The Business Review – The Journal of Healthcare Contracting

Pre-planning and clear action items will move things along

Editor’s note: Don’t let a business review with your key suppliers turn into an opportunity to admire your problems, advises Kreg Koford, assistant vice president of strategic sourcing and solutions, Intermountain Healthcare. Rather, it should be nothing short of an ACTION plan. Other supply chain executives with whom the Journal of Healthcare Contracting spoke agree. Based on their input, we have assembled the ingredients of a successful business review.

Number 1: Get your head straight about WHY you hold regular business reviews with your key suppliers

“A business review begins as concept,” says Brent Petty, executive industry consultant – healthcare, Lexmark International Inc. “Both the provider and supplier must consider what they can do better together than separately. They need to agree upon what success looks like. Both sides need to have a game plan that becomes a business plan, and then develop a path in which they can communicate and measure.”

At the very least, the business review should be an opportunity to ensure that the terms of the contractual relationship are being met – e.g., service, quality, pricing issues, says Petty. “From here, any project or initiatives updates should be provided, with priority given to those that support the health system’s strategic objectives, such as improving outcomes, lowering total cost of ownership or increasing staff and patient satisfaction.

Brent Petty

“Too many business reviews are focused on the provider trying to buy the same for less, and the supplier trying to sell more for more,” he continues. “A solid review should focus on value beyond price paid.”

Sean Poellnitz, director, contracting and resource utilization, CHRISTUS Health, says, “We want to look at our spend, trends, opportunities – and look at what’s working and what’s not.” The provider’s team is careful to share with the supplier “the current state of CHRISTUS,” he says. “The undertone of the meeting is, ‘Where do we need help?’

“It’s always smart to talk about the future,” he continues. “Healthcare changes quickly. Yes, you have to put your fires out, but you also need to look at, ‘How can we be proactive [in meeting] whatever might occur in the next five or 10 years?’”

Says Kreg Koford, assistant vice president of strategic sourcing and solutions, Intermountain Healthcare, “Not all QBRs [quarterly business reviews] are created equal. A key component is understanding the overall health of the relationship. We review performance, successes and opportunities, as well as breakthrough or value-creation projects. We believe suppliers can be an extension of our teams, and QBRs allow both parties to align their goals and ensure we are driving collaboration.”

Number 2: Select your business-review partners carefully

Kreg Koford

Supply chain executives should have a systematic way of identifying those suppliers with whom regular business reviews are essential, says Petty. “Important” suppliers are those with whom the health system spends significant sums of money, or whose contracts contain savings, quality or other targets. “Strategic” suppliers, on the other hand, are those who can “help define the current state (of the health system), and who can bring resources to help transform the organization’s future state.

“I’m a big fan of the word ‘partnership,’ though a lot of my peers criticize it because it’s overused,” he continues. “But look at the simplest definition of ‘partnership’ – two or more working toward a common goal. That’s exactly what we have to do in healthcare, yet many times, these common goals are never explored or reviewed.” The quarterly business review is a prime opportunity to do so.

Poellnitz recommends limiting business reviews to those suppliers who, by virtue of spend, market share, or other criteria, “drive” the healthcare system.

“Intermountain has over 10,000 suppliers and $2 billion in spend,” says Koford. “We can’t do QBRs with everyone.” With a four-tiered supplier segmentation model, the health system focuses most of its time on about a hundred strategic or key suppliers, he says. “Not all hundred warrant a QBR,” he says, “but they’re definitely in the mix.”

No. 3: Make sure the right people are at the table

The supplier should bring regional or national leaders, as well as the individual(s) who own(s) the local relationship, suggests Petty. The IDN should bring the supply chain leader and perhaps the director, contract manager or analyst. “Don’t be concerned if the ‘boss’ is not in the room,” he says. “Good supply chain leaders surround themselves with future leaders who are more than capable of executing a good review and moving objectives forward.”

It’s a good idea to include other stakeholders as needed, such as the head(s) of the clinical departments most affected by the supplier’s products or services, says Petty. Formal, strategic reviews should include someone from the C suite. If the relationship falls under the umbrella of a group purchasing contract, both sides should invite someone from a GPO to attend. Suppliers with multiple divisions should consider gathering executives from all of them for a joint business review, he adds.

Says Poellnitz, “From the supplier side, we want the account executives who can make a decision – who understand the impact of all of their companies’ divisions and how they work together. We want someone who is very strategic, who can help us look at, ‘Here’s where we are now; here’s where CHRISTUS needs to be in the next 10 years.’” On the CHRISTUS side, Poellnitz brings key executives, directors and stakeholders to business reviews.

Intermountain organizes its sourcing and contract team by business line, says Koford. Each of eight senior category managers focus on nine to 15 suppliers. Those senior managers maintain that single-point-of-contact relationship, and they work out the QBR. Based on the product or service line under discussion, typical Intermountain attendees at the reviews include the senior manager, the appropriate business leader (e.g., director of surgical services), and, potentially, analysts, sourcing managers, buyers, logistics, accounts payable, etc. The supplier is typically represented by a peer group of individuals, e.g., someone from sales, marketing or logistics, or even a clinical expert to address a product or technology under discussion.

Number 4: Set the table

Business reviews should be extremely transparent, says Poellnitz. “We look for an environment in which both sides can talk freely. We want people to be proactive with intel, and we want the supplier to come to that meeting having done its homework.”

Number 5: Have an agenda

“Business reviews should be agenda-driven,” says Petty. Under the best of circumstances, each side has discussed and signed off on that agenda 24 to 48 hours prior to the meeting.

“The key reminder here is that the supplier is helping the provider run its business. Both should have their objectives set and measured. Make sure that opportunities for improvement are reviewed from both sides. Both sides should be prepared with actionable items. Always leave with goals and priorities for the next review. Understand what is urgent and what is important.

“Having no agenda and a canned presentation can lead to disaster,” he says, adding, “One of the biggest plans for disasters is the supplier using this meeting to upsell.”

Intermountain has a standard QBR template, which includes a pick-list of topics, roles and responsibilities, timeline, potential barriers, etc., says Koford. Depending on the maturity of the relationship and the current issues or opportunities under discussion, the senior manager adapts that list to his or her needs for the meeting.

Number 6: Help your people conduct a productive meeting

“What I have found, in my experience, is that not everybody has the same skill set [to run a business review],” says Koford. “For some, it’s natural; for others, it’s a stretch.” So Koford gathered best practices integrating Intermountain’s preferred approach with key suppliers, and produced a guideline for team members to follow for a successful meeting.

Number 7: Surprises at the meeting? BAD

“There should be NO surprises at a business review,” says Petty. “If the supplier has a significant enough relationship to merit a business review, there should be no surprises brought up. If there is a contractual, pricing, or utilization issue, it should have been addressed prior to the review, and an update provided.”

Number 8: Agree on a plan, then EXECUTE

Great business reviews have one thing in common: Participants walk away with real intel, says Poellnitz. “The supplier tells me about my region, so I have a better understanding of what is happening at my health system and even the one across the street. I also walk away with an action plan, and we start to take action that week – because if you move quickly, it shows that what you put down is real. You walk away with an idea about what’s next, and it’s tangible.”

Says Koford, following a business review, participants should take stock of how it went, and note action items, unfinished business and lessons learned, if any. “We want to make sure that people are engaged and participating in follow-up (actions),” he says. “We need to know that we’re doing something as a result of the meeting, not simply admiring the problem and walking away. We want to know what happens next, and who will lead it. If we’re talking about value creation, we want to ask, ‘Who’s on point? What are the next steps? When will we hear back?’

Sean Poellnitz

“The idea of participation and actionable content is consistent with all our business reviews. Ultimately, we’re trying to increase trust and collaboration between the two organizations. These QBRs help put issues and opportunities on the table.”

Number 9: Try achieving something exceptional

Sean Pollnitz looks for meetings that result in both sides doing something exceptional. “That’s the word that drives change, and healthcare is about change management. Those are the meetings where your projects tend to start working extremely well, and they make you want to work with your supplier more.”

The finer points of the business review

Question: How often should I meet with key suppliers?

The frequency of the business review varies, as some suppliers are more strategic than others, says Brent Petty, executive industry consultant – healthcare, Lexmark International Inc. Rule of thumb: Quarterly meetings with suppliers of highest value; semiannual with those of lesser spend or scope; annually for others.

Sean Pollnitz, director, contracting and resource utilization, CHRISTUS Health, holds formal business reviews with high-impact suppliers at least twice a year – quarterly, if the provider and supplier are jointly working on “hot” projects.

Question: Face-to-face? Teleconference? Skype?

True, it is 2017, and the technology exists to enable virtual meetings, says Poellnitz. “But if you look at contracting, it’s still based on the relationship; so we strongly prefer our meetings to be in person.”

Question: How long? Hour? Hour and a half?

The length of the formal business review will be dictated by the size of the supplier or the strategic nature of the portfolio being reviewed, says Petty. “Leading practice would recommend the initial review be two hours. Should you be reviewing multiple divisions or aligning metrics or scorecards, also allow two hours. But after alignment has been agreed upon, a review should be no more than 60 to 90 minutes long.”

Says Poellnitz, a good business review shouldn’t go beyond an hour and a half. “We need time to go through the actual operations and opportunities; and then, at the end, we need time for question-and-answer, and brainstorming.”

Formal reviews should last between 90 minutes and two hours, says Kreg Koford, director of strategic sourcing and solutions, Intermountain Healthcare.

Anatomy of a lousy business review

An unsuccessful business review most likely has one or more of the following components, says Sean Poellnitz, director, contracting and resource utilization, CHRISTUS Health:

The supplier arrives at the meeting with a strong preset idea as to where they want to lead the provider. They spend most of the meeting talking – not listening.
If product or technology is a topic of discussion, the meeting becomes a sales call. “If the provider tells you how the actual product works, that’s a bad sign.
The tone of the meeting turns hostile, where one side is accusing the other of something. “If there are issues, you need to find a way to say, ‘Here’s an opportunity to improve and to answer each other’s questions.”
One side refuses to invest in resources that the other finds essential.

Kreg Koford, assistant vice president of strategic sourcing and solutions, Intermountain Healthcare, points out, “Even with all the prep, some suppliers come in just trying to make a sale. This is an absolute deal-killer.” Koford recalls pulling the plug on one business review because the supplier “brought the wrong people and the wrong topic.”

Other clues that point to a lousy business review:

No follow-up action is taken.
Key stakeholders from either side are missing.
There’s no agenda.
One side or the other springs a surprise on the other.

Points to cover

Sean Poellnitz, director, contracting and resource utilization, CHRISTUS Health, uses the following checklist to build an agenda for a productive, two-hour business review with key suppliers.

Current state

What products/services does your company provide CHRISTUS?
What is the current and three prior years’ scope of business in dollars by CHRISTUS region? If possible, provide this information by product/service category.
Considering CHRISTUS as a standalone profit center for your organization, how are we doing? In other words, how does CHRISTUS compare to your very best customers in terms of our contribution to your company’s profit margin?
In the last 12 months, how have you specifically supported CHRISTUS with our Quality Assurance, Sustainability, or Diversity initiatives?
In the last 12 months, where in the industry have you been recognized (i.e., green initiatives, employer of choice, diversity, operational excellence, etc.)? Of these recognitions, where and how might CHRISTUS benefit from your capabilities?
What are the top three opportunities for improvement to enhance our relationship?

Future state

What products/services does your company provide that are not sold to CHRISTUS? What are the obstacles/limitations for selling these to CHRISTUS?
What are your areas of potential growth within CHRISTUS ? What can CHRISTUS Supply Chain Management do to facilitate this growth?
What unique opportunities exist between our organizations to develop and drive unique solutions for the betterment of both organizations and the industry at large?
In the next six months, what can we agree to accomplish together?