Leverage buying power for better prices

In today’s healthcare environment, providers must carefully balance the need to control costs against their mission to deliver the highest quality care. One of the multiple paths to this end may be the use of reverse auction services to strategically source and negotiate contracts.

The average health system is comprised of many regional providers. Each of these providers requires goods and services to fuel their operations – everything from maintenance, legal and IT to medical and surgical equipment and pharmaceuticals. And they may all be purchasing these products from different vendors.

[See also: Outcomes matter to hospital supply chain]

As a result, the health system is not effectively leveraging its purchasing power to get the best prices from the best suppliers, according to Oscar May, director of healthcare for Ariba, a SAP Company.

“The first step in evaluating whether a service is right for a reverse auction is to determine where there is spend that can be consolidated,” he said. “Innovative providers have found that by connecting to a business network, they could discover, connect and collaborate with suppliers who can meet their needs on both fronts.”

May said providers using Ariba’s Discovery reverse auction platform can search for suppliers of the goods and services they need, view detailed profiles of their capabilities and even get ratings from other providers who have used them.

“By reaching out and touching more suppliers we are able to increase competition and as a result of increased competition we are able to get more value for the products and services in the prices that we’re paying,” said Karen Sherrill, senior commodity manager at The Ohio State University Wexner Medical Center in Columbus, Ohio. OSU Wexner uses the Ariba Discovery platform.

“We are able to reach a large crowd of suppliers, they’re able to narrow down and disqualify themselves,” Sherrill said. “Those who feel they qualify can go on to the next step and continue on with the process. It’s very streamlined, very efficient, and suppliers can realize business opportunities much quicker.”

World Energy Solutions is another firm that has organized reverse auctions for healthcare providers. The Worcester, Mass.-based firm operates online exchanges for energy and green commodities and serves various industries.

Phil Adams, World Energy’s president, said his company uses an “Anglo-Dutch” reverse auction approach in their online auctions, which is designed to get suppliers to offer their best prices.

“Hospitals have a very sophisticated procurement process and are always looking to be careful with their costs,” he said. “They can clearly see the value proposition in the reverse auction method.”