By R. Dana Barlow
October 2024 – The Journal of Healthcare Contracting
To borrow shamelessly from the opening line of a famous Charles Dickens novel (you know the one), purchased services in healthcare supply chain represents the best of opportunities and the worst of opportunities.
When the term “purchased services” emerged in the healthcare supply chain more than a decade ago, it drew curiosity, interest and miles of trade media coverage – not unlike artificial intelligence (AI) today and blockchain some 15 minutes ago.
The initial struggle centered on a definition, if not a delineation of financial and operational borders.
From a clinician’s perspective (and by default an administrator’s), purchased services resembled the letter and spirit of the first episode of the Netflix series, “The Crown,” titled, “The King’s Duck Hunt.”
In that episode, King George VI is advising new son-in-law Prince Phillip on the nuances of marriage shackled to royalty. Rather than diving into the weeds of the dialogue, however, it’s important to focus on the activity going on simultaneously. The actual royal duck hunt process could have been plucked from the assembly-line mentality of Henry Ford. The king, with the prince adjacent, indifferently received a single shot-loaded rifle from a royal subject on his left, leaving His Royal Highness to point, aim and shoot, before handing the empty weapon to the royal subject on his right.
His majesty cared not from whence this weapon came, nor where it went, just that it was loaded and ready for him at all times. This is just like a clinician – particularly a doctor or surgeon – who, by and large, cares not from whence their devices and products come (preferences aside), nor where they go, just that they’re always ready.
Such is the motivation and value of purchased services, which only gooses this process. Supply chain may maintain and manage product and service contracts (negotiated independently and via group purchasing organization) for much of what is used in a healthcare facility, but purchased services enables them to bring in “non-contract” products and services (including external consulting, freelancers and other third-party contractual services) in a different bucket and category than traditional labor (or staff/salary) and non-labor expenses.
Yet it’s not merely a bucket rearrangement, akin to a humorous exchange by Ted Forth in the March 2012 comic strip “Sally Forth” as he’s cleaning out the garage and his daughter Hilary asks what to do with a box marked “Stuff” that she found. “That was during my ‘hyper-organizing’ phase,” Ted replies. “Just place it next to the box marked ‘Things.’”
Purchased services can be the invention of a lifetime for optimistic supply chain professionals – a true watershed moment – or a Waterloo for pessimists, depending on your leadership acumen and management style.
Just like Spider-Man’s motto, “with great power comes great responsibility,” so goes supply chain with purchased services.
Arguably, this expansion gives supply chain more authority and influence with the addition of “non-traditional” product and labor costs that once fell outside the labor expense category (No. 1) and the non-salary expense category (No. 2). It’s not unlike the Pepsi (PepsiCo) and Dr. Pepper (Keurig Dr. Pepper) brands (virtually tied for No. 2 market share last year) hurdling past the Coca-Cola brand of soft drinks (e.g., Coke, Diet Coke and Sprite) by picking up a few Celsius’ and Monsters along the way.
With chutzpah and hubris, some might be so bold as to claim that purchased services vaults supply chain to the top of the expense management heap.
But planting your flag as king of the bills also means you have a lot more to be responsible for – keeping more plates spinning, whacking more moles, enduring more migraines.
Case in point: The recent CrowdStrike incident where a cybersecurity software transfer ran afoul of Microsoft technology, effectively shutting down operations at airports, banks, hospitals and others. CrowdStrike’s tech could be a purchased service for a healthcare organization, which relied on them as the Marvel Comics hero “Wolverine” fighting off unwanted hackers, but in that one incident got antihero “Deadpool” instead when 8 million Microsoft computers went dark across the globe and processes became less than tidy.
All in all, the concept of purchased services brings assembly, control and order to third-party everything. Whether supply chain considers this leadership by Lego or management by Minecraft, the oversight of purchased services allows them to succeed with the building blocks of outsourced strategic and tactical labor, products and services and to showcase their valuable contributions to healthcare operations and healthcare in general.
R. Dana Barlow serves as a senior writer and columnist for The Journal of Healthcare Contracting. Barlow has nearly four decades of journalistic experience and has covered healthcare supply chain issues for more than 30 years. He can be reached at rickdanabarlow@wingfootmedia.biz.