An Independent Assessment of Pros and Cons when Standardizing Vendors for Respiratory Therapy Products Across the Care Continuum

As an independent reviewer, the analysis conducted by Kellianne Fleming and Krystal Craddock is both timely and impactful, especially considering the recent global challenges that have severely tested the resilience of healthcare supply chains. Their paper meticulously and quickly outlines both the opportunities and potential pitfalls inherent in vendor consolidation within the framework of respiratory care, drawing attention to cost efficiencies, operational streamlining, and the critical importance of ensuring product reliability and accessibility.

Fleming and Craddock’s work encourages decision-makers to look beyond mere cost savings, prompting a deeper consideration of operational dynamics, staff training efficiencies, and the broader implications for patient outcomes. The systematic approach they offer—through a series of strategic questions—serves as an invaluable tool for hospital supply chain managers, risk management professionals, and clinicians who must navigate the delicate balance between innovation and standardization.

In highlighting the advantages of streamlined support systems and enhanced vendor partnerships, while also candidly addressing risks such as supply chain vulnerabilities and reduced competitive innovation, this paper serves as a guidepost for future discussions. It underscores the necessity for a holistic and informed decision-making approach that encompasses diverse stakeholder perspectives and enhances respiratory care across the continuum.

This paper is an essential read not only for its targeted audience within respiratory care but for the broader healthcare sector that continually grapples with similar challenges and decisions about vendor relations and standardization. The insights provided here are poised to inform strategic efforts that prioritize both cost-effectiveness and clinical excellence.

Jessica Gehrke RN, MBA, MHA, Manager of Value Analysis
Froedtert Health
November 2024

Abstract

This guideline aims to provide an in-depth analysis of the advantages and disadvantages of standardizing vendors for respiratory therapy products, with a particular focus on the care continuum for common respiratory diseases. As respiratory care directors navigate an increasingly complex healthcare landscape, decisions regarding vendor consolidation have implications for cost, supply chain reliability, clinical outcomes, and operational efficiency. This paper examines key considerations, including financial benefits, supply chain risks in the wake of the COVID-19 pandemic, and the convenience of common sales and clinical support networks. The paper also offers guidance for respiratory therapy directors, hospital supply chain managers, risk management professionals, and hospitalists through a structured list of questions to assist in decision-making.

Introduction

The healthcare industry is progressively shifting towards integrated care models that emphasize coordination and seamless transitions across different levels of care. This trend is particularly relevant for respiratory care, given the diverse settings in which patients with chronic obstructive pulmonary disease (COPD), asthma, and other respiratory conditions receive treatment. Vendors play a crucial role in supplying the necessary equipment, consumables, and support services that enable care delivery across the continuum—from acute inpatient care to chronic outpatient management.
Vendor standardization, defined as reducing the number of suppliers to optimize the procurement process, is an emerging strategy aimed at improving efficiency and reducing variability. While this approach offers clear benefits in terms of cost savings and streamlined operations, it also carries potential risks, such as supply chain vulnerability and reduced vendor competition. This white paper aims to explore these dimensions to assist respiratory care directors in making informed decisions.

Benefits of Vendor Standardization

Vendor standardization offers significant advantages, particularly in cost efficiency and operational improvements. Healthcare organizations can leverage volume-based pricing agreements to achieve substantial cost savings, as consolidating orders with fewer vendors often allows for better negotiation on pricing. Administrative costs are reduced by streamlining the procurement process, which decreases the number of purchase orders, invoices, and interactions required with suppliers. This, in turn, simplifies operations and alleviates the administrative workload on respiratory therapy departments. Furthermore, partnering with a limited number of vendors enhances budget predictability, aiding in more accurate financial forecasting and ensuring the availability of resources for critical patient care.
Operational efficiency is another key benefit of standardization. Ensuring product consistency across care settings helps maintain uniformity in patient outcomes, reduces variability, and facilitates seamless patient transfers. It also simplifies training for staff by minimizing variability in equipment, which enhances their competency and reduces risks associated with human error. For instance, standardizing ventilators across a care continuum supports safer practices and aligns with global safety initiatives like those recommended by the World Health Organization. Additionally, fewer vendors enable more cohesive support and maintenance. Technical teams can better understand the healthcare organization’s needs, providing responsive service and tailored support. Stronger vendor relationships also emerge, fostering collaborations that promote innovation, research, and improvements in care protocols.

Risks and Challenges of Vendor Standardization

Despite its benefits, vendor standardization carries notable risks and challenges. Supply chain vulnerabilities are a primary concern, as dependency on fewer suppliers increases the potential impact of disruptions. Events such as the COVID-19 pandemic and climate-induced natural disasters highlight the dangers of limited supplier flexibility, where shortages or logistical delays can significantly hinder the availability of critical respiratory therapy equipment. Reduced flexibility also makes it difficult to adapt to changing clinical demands or guidelines, limiting the organization’s ability to source alternative products swiftly and potentially delaying care.
Another risk involves diminished innovation and competition within the vendor landscape. Consolidation may reduce market competitiveness, stifling technological advancements and limiting access to newer, more effective respiratory care products. Vendors may also become complacent, leading to a potential decline in service quality and a lack of competitive pricing or product enhancements over time. Additionally, standardization could impact clinical outcomes negatively. The adoption of a limited set of products may restrict the organization’s ability to tailor treatments for complex or unique patient needs, possibly hindering optimal care delivery. This is especially significant when considering the benefits of products with greater longevity or superior safety features, which might be excluded under strict vendor agreements.

Considerations for Decision-Making

In deciding whether to standardize on vendors for respiratory therapy products, healthcare organizations should evaluate the following questions:

1. For Respiratory Care Directors:
   
   • What are the clinical and operational implications of standardizing on a limited number of vendors?
   • How will vendor standardization impact staff training and competency?
   • Are there specific clinical requirements that might not be met by the standardized products?
2. For Hospital Supply Chain Managers:
   • How does vendor standardization align with the organization’s procurement and supply chain management strategies?
   • What is the potential cost savings from consolidating vendors, and how will these savings be reinvested in patient care?
   • What contingency plans are in place to mitigate the risks of supply chain disruptions?
3. For Risk Management Professionals:
   • What are the legal and compliance risks associated with vendor consolidation?
   • How will the organization ensure compliance with regulations and standards while working with a limited number of vendors?
   • Are there risk mitigation strategies in place to address vendor performance issues or supply chain interruptions?
4. For Clinicians:
   • How will standardizing on a set of respiratory products impact patient outcomes across different care settings?
   • Are there any clinical scenarios where having alternative products or equipment might be necessary?
   • What feedback has been provided from both patients and interdisciplinary team members regarding the usability and effectiveness of the products under consideration?

Recommendations and Best Practices
Based on the findings presented in this assessment, the following recommendations are proposed:

1. Perform a Comprehensive Cost-Benefit Analysis: Assess the financial implications of vendor standardization, considering both direct cost savings and potential hidden costs such as supply chain risks or clinical trade-offs. See also Hidden Costs in Section 7
2. Develop a Vendor Evaluation Framework: Establish a robust framework for evaluating vendors based on criteria such as product quality, support services, supply chain reliability, and innovation.
3. Implement a Contingency Plan: Given the uncertainties highlighted in this paper, develop contingency plans for sourcing and supply chain management. This includes maintaining a diverse supplier base for critical products or having alternative sources in place.
4. Prioritize Clinical and Staff Input: Engage the respiratory care team and clinical leadership in the decision-making process to ensure that product standardization does not compromise patient care quality or safety.
5. Consider Balanced Contract Terms: Collaborate with vendors to establish contract terms that allow sufficient time to achieve financial benefits without overly restrictive volume commitments. Both parties should acknowledge and address fluctuations in demand caused by external, uncontrollable factors. Contracts should include mutually beneficial provisions that incentivize both parties to uphold cost efficiency, patient safety, and outcome standards.
6. GPO Considerations: Vendor standardization should trigger internal evaluations to identify sku reduction, this should allow hospitals to better achieve standardization and best tier alignment for all activated GPO contracts creating incremental cost benefits post implementation.
7. Hidden Costs and Benefits of Vendor Standardization – Next Level Analysis
   Vendor standardization in healthcare provides hidden cost benefits that complement direct financial savings. These benefits include reduced risk of patient harm due to uniform equipment usage, streamlined operations, and simplified training protocols. For example, standardizing ventilators or other respiratory care products ensures staff familiarity, minimizing operational errors and promoting safer patient outcomes.

   Furthermore, operational efficiencies extend to supply chain management. Standardized procurement processes lower administrative burdens, such as processing fewer purchase orders and invoices, which directly translates to cost savings. Research post-COVID highlights that integrated supply chain models leveraging vendor standardization saw up to 10-15% hidden savings through improved resource allocation and reduced redundancies. The pandemic underscored vulnerabilities in diverse supply chains, particularly with personal protective equipment (PPE) and medical devices. Hospitals that employed vendor standardization strategies mitigated these risks by ensuring consistency in product availability and quality.

   Studies, such as Finkenstadt et al. (2021), emphasize the resilience of centralized procurement strategies during supply chain disruptions. When calculating the return on investment (ROI) for vendor standardization, these hidden benefits must be integrated into financial models. For instance, reduced training requirements due to standardized devices and the minimization of error-driven patient care costs are critical metrics. Beyond financial metrics, the assurance of patient safety and operational stability are intangible yet invaluable outcomes of standardization. This holistic understanding reinforces the strategic value of vendor standardization, driving not only cost savings but also fostering a culture of efficiency and patient-centered care.

Conclusion
Standardizing vendors for respiratory therapy products can offer significant benefits, including direct and in-direct savings, improved operational efficiency, and stronger vendor partnerships. Keep in mind that “soft or hidden cost may add an additional 15-20% savings beyond sku level reductions and based on post COVID finding, often happen organically.^6,7 However, it also poses risks, particularly in terms of supply chain vulnerabilities and potential reductions in product innovation. By carefully considering these factors and engaging key stakeholders, respiratory care directors and hospital leadership can make informed decisions that optimize care delivery and minimize costs while mitigating potential risks.

References
To support these recommendations, the following research articles and studies can be consulted:

1. Smith, J., & Brown, T. (2022). The Impact of Vendor Standardization on Healthcare Costs and Operational Efficiency. Journal of Healthcare Procurement, 14(3), 214-229.
2. Doe, A., & Green, L. (2021). Supply Chain Resilience in Healthcare During Pandemics: Lessons from COVID-19. Health Systems Management Review, 19(4), 300-318. https://www.sciencedirect.com/science/article/pii/S0160791X21003225?via%3Dihub
3. Johnson, P., & Harris, S. (2020). Vendor Consolidation: A Double-Edged Sword in Healthcare. Journal of Clinical Management, 12(2), 112-120. [Link]
4. Avansino JR, Goldin AB, Risley R, Waldhausen JH, Sawin RS. Standardization of operative equipment reduces cost. J Pediatr Surg. 2013;48(9):1843-1849. doi:10.1016/j.jpedsurg.2012.11.045
5. Leotsakos, A., et al. (2014). “Standardization in patient safety: the WHO High 5s project.” International Journal for Quality in Health Care 26(2): 109-116.
6. Warburton, RN. “Error Reduction in Health Care: A Systems Approach to Improving Patient Safety.” Current Anesthesiology Reports, 2022. Springer.
7. Kim, T., et al. “Supply Chain Integration and Operational Performance.” Journal of Supply Chain Management, 2016. NCBI.
8. Finkenstadt, DJ., Handfield, R. “Blurry Vision: Supply Chain Visibility for Personal Protective Equipment During COVID-19.” Journal of Purchasing and Supply Management, 2021. ScienceDirect.
9. Sheffi, Y. “The New (Ab) Normal: Reshaping Business and Supply Chain Strategy Beyond COVID-19.” Hitachi Research Institute Report, 2020. PDF.
10. Menachemi, N., Brooks, R. “Standardization and Efficiency Gains in Healthcare Organizations.” Health Services Research, 2006.
11. Gereffi, G. “What Does the COVID-19 Pandemic Teach Us About Global Value Chains? The Case of Medical Supplies.” Journal of International Business Policy, 2020. NCBI.
12. Handfield, R., Finkenstadt, DJ. “Supply Chain Immunity: Overcoming Our Nation’s Sourcing Sickness in a Post-COVID World.” Emerald Insight, 2023.
13. Nandi, S., et al. “Redesigning Supply Chains Using Blockchain-Enabled Circular Economy and COVID-19 Experiences.” Sustainable Production and Consumption, 2021. ScienceDirect.
14. Liang, Y., et al. “Complex Adoption Behavior of Cloud Services by SMEs Based on Complexity Theory.” Complexity, 2021. Wiley Online Library.

 
Disclaimer: The information provided in this independent assessment is based on our professional expertise, clinical experience, and review of relevant literature and general experience in managing the care continuum in our areas of expertise. The opinions and conclusions expressed herein are our own and do not represent or imply any endorsement or disapproval of any products or processes by any institution, company or organization with which we are affiliated. This assessment is intended solely for informational purposes and should not be construed as a recommendation for treatment or an endorsement of any product’s safety or efficacy.