instrumentals, and representative services are more important to physicians and the choices they make. 1,4 (Table 1) Physicians exert great control over hospitals because they are generally unwilling to allow constraints to be imposed upon them or their decision-making. 5 Physicians are also able to take their patients to competing hospitals if another hospital applies constraints to their autonomy. These options produce a competitive disadvantage for the hospitals and their supply chain managers. Vendors have a definite advantage over hospitals. They have been influencing physician/surgeon preferences as far back as their residency training. 5 Hence, physicians/surgeons have become very loyal to their vendors and suppliers. Perhaps physicians/surgeons also have collaborated with specific manufacturers to develop new and innovative technology. 3 This then creates an incentive to the collaborating physician as he may receive financial remuneration for the use of this new product. Another advantage that vendors’ possess is their physical presence during procedures that allow direct influence over the specific use of a particular physician preference item. 3 Indeed, vendors many times are present for scheduled or emergent cases in the surgical or procedural suites. All of these vendor or manufacturer specific measures have helped to influence physician’s decisions. Device vendors have successfully divided the alignment of physicians and hospitals and created a competitive advantage for themselves. The relationship between physicians, hospitals, and vendors has created a situation where it has been difficult to control the costs of physician preference items. Achieving price uniformity over a range of products or narrowing the range of products utilized for specific procedures will enable standardization and possible cost savings for the...
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