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To Cut Hospital Costs, Leverage Vendor Relationships

Karen Minich-Pourshadi, for HealthLeaders Media, May 9, 2011

Once the ink dries on your vendor contracts, do they simply get filed away? Many financial leaders would likely respond "Yes", but there's more to supply chain management than getting the best price. Actual supply chain management requires cultivating relationships that can reduce revenue cycle expenses and help a hospital or health system achieve strategic goals.  


What is SRM?

Supplier relationship management is an approach to managing business interactions with the vendors. Practiced by many in the business world, it is rarely used in healthcare, though with a larger number of providers using Lean and Six Sigma process improvement initiatives, the numbers are growing. The goal of SRM is to make the processes between an enterprise and its suppliers more streamlined and efficient. SRM encompasses both business practices and software, and falls under the information flow area of supply chain management.

SRM creates a common communication and goal-setting structure between the hospital and supplier, both of whom frequently use different business practices and terminology. In doing so, both the hospital and the vendor increase the efficiency in acquiring goods and services, managing inventory, and processing materials. Advocates of SRM say it lowers production costs and improves quality.

How does it work?

Intermountain Healthcare, a 24-hospital, $3.6 billion net revenue Utah-based healthcare system, embraced SRM eight years ago as part of its supply chain management. Brent Johnson, vice president of supply chain and imaging services and chief purchasing officer, says he found that building a relationship with his vendors opened up a variety of opportunities and cost savings.

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