Internal Customers, Physician Preference Items, and Standardization

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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



References: 1. Schneller, ES, and Smeltzer, LR. 2006. Strategic Management of the Health Care Supply Chain. San Francisco: Jossey-Bass.

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