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Playing It Close to the Chest
Hopkins sees the potential for cost-savings in an online bidding service.

blank An online bidding session, with Supply Chain Shared Services associate director James Kruelle, Angela Green, staff assistant, and Betty Gibula, director.
An online bidding session, with Supply Chain Shared Services associate director James Kruelle, Angela Green, staff assistant, and Betty Gibula, director.

Joined by a dozen rapt colleagues in a conference room, Betty Gibula, Johns Hopkins Health System’s corporate purchasing director, scans a computer screen where three vendors vie online to win a contract for incontinence and patient care products worth more than $1 million in annual spending.

The bidding may lack drama and the products shelf appeal, but the live, online competition run by a sales representative for a Web-based bidding service activates Gibula’s inner poker player. By the time the competition draws to a close, Gibula still doesn’t show her hand. Instead, she pushes for more, perhaps a rebate or additional discount: “Are there any value-adds you would like to provide?” she asks of one vendor in an e-mail dictated to the sales rep. 

In less than two hours, Gibula’s strategy pays off. The three-year contract awarded to the winning bidder will save the health system approximately $560,000 compared with its current vendor contract.

In August, the health system participated in its first timed-bidding session run by MedPricer, an Internet-based business that connects buyers with vendors on a secure Web site to negotiate purchases of supplies and equipment. That initial bid—for a specialty bed rental contract—introduced the hospital to a powerful cost-cutting tool that has since led to savings ranging from 15  percent to 30 percent, depending on the commodity bid, according to Gibula.

At first, Gibula was skeptical that MedPricer could streamline hospital procurement procedures while preserving product standards. “We tried the same sort of process about five years ago with another company, but it didn’t work well for us,” she says. That company’s model for negotiations didn’t encourage robust bargaining, nor did it serve the specialized needs of health care providers, Gibula says.

But MedPricer’s electronic negotiation system has avoided those pitfalls while sparing Gibula’s department from the drudgery of protracted, paper-based negotiations. “We used to send bids out and wait for vendors to get back to us before decisions were made,” says Rick Kruelle, associate director of purchasing. “It was like watching paint dry and we would have to plan way ahead.”

The Supply Chain Shared Services Department has expanded the bidding process through MedPricer to include $50 million in capital purchases, such as exam tables and ultrasound systems, for the new clinical
buildings on the East Baltimore campus, as well as
construction-related contracts for the installation of lighting, built-in cabinetry and various other services.

Gibula anticipates that medical supplies and equipment purchased through MedPricer for the health system, excluding the new clinical buildings, will total $20 million before long. Ultimately, the plan is to run the majority of bids for equipment, supplies and services above $100,000 through the online bidding system, she says.

So far, several clinicians have attended bidding sessions to lend their expertise to the process.

“We all felt very supported and secure that the patients’ best interests were at heart in a complicated and expensive contract,” says Amanda Owen, a wound care nurse in the Department of Medicine who participated in the bid for specialty beds.

Before the bidding session took place, Owen and caregivers system-wide completed an exhaustive review of prospective vendors and found three that met their complex clinical needs. After the time-consuming prep work, the online bid itself flew by. “Within two hours, the whole thing was done,” Owen says.

In the MedPricer system, vendors cannot see competitors’ bids. Logged on to a private portal, buyers are “in the driver’s seat,” where they can see all the action, Kruelle says. “It’s no longer a matter of a well-trained sales representative attempting to negotiate additional business without Purchasing’s intervention.”

While impressed by MedPricer, Gibula notes a few kinks in the system. For example, vendors who participated in the bid on the incontinence and patient care products waited until the last minute to post their responses to the health system’s terms and conditions, giving the purchasing department little time for review before the bid began. 

In addition, it’s a waste of bidding time to haggle over contract terms and conditions, which should be agreed to ahead of time, Gibula says. The Purchasing Department has developed guidelines for future MedPricer bids that require vendors’ responses to terms and conditions weeks before the bidding event.

When the incontinence and patient care supply bid closes, such irritations don’t stop the purchasing department from marveling at the speed and economy offered by the online platform. And, just as Gibula requested, the bidding offered a “value-add”: It was fun.

“It’s as close as I come to Atlantic City,” she quips. 



— Stephanie Shapiro

 

 

Johns Hopkins Medicine

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