Arnold Palmer Hospital's Supply Chain Arnold Palmer Hospital, one of the nation's top hospitals dedicated to serving women and children, is a large business with over 2,000 employees working in a 431-bed facility totaling 676,000 square feet in Orlando, Florida. Like many other hospitals, and other companies, Arnold Palmer Hospital had been a long-time member of a large buy- ing group, one servicing 900 members. But the group did have a few limitations. For example, it might change suppliers for a particular product every year (based on a new lower-cost bidder) or stock only a product that was not familiar to the physicians at Arnold Palmer Hospital. The buying group was also not able to negotiate contracts with local manufacturers to secure the best pricing. So in 2003, Arnold Palmer Hospital, together with seven other partner hospitals in central Florida, formed its own much smaller, but still powerful (with $200 million in annual purchases) Healthcare Purchasing Alliance (HPA) corporation. The new alli- ance saved the HPA members $7 million in its first year with two main changes. First, it was structured and staffed to assure that the bulk of the savings associated with its contracting efforts went to its eight members. Second, it struck even better deals with vendors by guaranteeing a committed volume and signing not 1-year deals but 3- to 5-year contracts. "Even with a new internal cost of $400,000 to run HPA, the savings and ability to contract for what our mem- ber hospitals really want makes the deal a winner," says George DeLong, head of HPA. Effective supply chain management in manufacturing often focuses on development of new product innovations and efficiency through buyer-vendor collaboration. However, the approach in a service industry has a slightly different emphasis. At Arnold Palmer Hospital, supply chain opportunities often manifest themselves through the Medical Economic Outcomes Committee. This commit- tee (and its subcommittees) consists of users (including the medical and nursing staff) who evaluate purchase options with a goal of better Video Case medicine while achieving economic targets. For instance, the heart pacemaker negotiation by the cardiology subcommittee allowed for the standardization to two manufacturers, with annual savings of $2 million for just this one product. Arnold Palmer Hospital is also able to develop custom products that require collaboration down to the third tier of the supply chain. This is the case with custom packs that are used in the operating room. The custom packs are delivered by a distributor, McKesson General Medical, but assembled by a pack company that uses materi- als the hospital wanted purchased from specific manufacturers. The HPA allows Arnold Palmer Hospital to be creative in this way. With major cost savings, standardization, blanket purchase orders, long- term contracts, and more control of product development, the benefits to the hospital are substantial.

What role do doctors and nurses play in supply chain decisions in a hospital? How is this participation handled at Arnold Palmer Hospital?