When SuppliersBecome Part of AProvider’s Mission

By Ed Hardin, FACHE, Senior Vice President, Supply Chain Management

The supply chain at CHRISTUS Health, which has more than 60 hospitals across the care continuum, has seen a dramatic performance turnaround in the past few years. By controlling annual growth in non-pharmaceutical spend and reducing pharma spend at a time of drug cost hyperinflation, we have moved from the bottom half of Catholic systems to the top 25% and from a flow of red ink to financial stability.

We have achieved this through many different initiatives, but an increasingly important strategy is our relationships with our suppliers. While most hospitals and health systems hold vendors at arm’s length, we have established strategic partnerships with a subset of vendors that have committed to meet key performance indicators and to work with CHRISTUS to help achieve its faith-based mission.

This effort took root in late 2012 with the formation of the industry’s first vendor board, the Partner Advisory Council. Far less than 1% of our suppliers havemade the cut to join the PAC. The returns, however, are significant. Approximately $350 million out of a total spend of $1.2 billion goes to just 25 PAC suppliers. For these vendors, this is a chance to work with an organization that is highly collaborative, keeps its word, and rewards high-performing suppliers with more business. For CHRISTUS, it means improved performance, lower costs and value add-ons that go well beyond contractual obligations.(A Diversity Supplier Council also branched out from the PAC to promote inclusion and share performance data.)

Being a PAC member isn’t easy. A Vendor Balanced Scorecardmeasures supplier performance based on criticality to operations, product/service performance and customer satisfaction. Twice a year we require executives of each vendor to come to our headquarters in Texas for business reviews with our Supply Chain Management team. They don’t get any more of our business unless they prove they are delivering value. We also look to see if the relationship is deepening. The status quo is not our goal; we look to the partner to continue to look for innovations to improve their level of service.

We hold quarterly PAC meetings in which we share proprietary information, system strategies and organizational status. We want to have our partners walk in our shoes for a while, and to the degree they feel comfortable with it, let us walk in theirs. We want to know what motivates them and where they are going as companies. We also want to share our needs and find new ways of working together than benefit both sides. When we make a new policy, we ask for the entire PAC community to review and sign off on that policy.

We have identified five key strategies providers might use to move from a transactional framework for vendor relations to a strategic partnership model:

  1. Involve vendors in your strategic planning efforts, thus creating ownership for your success.
  2. Regularly release organizational information, historically kept from vendors, and provide the context so that vendors can “walk in your shoes.”
  3. Annually identify two to three collaborative projects that can receive internal and external visibility.
  4. Embed large dollar and highly interactive vendors into your organization. We have a GPO rep, a rep of primary distributor and a clinical engineering rep, each of whom spend a day or two a week on site with us. The insights gained from being embedded in our health system enables vendors to deliver more targeted and effective solutions, because they know what we are thinking about.
  5. Remove underperforming vendors from your ranks and provide the context to rest of your vendor community so that they learn your expectations.

Through our PAC community we are making a connection between our performance, our faith-based mission and our collaborations, which have helped turn around our organization. This is a big part of our future vision for our organization as we continue to find new ways of lowering costs and improving patient care.