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Health-care sector doesn't have to wait for procurement review to collaborate

Health organizations interested in consolidating the procurement of goods and services with other entities need not wait until the Ontario government completes its Health-care Sector Supply Chain Strategy Expert Panel review, says Toronto health lawyer Michael Gleeson.

“Even while we are waiting for the recommendations, there are opportunities for health-care providers in Ontario to collaborate on procurement efforts,” he tells AdvocateDaily.com.  

Gleeson, senior corporate counsel with DDO Health Law, comments on the issue as the province looks at how best to consolidate the procurement process for health care in an effort to maximize taxpayer dollars. 

The Ministry of Health and Long-Term Care and the Ministry of Government and Consumer Services are working together to develop a province-wide supply chain management strategy for the health-care sector, explains a government website. It says the current delivery of health-care supply chain management and procurement is “disparate, fragmented and non-integrated. 

“A province-wide approach to health-care supply chain can optimize efficiencies, identify savings and contain ongoing costs, and support innovative advances in patient care to promote improved health care outcomes,” it says.

Gleeson notes that a report to the Minister of Health and Long-Term Care and the Minister of Government and Consumer Services outlining a strategy and implementation plan is expected sometime in the coming weeks.

But while that process is ongoing, he says health organizations can take their own steps to consolidate their procurement process to save money.

“This can be done formally through shared-services organizations where hospitals come together and pool their funds to put out procurement documents such as requests for proposals (RFP), requests for quotations (RFQ) jointly,” he says. “It can also be done more informally through collaborations between smaller organizations in what’s called piggybacking.”

Gleeson explains that piggybacking is a method of joint procurement where the RFP or RFQ document notes that certain organizations might want to jump onto the particular procurement at some point during the agreement.

“This means that entity A puts out an RFP that they want to buy hospital beds and they mention that other health-care providers in the future may want to buy the products," he says. "It’s to make the vendor aware that health-care provider B, C and D might want to buy the product as well.”

Gleeson says if this information is included in the procurement document and the agreement between the vendor and health-care provider A, then providers B, C and D all have the opportunity to buy those products or services without having to go through a similar procurement process.

“Obviously, this means much less administrative work for B, C and D so they are spending less time and money on going through the procurement process,” he says. “They just have to negotiate their entry into the agreement with provider A and they may tweak the agreement slightly to suit their particular circumstances, but the agreement will be essentially the same.

“Ultimately, this results in less admin. work in the procurement process and in the deal itself. It’s a much more efficient process.”

Gleeson says there are likely pricing benefits as well.

“When health entity A puts out the procurement document, they make it clear that five or six or 10 other entities may also jump onto the agreement. This sends the vendor the message that there could be a larger volume of work,” he says. “The vendor may adjust their pricing accordingly because it’s more attractive than just doing business with entity A for the same request.”

Gleeson says an increasing number of health entities are doing this through shared-services organizations.

“The idea of maximizing value for money is attractive to these organizations,” he says. 

Gleeson says there are currently at least 10 shared-services organizations across Ontario that consolidate the procurement groups for all of its member hospitals. They handle the procurement of goods and services for their member hospitals while increasing buying power for them.

While most member hospitals of shared-services organizations are large health entities, Gleeson says smaller entities can benefit from joint collaborations as well. 

“The buying power would dramatically increase if smaller organizations teamed up with other providers, I would think,” he says. 

If health providers decide to do joint procurement, they have to ensure that the resulting contracts allow for that, Gleeson says. 

When any health organization moves forward with a plan to collaborate on procurement, efforts need to be made to ensure the legal agreements between the parties reflect that, Gleeson says.

“There should be some wording in there that parties B, C and D can piggyback and there should be tweaks to the confidentiality section to allow for the possible sharing of information between the parties that are piggybacking,” he says. 

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