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The County Hospital


The Lesson - Read the Room - they hired me expecting no result to keep the wolves at bay.

These stories both good and bad should send up success or warning signs for you to learn from experience.

County hospitals run at 25-50% higher costs than private hospitals. I was approached to do a partial contract and partial get a percentage of savings deal. So we will pay you X and then Y% of savings to help us.

The real question is do they want the help? And how many silos are you allowed to cross.

When i do these deals in a place like this i use my technology and quickly imported all their purchasing and revenue histories. I built a data warehouse and analyzed the data.

I look for high dollar and high volume data with year over year transactions.

They had gone with a GPO - a purchasing organization that is supposed to get them lower prices but it is really nothing more than a front for a very large US Healthcare vendor and all the people and politicians greased along the way.

So on top of my radar the first week was the glove usage that went from 15 million pairs per year to 28 million with no change in patient volume. Looking over their volume that amounted to 73 pairs for each patient.  The problem with the model was 95% of their business was Emergency Room so we are looking at 5 pairs maybe per visit.

I brought this up on the first meeting, of course i was in a very unionized hospital and how dare i question this,  second the county executive had appointed a bunch of friends to the hospital and third the biggest campaign contributors were the middleman vendors.

Within 2 weeks glove volume had dropped 40%. back down to normal.   now we only really have 2 ways they could be stealing

  • Order the product, never actually receive it, tell the system it was received and pay the invoice
  • Order it, Receive it and take it out the back door.

Remember this was the first item I went after. I also noticed it took 10-20 people to order a box of paper so i put in an ordering system where departments could order, the manager could say Yes online and the order was submitted and delivered the next AM. Management was fiddling with mirco-managing this process instead of addressing the real hospital issues. So all those pensions, salaries and more were stuck focusing in the trivial world.

So i decide to check out these gloves - How do you find out where the real supplier is or the cost you ask?  I called the last guy that bidded against the current vendor and asked him and he was ready to talk as he hated the other vendor. He told me way more than i needed to know.  The gloves came from factory X in china and could be bought for 70% less than the GPO price.

I set up a meeting with the supplier and executives and he had a huge team show up. this was a father/son type operation and i asked him how they were paid. He said they barely scrape by because they get 3% of the order but he pays for, stocks and holds the inventory for the hospital and passes it through at cost+3%.

I think asked him do you care if i get some of the products from other suppliers because i can save the hospital about 1.6 million per year.  He stood up and said that's impossible we have the lowest prices.  I told him i could by the gloves 70% cheaper directly from the factory and he said those are not the same gloves. I said funny Because the company that lost the bid to you told me they were and that alone was 300+k back to the bottom line

Within Days the CEO was gone, the county executive replaced the board, the compliance lawyer was gone, the CFO was pushed out and then i was shown the door. It was fairly evident who and what was going on.

 This is why i no longer work with government unless I have complete control over people and vendors.

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