Master Thesis
Supply Chain Management
Alignment Between Physicians and Purchasers: The Role
of Communication and Performance
Hidde Sonneveld
H.O.Sonneveld@student.rug.nl
S2808404
University of Groningen
Faculty of Economics and Business
MSc. Supply Chain Management
Supervisor
J.T. van der Vaart, University of Groningen
Co-assessor
A.C. Noort, University of Groningen
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Abstract
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Table of contents
Abstract ... 2 1 Introduction ... 4 2 Theoretical background ... 6 2.1 Purchasing in healthcare ... 62.2 Relationship physician and purchaser ... 6
2.3 Communication ... 7
2.4 Performance: Quality and costs/price of purchase materials ... 9
2.5 Conceptual model ... 9 3 Methodology ... 10 3.1 Sample selection ... 10 3.2 Interview protocol ... 12 3.3 Data collection ... 13 3.4 Data analysis... 13 4 Results ... 14
4.1 Within case analysis ... 14
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1 Introduction
The expenditures in healthcare have risen rapidly the last number of years; steps have to be taken to maintain an efficient and cost-effective healthcare system (Kumar et al., 2005). According to Ventola (2008) is selecting medical items only on safety or physician preference no longer acceptable. Therefore, the role of costs in purchasing in healthcare has increasingly become more important (Ventola, 2008). One of the main cost drivers in healthcare supplies are the high-preference clinical items, which could make up to 61% of the total supply expenses (Montgomery and Schneller, 2007). The total supply expenses represent as much as 31% of the hospital costs (Schneller and Smeltzer, 2006). High-preference clinical items are items such as hip and knee implants, cardiac stents and mechanical devices used in spine surgery (Montgomery and Schneller, 2007) and are mainly used by physicians in orthopaedic, neuro and cardiovascular surgery (Robinson, 2008). Throughout the purchasing process of high-preference clinical items, two streams, with two different backgrounds and motives, conflict. A disconnection occurs of who is responsible for the buying decisions and of who actually purchases the items (Chen, Preston and Xia, 2013; Robinson, 2008). On the one hand, the selection and buying decisions are often driven by physicians and are based on medical training, knowledge, previous experiences with items, and or context-specific demands (Chen, Preston and Xia 2013; Sorensen and Kanavos, 2011). Therefore the physician is concerned with patient quality and less with the economic effects (Robinson, 2008; Ventola, 2008). On the other hand the hospital is interested in a combination of cost containment goals and patient quality (Montgomery and Schneller, 2007). Montgomery and Schneller (2007) state that aligning physicians and hospitals interests play a significant role in distinguishing successful hospitals from those which are struggling. This paper aims to show the alignment between physicians and purchasers and how this affects performance of the purchasing process in a healthcare setting.
5 methods which tackle some of these aligning factors by balancing physician preference and reducing costs. These are: the formulary model which restricts the number of choices of suppliers, and the payment-cap model which standardises costs by restricting paid price for certain categories (Montgomery and Schneller, 2007).
More factors that could influence alignment in a healthcare setting can be found by examining cross-functional alignment in other industries. Cross-cross-functional alignment factors can be divided into a number of different categories: knowledge of other functions, inclusive communication and effectiveness of working relationships (Ellinger, Keller and Hansen, 2006), reward system and different cultural or educational background (Piercy, 2007), understanding peer function, functional separation and politics, resource allocation (van Hoek, Ellinger and Johnson, 2008). Although the interest in healthcare purchasing and the alignment between physicians and purchasers has increased, it lacks in research about the relation with performance of the purchasing process.
An interesting and recurring topic in cross-functional alignment literature is communication effectiveness. Ineffective communication could be caused due to different educational background and previous experiences of employees (Piercy, 2007). In the purchasing process of high-clinical preference items two different educational backgrounds collaborate to achieve a purchase. These different backgrounds could lead to misunderstanding or difficulties in communication. These barriers which make communication difficult are missing in current literature about the alignment between physicians and purchasers.
This paper will contribute to the existing literature by studying how perceived performance of the purchasing process is affected by the alignment between physician and purchasers. This knowledge could not only be of help to physicians and purchasers in improving the alignment, but also enhance the overall performance of the purchasing process. In addition, this study will also focus on how communication influences alignment. By seeking for possible communication barriers between physicians and purchasers this paper could contribute in making communication more effective. Hospitals, physicians and purchasers could anticipate on this kind of knowledge to improve the alignment between them.
In conclusion, the first part of this research focus lies on the influence of communication on alignment. And the second party of this study will examine what influence the alignment of physicians and purchasers have on perceived performance of the purchasing process of high-preference clinical items. This resulted in the following questions: (1) ‘What is the influence of communication on the alignment
of physicians and purchasers?’ and (2) ‘How is the perceived performance of the purchasing process of high-preference clinical items affected by the alignment between physicians and purchasers?’
6 physicians and purchasers questioned via a semi-structured interview. They were chosen on their speciality and participation in the purchasing process of high-preference clinical items.
In the next chapter the relevant literature is reviewed. Chapter three consists of the methodology of this study. Chapter four provides the results of this research. This paper concludes with chapters consisting of the discussion and conclusion
2 Theoretical background
2.1 Purchasing in healthcare
Healthcare purchasing is complex due to the tremendous amount of different supplies, and multitude of distribution channels (Rivard-Royer et al., 2002). Many physical goods are identified by their high value, and they require special handling such as: safety regulations, risk of spoilage and obsolescence (Gobbi and Hsuan, 2015). Chen, Preston and Xia (2013) state that a part of the supplies is initiated by physicians’ preference. A significant difference when compared to a manufacturing company or retail environment, where purchasing is more focused on cost considerations and production/sales forecast (Chen, Preston and Xia, 2013). Another important characteristic is the fast changing environment of technological, and medical innovations. Both of which are incredibly important in healthcare; and it therefore makes information and knowledge updating critical for the management of purchasing (Chen, Preston and Xia, 2013). Furthermore, an interesting characteristic is that items are often context-specific and are specific to a patients’ requirements. As such, it is integral that items are delivered on time and that they are of the agreed upon quality, so that the patient does not incur any disruptions (Lee, Lee and Schniederjans, 2011).
2.2 Relationship physician and purchaser
High-preference clinical items could also be defined as physician preference items (PPI). These items are hip and knee implants, cardiac stents and mechanical devices used in spine surgery. They are called PPI due to the fact that it is the physician who understands and recognizes the needs of the patient and translates it into the right purchase (Montgomery and Schneller, 2007). Interestingly, it is often a purchaser within the hospital who makes the payment decision about purchased items. PPI’s can therefore be distinguished from regular items in the way they are purchased. Regular items are normally bought through bulk discounts, while PPI’s are bought in smaller numbers. Furthermore PPI’s account for approximately for 61% of the total supply expenses (Montgomery and Schneller, 2007).
7 (2005) state that in some cases in the US, devices are engineered and developed through incremental and collaborative interactions between supplier and physicians. Subsequently physicians were rewarded with stock options or other financial interests of the product in question (Abelson, 2005). This reward system can result in a potential conflict of interests between physicians, hospitals, patients and manufacturers (Baim et al., 2007). According to Burns (2007); however, it is highly important to keep a dialogue between physicians and manufacturers to improve and optimize products, instruments and surgical techniques, nevertheless to stay innovative. Motivating physicians’ involvement, and aligning physicians more closely with the interests of the hospital is an important aspect to reduce the power of the supplier and to reduce hospital supply costs. One promising method to achieve this is to change from a financial incentive reward system from the supplier (e.g. stock options) to a more non-financial incentive system. This should be structured in such fashion that the quality in patient care increases and indirect financial incentives (e.g. investments in new technology) are worth more to the physician (Montgomery and Schneller, 2007). Robinson (2008) concludes with the importance of aligning incentives. Balancing the right incentives of the physician could help improve the objectives of the hospital (Robinson, 2008).
Another aspect which is important to the purchasing process of high-preference clinical items is information availability. Restricted information availability would make it harder for physicians and purchasers to collaborate and to make proper decisions. Decisions would be called into question because of the limited information they are based on. Clinical evidence on safety and efficacy are appropriate reasons to select a new device with major technological innovations. This, however, is not applicable to all devices or items, most are introduced as incremental modifications or existing products without performance relative studies (Robinson, 2008). According to Robinson (2008) hospitals in the US created technology assessment committees for making proper decisions. In these situations physicians have to provide evidence of supporting clinical and/or pricing information. These committees are called into life in order for the physician to make more responsible and considered choices. Accurate, integrated and fine-grained data is identified as a crucial aspect to support decisions about product use and equivalency to enable cost similarity and to assess patients’ outcome (Montgomery and Schneller, 2007). Nevertheless, there is a lack of price transparency from the industry until it is ordered and billed. Performance data about the device or item over the entire course of the treatment and its components, and not only the part of the industry, is highly important. Gathering this data, however, is a difficult and time expensive process (Robinson, 2008). Currently the industry provides the physician of studies about performance of the device or item (Robinson, 2008).
2.3 Communication
8 educational backgrounds and experiences (Piercy, 2007). This could be important in healthcare purchasing where two different backgrounds and experiences are working together to establish the purchasing process. The background of a physician is founded in medicine and the purchaser has more affinity with business.
One of the misalignments in the study of Van Hoek, Ellinger and Johnson (2008) is the lack of understanding and communication between two functional departments. Inclusive communication by focusing on their own perceived functional goals and objectives will lead to disservice of the company, its partners, and customers. Piercy (2007) contributes in that communication is a key factor to integrate thinking among different functional areas. Effective communication is an important component for expanding a positive working relationship and achieving positive business performance. Moreover, it is a pre-requisite for developing a market-orientated and customer-led organisation. More communication in itself between departments does not mean automatically to be good, the communication has to be perceived as believable and understandable (Calantone et al., 2002). Forcing managers to provide more information could also have a negative effect. Built on that notion, this paper will also study the quality of communication. A way to overcome cross-functional barriers as well as encouraging communication and integration, is to work in cross-functional project teams (Piercy, 2007). According to McKone-Sweet, Hamilton, and Willis (2005) cross-functional teams in healthcare are vital to successful implementation of projects and to adopt effective performance of organization as a whole. People who work outside their functional area, often ask basic and simple questions that challenge the other members of the functional team. The simplicity of communicating and discussing leads to radical changes and eliminates barriers between departments (McKone-Sweet, Hamilton and Willis 2005). In this research we are going to seek communication barriers which make information exchange and alignment more effective.
9 functions is a two-way process. Bi-directionality is included because it is important in cross-functional relationships (Dawes and Massey, 2005; Fisther et al., 1997). A way to improve understanding is to create bidirectional flows in the communication process. Communication frequency and bi-directionality could show the effect of communication on alignment between cross-functional stakeholders. In this research the research question: What is the influence of communication on the
alignment of physicians and purchasers?, is going to be answered.
2.4 Performance: Quality and costs/price of purchase materials
According to Kumar, Ozdamar and Peng (2005) performance measurement is divided in efficiency and effectiveness, and is defined as how organisations achieve its goals to satisfy its customers. Efficiency measures how well the system transforms inputs into outputs. Effectiveness, in turn, measures how successful the system is in achieving its desired output (Kumar, Ozdamar and Peng, 2005). The relationship between the purchasing department and the internal customer is an important aspect of this research. Due to that this research is about the purchasing of high-preference clinical items which mostly involve the involvement of physicians and purchasers of the hospital. According to Montgomery and Schneller (2007) the supplier is occasionally involved in the relationship with the physician, but in respect to high-clinical preference items it would be more often. University Medical Centre’s are working more closely with suppliers which involve frequently collaboration. Physician and supplier work together in studies and are collaborating, and communicating about the needs of patients (Montgomery and Schneller, 2007). Therefore, the supplier plays also an important role in the purchasing process.
To measure what the effect of alignment is on performance of the purchasing process, both the outcome of perceived quality and costs are going to be studied. Costs and quality are important aspects as the hospital is looking for cost containment goals on the one hand, and on the other hand the primary role of a physician is to cure and help patients, and thus focusing on quality of items (Montgomery and Schneller, 2007). The perceived quality and costs/prices of purchase materials of the outcome of the purchasing process is going to be studied (Van Weele, 2003).
2.5 Conceptual model
10 Communication - Frequency - Bi-directionality Performance purchasing process Alignment Physician Non-physician
Figure 1 Conceptual model: purchasing process of high-preference clinical items
3 Methodology
The aim of this research is to gain insight in how the performance is affected by the alignment between physicians and purchasers in the purchasing process of hospitals. Furthermore, this research consists of the role of communication barriers in the alignment between physician and purchasers. In order to answer these questions a multiple-case study methodology was adopted for this research. According to Yin (2003), Meredith (1998) and Voss et al., (2002), the strengths of a case research in contrast with a survey study lies on the fact that a case study is a preferred method for a full understanding of the nature and complexity of the complete circumstances. In addition, the explorative characteristic of this research is more aligned with gathering data about contextual factors that influence the purchasing process in the hospital, via a case study (Voss et al., 2002). On the other hand it is important to conduct a case research well, and therefore it is time consuming and it needs skilled interviewers. In this study multiple cases were used to increase generalisability of the conclusion and to guard against observer bias (Karlsson, 2009).
3.1 Sample selection
The purchasing process of high-preference clinical items in hospitals play a central role in this research. High-preference clinical items are items such as hip and knee implants, cardiac stents and mechanical devices used in spine surgery(Montgomery and Schneller, 2007) and are mainly used by physicians in orthopaedic, neuro and cardiovascular surgery (Robinson, 2008). In most hospitals these items are the most expensive supplies and can cover up to 61% of the total supply costs (Ventola, 2008).
11 and is restricted by European regulations. A Non-UMC, on the contrary, is not restricted by European regulations. The UMC is restricted by the European regulation in ways in which they have to purchase. Each purchase of more than 209.000 euros has to be publicly procured according strict regulations. Non-UMC are not restricted by these regulations and can therefore choose which supplier they select. As a result, in this research we chose one UMC and one Non-UMC. In these two hospitals we studied four different cases. These cases are chosen based on a mixture of literal and theoretical replication. We mainly focus on literal replication by studying multiple cases which could support our findings and make it more generalisable. Theoretical replication is considered through the different specialities. Each specialty could have his own impact on the research due to the characteristics of the items. For example neurosurgery could be more focused on innovation than orthopaedics. Theoretical replication is applied by studying a UMC and a Non-UMC. The difference could be European regulations but also the fact that UMC’s are more specialised and a Non-UMC is more general care.
During the general interviews with the two hospitals we noticed the influence of different actors in the purchasing process. According to these hospitals three actors are involved: the purchaser, budget holder, and the physician. The purchaser is the one who purchases, in collaboration with the physician and the budget holder, the items. The budget holder is mainly to give permission for the budget, while the physician is primarily the one who defines the needs. We interviewed the physician and purchaser due to their direct role in the purchasing process. Furthermore, we also interviewed the budget holder about his perception of the purchasing process. The purchaser and budget holder are called non-physicians in this chapter.
In selecting the hospitals a well-known contact person was used to identify the right cases and the right persons within the hospitals. See table 1 for an overview of the cases and the differences. And table 2 for an indication about the different hospitals and their purchase department.
HOSPITAL SPECIALISM INTERVIEWEES
CASE 1 UMC A Neurosurgery Purchaser 1 and Physician 1
CASE 2 UMC A Cardiology Purchaser 2 , Physician 2 and budget holder 2
CASE 3 Non-UMC B Orthopaedics Purchaser 3, Physician 3 and budget holder 3
CASE 4 Non-UMC B Cardiology Purchaser 4 and Physician 4
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Hospital Purchase amount in euro Purchasing department in employees
UMC A €200.000.000 a year 9 tactical purchasers and 11 operational purchasers Non-UMC B €30.000.000 a year 5 FTE
Table 2 Indication hospitals
3.2 Interview protocol
On the basis of this research, a semi-structured interview was conducted. According to Karlsson (2009) the core of a protocol is the set of questions that is used in the interview. Part A of the interview guide is made in collaboration with the University of Buffalo in the United States. Part A aims to form a comprehensive understanding of the purchasing process, alignment influences and the performance of the purchasing process. Part B consists of questions about what influence communication has on the alignment between physicians and purchasers in the purchasing process. Appendix A can be consulted for the semi-structured interview guide of part A and B.
Part A of the semi-structured interview guide is divided in a version for physicians, and one for purchasers. Both versions start with questions about the setting of the hospital and specialisation. For purchasers questions are more geared towards the purchasing department and the setting, and for physicians the questions relate to their speciality. The next part contains questions about the personal background, which is the same for both participants. The functional area is discussed in the third section. For physicians it is about their objectives, for the purchasers this part related to their responsibilities and objectives in the purchasing process. In the purchasing process part more in-depth questions are asked but also about influences outside the internal organisation. The last part of both interviews is finalised with questions about recommendations and future clarification.
13 Part B of the interview guide is based on the variables of Fisher et al. (1997). Which are frequency and bi-directionality. Frequency is used to determine how often physicians and purchasers communicate and why they choose to do it like this. Bi-directionality is about how parties communicate with each other and how they respond to each other. In addition, to what extent is communication a two-way process. By researching these variables we hope to find and to identify communication barriers that influence the alignment between physician and purchaser.
3.3 Data collection
The data were collected by visiting the different hospitals and each individual interview took approximately about one hour. An advantage of this method is that the interviewer could ask in-depth questions to develop a better understanding. All interviews were digitally recorded by approval of the interviewee and are handled strictly anonymous. The recorded conversations were later transcribed into text. In such a way that transcriptions could send back to the interviewee. As a result, the interviewee could give permission about the gathered data, and clarify questions and misinterpretations.
3.4 Data analysis
Once the data is collected it should be documented and coded. Initiated codes are derived from the theoretical model of the theoretical background and are called interpretive codes. These codes could be seen as first order coding to reduce data. An exception was made about the first code: purchasing process. The interpretive codes of the purchasing process came forward from a pre-mature analysis of the data. Data reduction continues with descriptive codes which were given as overall labels for different text sentences with the same context. All these codes lead to a coding tree which given a better overview of the data, and filters the unneeded data. Excel was used to as a tool to analyse the data. The next step in analysing the data is to determine patterns within the different cases. In this process a causal network analysis was used. This shows the relations between different variables. Whether the answers corresponded or not with each other gave an illustration of the alignment between them. Cross-case patterns was the next step in the analysis process. In this step cases from were compared on patterns, similarities and differences.
FIRST CODE INTERPRETIVE CODE
Communication Fisher et al. (1997)
Frequency Bi-directionality
Alignment Perception about purchaser
Perception about physician Perception about budget holder Understanding of each other Collaborative behaviour Performance purchasing process
Van Weele (2000)
14 Purchasing process Process description
Internal
External factors Improvements
Table 3 Coding tree
4 Results
In this section of the report main results are summarised. The results are divided in a within case analysis, and a case analysis. The within case analysis represents findings within each case and the cross-case analysis consists of a comparison between cross-cases.
4.1 Within case analysis
Case 1 neurosurgery UMC ACommunication between physician and purchaser
Analysing the data there appears to be little, and brief, but clear communication between the physician and the purchaser. This is apparent from the finding that the physician and purchaser only communicate when a contract expires. A new supplier has to be found, which results in a short period of contact, more contact than there usually is when a contract is executed. The clarity of the communication is based on bidirectionaity and coerciveness of influence attempts. The purchaser chooses to use the physicians’ time effectively by only exchanging necessary information. ‘When I speak with a physician 2 times a
year it is straight to the point, then on to the next subject’. ‘An e-mail should consists only of 4 or 5 lines otherwise the physician loses interests’. ‘The physician should basically say yes or no’. Thus when there
is contact between the physician and purchaser, the physician should only have to answer with yes or no. The purchaser, in turn, receives the necessary information for the purchasing process.
In this case the communication influences the alignment between physician and purchaser. In such a way that the purchaser adapts his communication towards the physician on the basis of earlier experiences, and the relationship he/she has with the physician. But also due to time restriction he/she needs to be effective and therefore only request necessary information.
Alignment between physician and purchaser
On the basis of perceptions, a mutual understanding, and collaborative behaviour the physician and purchaser are aligned.
The understanding of each other is clear from the statements about each other’s role. The purchaser identifies the physician as: ‘Physicians are the boss: They decide which tools they use’. The purchaser understands that the physician possesses more knowledge about the product and therefore he/she is in the lead of the purchasing process. Nevertheless the physicians’ power is more narrowing down due to
15 defines that the supplier influences the physician but this is not necessarily considered bad. ‘The
physician understands the market development better’, ‘The supplier can talk about content with the physician’. The physician is positive and understands the role of the purchaser. He acknowledges the
benefits of the purchaser, this can be explained because of his own collaborating role in two hospitals. ‘In an early stage we witnessed the benefits of purchase, if you collaborate with them’, ‘Purchase is
necessary’, ‘They are about the price’. The physician confirms the understanding of the purchaser about
that the physician is in the lead: ‘Purchase does not obligates me’. Nevertheless the physician states minor misunderstandings about the role of the purchaser: ‘They cannot be transparent about price due
to the competition authority’ and ‘Purchasers should compare information with other hospitals’.
To start with the cutback objective of the hospital is one reason they are aligned. A way to realise cutbacks is cooperation with the purchaser. A purchaser could realise cutbacks by purchasing items cheaper. On the other hand the purchaser is dependent on the physician to define the quality of an item, therefore collaboration is necessary. In this case the physician is personally interested in purchasing because of his collaborating role between two hospitals. Furthermore, interpersonal trust plays a role in the alignment. ‘As purchaser I start with something small and if it works I try bigger activities. This
enables trust which benefits the physician’. Besides facilitators there are also inhibitors. In general
physicians are afraid to change because of the ease of use of a product. One physician, however, mentions ‘A good craftsmen never blames his tools’, therefore he/she is more open to alternatives and attempts to influence other physicians. In addition, research is important to the physician, the supplier is an option who could deliver a piece of the research budget. Thus by choosing a certain supplier could have impact on the purchasing process because the physician would have a preference. Furthermore, the supplier-physician relationship is closely related to the research incentive. The supplier-physician relationship affects the purchaser-physician relation ‘A supplier can offer more than I do, I’m often about
the money’. A supplier could provide discussions about content but also research opportunities. Performance of purchasing process
The purchaser would focus more on competition and as a result put a great emphasis on costs:
‘Competition is the most important thing, when the supplier perceives competition it is for him the biggest drive to lower his prices’. This is in line with his own interests as purchaser but is partly aligned
with the interests of the physician who acknowledges costs but regards quality also as important. The physician is pleased with the current purchasing process because due to the understanding of each other and interpersonal trust. ‘If I say I need this one, than the purchasers does not obligate me to choose
something cheaper and maybe of worse quality’. ‘I hope that it stays like this, because this is going really well’. This is related to the understanding and perception of each other: the physician is in the
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relation with the purchaser’, and ‘It is really enjoyable’. This is caused by the interpersonal trust and
the collaboration between physician and purchaser.
Case 2 cardiology UMC A
Communication between physician, purchaser and budget holder
The communication between actors is sufficient but could be improved in the understanding of each other.
Communication is sufficient due to the plenary meeting with the head of cardiology, physicians, people of logistics and planning, and people of the OR floor, every two months. During this meeting there is an information exchange which consists of: ‘expiring contracts, newly arrived needs from the physicians
and about the plan of approach’, which should give the purchaser enough information. The purchaser
also speaks one on one with physicians. Furthermore, due to time restrictions (of the physician) the purchaser avoids overloading the physician with too much information. ‘I always try to get feedback or
an approval to do something’, the purchaser avoids miscommunication by doing so. The relationship
between physician and purchaser plays also a role in sufficient communication. ‘Purchaser x is the only
one who we talk with’, ‘These kind of meetings can only occur if you understand each other and is to everyone’s satisfaction (physician)’, ‘I put a lot of time in this relationship. This resulted in a long term relation based on trust (purchaser)’. In addition the budget holder states that purchaser’s sincere interest
in the physician’s work creates a mutual communication language between physician and purchaser. Nevertheless, according to the purchaser the understanding of each other could be improved by increasing formal or informal contact. ‘It would be better for the understanding and for the relation to
meet the physicians at periodic moments in time. This would give me better insights about what is happening in the department (cardiology) (purchaser)’.
Communication influences alignment by creating a relationship between the different actors, adapting behaviour of the purchaser towards the physician, and sincere interests in each other’s work creates understanding.
Alignment between physician, purchaser and budget holder
The physicians and purchasers are aligned because they understand each other’s role in the purchasing process but also due to the facilitating collaborative behaviour they show.
This understanding of each other’s role is derived from the role of collaboration in the purchasing process. The purchaser acknowledge that the new generation is more interested: ‘The new generation is
more collaborative and acknowledge costs as an important aspect’. These aspects are important to the
17 confirms his role and the influence of collaboration: ‘Purchase thinks along with us and is supporting’,
‘Consensus agreement with purchase results in the right fit’, and ‘They are not obstructive’. Which is
also in line with the role the purchaser would fulfil. The physician acknowledges own limitations and the added value of the purchaser: ’Purchase can negotiate much better than we can’, ‘Purchaser is
about the financial and legal activities’. Also the purchaser acknowledges his limitations by stating the
positive influence of the supplier. The supplier can talk about content with the physician’. And therefore the physician develops ‘A better understanding of the market than I do(purchaser)’. In addition the physician underlines his understanding by mentioning the difficulties in their collaboration. ‘Their
cutback interest can conflict with our interests (physician)’.
The budget holder has also some interesting thoughts about the understanding of each other. Due to the fact he/she has a medicine and business background: ‘The physician understands me better than
colleagues do’. This budget holder understands the way physicians think in incentives, and therefore he
could perceive and recognize them better than purchasers.
Collaborative behaviour strengthens the alignment between physician and purchaser. The supporting role of the purchaser is a reason why they are aligned. ‘Our main objective is to support our internal
customer in their needs’. Physicians do not see this as intrusive and could therefore use purchasers for
a purpose. A purpose could be reducing costs which is initiated by cutback objective of the hospital.
‘Our focus is mainly about reducing costs (purchaser)’. When a physician realizes a cutback a
percentage flows back to research money. The physician, as a result, also gains by realizing cutbacks. This incentive benefits the alignment also because they have a mutual interest. On the other hand the purchaser also needs the physician to determine the quality of a product. ‘I can’t say a lot about the
quality’, ‘Only a physician could determine the quality’. The purchaser could only gather this data by
collaborating with the physician. The result of these facilitators in collaborative behaviour is the relationship that has been build up. Both actors understand, and trust each other. In addition, the budget holder perceives there is more alignment due to the way they educate the physicians in the purchasing process. Physicians would understand how the game is played in purchasing, and therefore they understand the interests of the purchaser.
Three things increase difficulty in the alignment between physician and purchaser: restriction of available time of the physician, supplier-physician relation and research incentive. The restricted time makes it harder because only a selection of subjects could be discussed. The supplier-physician affects the purchasing process: ‘If the relation is good, the supplier could whisper the specifications for the
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Performance of purchasing process
The actors are pleased by the performance of the purchasing process. The performance is influenced by the understanding and by acknowledging each other’s role. The purchaser cannot define quality and the physician agrees that price is the purchaser’s area. In addition the budget holder is satisfied because of the relationship that has been build.
The purchaser perceives costs as important: ‘The new generation is more used to the collaboration and
is aware of costs. Money is an issue of the last few years’. On the other hand he/she could not define the
quality as that is up to the physician. Nevertheless, by accepting these roles the purchaser is pleased about the performance. The budget holder agrees:’ I am very happy about the purchase tendering
process how we manage it, but this took us five years’. Although price could be more considered: ´We could choose more often for the lowest price because cowboy suppliers do not exist anymore’. The
physician is also satisfied about the purchasing process, in particular the collaboration is good. ‘I think
that cardiology and purchase are doing a good job’. The quality has to be good and purchase is
responsible for the price.
Case 3 orthopedics Non-UMC B
Communication between physician, purchaser and budget holder
The communication between the physician and purchaser is low of frequency, nevertheless, it is good due to actively requesting for information and understanding of each other.
The frequency is low when a contract is executed but communication increases when a contract ends. ‘For implants the easiest and best way is face-to-face communication’. But due to the busy schedule of physicians this happens too little, ‘it is in general a trend that everyone has little time’. The contact between the budget holder and purchaser is more frequent: a monthly meeting. An interesting remark is that the budget holder only has contact with physicians when problems occur.
The good communication is derived from statements about bi-directionality. Requesting for information is necessary because: ´Everyone has his own job and knowledge’. ‘A good purchase process is making
use of each other’s knowledge (purchaser)’. Thus by requesting for information he is able to gather the
data he needs, but he also develops a better understanding of the physician. The understanding and information flow is harder when another hospital is involved. ‘The communication is influenced by
involving more incentives from a different hospital’. The understanding of each other is, according the
19 The educational background of someone creates more or less communication and therefore influences the alignment. Furthermore actively requesting for information results in more information but also to more alignment because of the understanding they create.
Alignment between physician, purchaser and budget holder
The actors in this case are aligned on the basis of understanding of each other and due to collaborative behavior but the physician perceives a strong mismatch in objectives.
The actors understand each other by interpreting their own and each other’s role. The physician acknowledges the purchasers’ role: ‘The purchaser is emotionless which is better for the starting
position’, ‘I do not negotiate with the supplier, the purchaser does’. On the other hand the purchaser
shows understanding of the physician: ‘The physician wants something good no matter the price’,
‘Physician desire to treat as many patients as possible’. Furthermore, the purchasers acknowledge some
of his own interests with the physicians: ‘Physician acknowledge costs more’. This is in line with the interests of the purchaser which is cost focused. In addition the purchaser is strongly depended on the physicians’ information about the quality of a product. Both actors acknowledge this dependency and therefore they are aligned. Nevertheless the physician strongly notices a costs preference which is not in line with his interests in quality. ‘For purchasers costs play a very important role’, ‘Purchase is about
the short term result, but what I do for the patient is on the long term’. This perception is influencing
the alignment: ‘Relation is hard when costs increase and the relation is pleasant when the costs are
reduced’.
Furthermore, the educational background is a factor that influences alignment. The budget holder is medicine and business educated. According to the budget holder, the physician understands him better due to the mutual language they speak. This results in a faster gaining trust with the physician and it would change the communication.
Collaborative behavior also results in more alignment. Reducing costs of purchase items results in more collaborative behavior. ‘Lower the price of implants this way he could do more for the same amount of
money. Treating more patients is his incentive’. Thus the physician improves when there is more budget
available due to reducing costs. In addition, the informal culture within the hospital enables easier communication and collaboration. The new generation physicians also play a role in this. ‘The new
generation is more accessible and more open to alternatives. On the other hand the supplier-physician
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Performance of purchasing process
The alignment directly influences the perceived performance of the purchasing process. The physician perceives too much focus costs and therefore he/she perceives that quality is inferior to costs.
The purchaser perceived the performance as quite successful. According to him/her there is a good internal collaboration and physicians are open to alternative purchase options. Alternative purchase options are proposed by the purchaser to reduce costs, which implies that the physician is open to other options. But according to the physician: ´Costs are normally secondary, unfortunately are the costs
nowadays more important than the quality of a product’. This statement opposes the one of the purchaser
about costs. On the other hand the budget holder agrees with the purchaser. ’We definitely not have the
most expensive products but also not the cheapest. Price-quality ratio is highly valuated in this hospital and in the purchase department’.
Case 4 cardiology Non-UMC B
Communication between physician and purchaser
The communication is closely in a short period of time but is remarked by the good understanding of each other.
During projects there is close contact between the physician, purchaser and the multidisciplinary group. But, afterwards it could be that the physician and purchaser will not speak each other for 3 years. Each actor is requested to add their feedback in the data pool. The good understanding is developed due to the ‘stupid questions’ the purchaser asks. The physician agrees and states that ‘everyone should ask
questions and should give feedback’. The purchaser does not know everything, therefore he actively
asks questions which results in a bidirectional information flow. Nevertheless they should understand: ‘the important things about the product’ and ’the main things about the purchasing process’. According to the purchaser, good communication is a skill that he should possess: ´I should communicate clearly’. The physician perceives that clear communication should be a goal. This clear communication is harder for physicians compared to the purchaser. This is because a physician is a specialised.
Communication influences alignment by seeking for bidirectional communication through requesting information. A lack of explanation of the physician could lead to a communication barrier. But, in this case, the purchaser is not afraid to ask stupid questions, which results in more alignment.
Alignment between physician and purchaser
21 The actors understand the need of each other by looking at responsibilities. ‘The physician needs to be
involved in the list of requirements’. The physician provides input and requirements of the product. But
the physician could also talk better with the supplier. ‘The supplier can talk about content with the
physician’, if this was abandoned ‘you would keep innovation out’. Therefore it is important to keep a
dialogue between physician and supplier. On the other hand, the physician understands the need for the purchaser: ‘Purchase is involved in the important role to negotiate’. Furthermore, the multidisciplinary group enables alignment: ‘Keep everyone informed from different perspectives from a physician,
technical side, ICT, and the purchase side, that has come together. I think it makes sense to do it like this, it would be bad if you would not do it like this’. Both the physician and purchaser acknowledge the
need for this group: ‘this group makes or breaks the process’.
Furthermore, collaborative behavior enables alignment. To start with an external factor: covenant medical technology. In this covenant, they obligate to work in a multidisciplinary group when implants are bought. This affects the alignment because each participator should give his input and feedback. Also, the purchaser has a supporting role, by stating that the physician is in the lead and the purchaser advices and supports. This would not be seen as intrusive. In addition, the interests and objectives play a role in the alignment. Both actors perceive that price is inferior to quality, and therefore they strive for the same objective. But also the interests of the physician in his own materials benefits collaborative behavior. The physician would like to participate in the decision making process. And the last facilitator, which makes collaborative behavior easier, is the informal culture within the hospital. The alignment is also negatively influenced by the supplier-physician relationship, but does not have big impact on the alignment due to the necessity to be innovative. Furthermore, the physician mentions that it lacks in communication on the long-term but this could also be caused by barriers between hospitals.
Performance of the purchasing process
Alignment is not directly influencing the perceived performance of the purchasing process in this case. Both objectives are aligned and therefore they perceive quality more important than price.
The purchaser perceives quality over costs in the purchasing process: ‘Both are equally important.
Well, quality is maybe more important’. The physician agrees about this, the quality of the product is
more important than the financial aspect.
4.2 Cross-case analysis
22
The influence of communication on alignment
For purchasers, it is hard to get in contact and keep physicians interested. This is caused due to the restricted available time of the physician and because of the physicians’ interests. But, communication between the actors is necessary to gather data from each other. Mainly it is the purchaser who initiates for information about quality, requirements and needs. Due to experiences and the relationship the purchaser has built with the physician, he modifies his communication behaviour upon the physicians’ behaviour. The purchaser achieves this by actively requesting for information and by keeping the communication short and brief but interesting enough. The physician on his way could give short and fast feedback and therefore the purchaser receives the necessary information. This communication behaviour has led to a better understanding of how to gather the proper information of each other. And therefore they have a better understanding of each other and are they more aligned.
Proposition 1.1 Short and brief information requests leads to more bidirectional communication and understanding
In case 2 and 3, the background of the budget holder has influence on the way he communicates with physicians. The budget holder has educational backgrounds in medicine and business. This would lead in a better understanding of how the physician thinks. The budget holder is better aligned because he recognizes and understands the mind-set of the physician. On the other hand, when physicians notices the medicine background of the budget holder, it would instantly result in a ‘mutual language’. This mutual language could be seen as how physicians communicate with each other. Thus, more in line with other physicians.
Proposition 1.2 Educational background affects communication and the understanding of each other The influence of alignment on perceived performance of the purchasing process
This section starts with how alignment influences the performance of the purchasing process and ends with some interesting findings that influences alignment.
23 physician is pleased with the current performance of the purchasing process because of the good collaboration and the understanding of the role ‘The purchasers don’t obligate me to choose for
something cheaper, which is worse’. That implies that the physician is satisfied with the quality and the
price of the product. And the physician states: ‘I hope that it stays like this, because this goes really
well’.
Proposition 2.1 Understanding of each other’s responsibilities, role and benefits results in a satisfied performance perception
Proposition 2.2 A good relationship and collaboration results in a satisfied performance perception
Interests in each other’s objectives could lead to more alignment. In case 3, the physician perceives too much attention to costs during the collaboration with the purchaser. This is not in line with his own perception about costs and quality of a product. In the physician’s opinion, costs are inferior to quality. Quality is the most important objective in his eyes. But he perceives: ´Costs are normally secondary,
unfortunately are the costs nowadays more important than the quality of a product’. And therefore, he
is not pleased with the performance. On the other hand, when the physician shows more interests in the purchasers’ objectives it could have the opposite effect. In case 1 and 4, the physician acknowledges the importance of costs which are aligned with one of the objectives of the purchaser: reducing costs. The physician in case 1 does not only acknowledge costs he also shows it by choosing for more cost-friendly decisions. In example, this physician strives for a big purchase volume which has a positive effect on the purchase price. The physician and purchaser are more aligned due to acknowledging and acting upon these interests. And in this case it results in a satisfied performance perception.
Proposition 2.3 Acknowledging each other’s objectives results in a better performance
In addition, there are some interesting findings about the alignment that not directly influences the performance.
A recurring topic in the different cases is the cutback objective of the hospital. One way for the physician to realize the cutback objective is to cooperate with the purchaser. The purchaser could achieve a reduction by reducing the costs of materials. Furthermore, physicians of UMC’s are stimulated by a financial incentive to collaborate with the purchaser. Each cutback the physician and purchaser realize a percentage of the money will flow back to the physician’s research. Therefore, the physician is more stimulated to collaborate with the purchaser. Thus first of all they will collaborate more and secondly, they are more aligned because of the mutual incentive.
Proposition 2.4 Objectives and financial incentives of the hospital results in more alignment
24 during the purchasing process. For example, when there is a relationship between the physician and supplier, the supplier could suggest what specifications the physician should choose. This affects the purchasing process from a neutral process to a subjective process, based on the preference of the physician. This will results in misalignment between the physician and purchaser because of the mismatching interests. On the other hand it is important to keep a dialogue between the physician and supplier. A supplier provides innovation and therefore it is important to stay informed about the market. The physician has a better understanding of the development of the market.
Proposition 2.5 The role of the supplier in the purchasing process affects the alignment between physician and purchaser
The context of hospitals and cases could also have influence on the alignment. To start with the kind of hospitals: UMC and UMCs. The biggest difference for the physician is that a physician in a Non-UMC is self-employed and therefore they are not responsible for the department budget. For physicians of the UMC applies that they are employed by the hospital. The employment of physicians differentiate in how hospitals can stimulate them in participation. For Non-UMCs it is harder to stimulate physicians in reducing costs because they do not have an applicable incentives for cost reduction. But due to the covenant medical technology which is initiated from the government, there is more forced alignment. This covenant medical technology forces hospitals to work in multidisciplinary groups when they purchases for example high-preference clinical items. In simple terms the physician needs deliver input and need to be involved when these items are purchased. Due to this covenant physicians and purchasers are obligated to work with each and therefore this will lead to alignment.
5 Discussion
In the discussion part we will discuss and interpret the results in comparison with available literature in this subject. We start with the part about how communication affects alignment and we continue with the second part about the influence of alignment on performance. The discussion is finalized with limitations and how the insights of the discussion could be interpreted.
Proposition 1.1 Short and brief information requests leads to more bidirectional communication and understanding.
25 is only interested in the information which is a contribution to the purchasing process. This way of bidirectional communication leads to understanding of each other and to a more effective relationship (Massey and Kyriazis, 2007).
Proposition 1.2 Educational background affects communication and the understanding of each other.
The budget holder perceived a difference in communication when different educational backgrounds are involved. Physicians talks on another level with purchasers than with physicians. This could be explained due to culture differences between physicians and purchasers. For example the physician is more about the health of people and the purchaser about businesses and money. Each department in the hospital creates a separate culture and community with their peer physicians or purchasers (Piercy, 2007). Both functions will have their different backgrounds, experiences and expertise (Piercy, 2007). Which results in different languages based on their own knowledge base (Calantone et al., 2002). Physicians and purchasers have different backgrounds and experiences with each other, but also with their own broader function and humanity that can result in opposing perceptions (Shapiro, 1997; Robbins, 1998). Colleagues will be more aligned because they share the same kind of experiences, knowledge base etc., and therefore recognize and understand each other’s mind-set.
Proposition 2.1 Understanding of each other’s responsibilities, role and benefits results in a satisfied performance
The understanding of each other is based upon how other functions make decisions. By frequently communicating about goals and priorities of the other function it leads to a consensus (Pagell, 2004). In addition Eng (2006) state that mutual understanding of each other’s function is a factor that makes collaboration successful. But the question is what should be interpreted of each other’s function. Our findings suggests that the understanding of each other’s responsibilities, role and the benefits of the opposing function influences performance. Ellinger (2000) confirms that mutual understanding of responsibilities could increase the performance of the service system. The physicians and purchasers should build an understanding of their responsibilities in the purchasing process, this would create expectations of what to suspect of the performance. Furthermore the actors should also understand their own role and of their peer function. They should not interfere with these roles and rely on the benefits of these functions. By sticking to their own role a mutual understanding is created which results in more satisfaction and therefore an aligned performance.
Proposition 2.2 A good relationship and collaboration results in a satisfied performance perception.
26 is a mixture of informal communication, the ability to trust each other, meaningful relationships and the appreciation of another’s knowledge (Ellinger, Keller and Hansen, 2006). Thus the inter-functional relationship between physician and purchaser affects the collaboration. The performance of the purchasing process is therefore influenced by cross-functional collaboration. A good collaboration results in a better performance.
Proposition 2.3 Acknowledging each other’s objectives results in a better performance
In several cases the physician or purchaser showed interests in each other’s objectives. Which had a positive effect on the opposing actor. These interests in objectives demonstrates that the actors are more acknowledge by each other’s interests. Most of the time physician’s decisions are based on the quality of the patient and is therefore less focused on the cost aspect. This would result in a disconnection between the purchaser goal and the physicians’ preference (Montgomery and Schneller, 2007). But by showing interests in each other objectives it would lead to a better perception of the performance of purchasing process. Too much attention to own objectives results in a disconnection and therefore a negative performance outcome.
Proposition 2.4 Objectives and financial incentives of the hospital results in more alignment
27
Proposition 2.5 The role of the supplier in the purchasing process affects the alignment between physician and purchaser
The supplier could have a negative, positive or both effects on the alignment. On the one hand the physician can talk with the supplier to develop a market understanding and to keep innovation in the hospital, which is positive for the hospital. Nevertheless the supplier could affect the relationship between the physician and purchaser by influencing the interests of the physician. These interests are established upon the long-standing relationship with the supplier, as far back as the training goes. Furthermore, the sales representatives of the supplier trains the physicians about their technology for in the OR. In addition the physician is less likely to change from a supplier due to the financial incentive (e.g. research money) (Burns et al., 2009). Although in the last few years the interests of the physician changed more in line with the interests of the hospital, for example physicians are more interested in costs these days. Nevertheless, there is still a certain influence of the supplier on alignment. This is line with the findings of Burns et al. (2009) where suppliers have the advantage in competing for the attention of the physician, in comparison with hospitals. The advantage could be explained due to three things: a relationship component, financial incentive component (research budget) and a service component (training and support of the sales representative) (Burns et al., 2009). Due to the strong relationship of the physician with sales representative it could also affect the performance of the purchasing process. A physician could see the performance as more satisfied because it is aligned what he prefers. On the other hand the purchasers could perceives the performance as unsatisfied because he is restricted to the preference of the physician. Which is not in line with a neutral purchasing process.
In short communication influences in several ways the alignment between physician and purchaser. Next to frequency and bi-directionality, does play the way how information is requested an important role in the alignment. The way of information requesting influences bi-directionality and therefore the understanding and relationship effectiveness. In addition, educational or cultural background affects the alignment negatively. Due to the differences in educational or cultural background the physician or purchasers perceives a communicational barrier which affects the understanding of each other. This complicates the alignment between physician and purchaser.
28 more alignment between the actors but also to more satisfaction of the purchasing process. This is in line with current literature that shows that a reward system affects the attitude and behaviour of a participant. The alignment between physician and purchaser is furthermore affected by the supplier. The supplier-physician relationship plays a negative role in influencing the physician in an opposing way of the hospital. Although the negative effect on alignment the influence on performance is not found, only a more divided performance could be suggested.
6 Conclusion
Returning to the first research question about what influence communication is on the alignment between physicians and purchasers. The findings of this research suggests that frequency and bi-directionality do play an important role to align physicians and purchasers. Nevertheless, the way of requesting for information determines the effectiveness of the information. Due to short and brief requesting for information the purchaser would only receive the necessary information. And therefore is more effective than requesting in way that is not in line with the physician. In conclusion, a combination of frequency, the way of requesting that influences bi-directionality, results in a better understanding of each other and a more effective relationship. In addition, the cultural or educational background of the actors also play an influence on the alignment. A communication barrier arises when two different cultural or educational backgrounds communicate with each other. Between physicians or purchasers communication will be more in line because in general they will share the same perceptions, experiences and understanding about things and therefore use a mutual language to communicate. When two opposing backgrounds communicate they will speak different languages which are not aligned.
The second part of this study is about how performance is affected by the alignment between purchasers and physicians. According to the findings there are several aspects that affect the performance of the purchasing process. The physician’s and purchaser’s mutual understanding of each other’s responsibilities, role and benefits of these roles, leads to better performance. In addition, when the collaboration between actors is perceived as good it would also increase the performance in a positive way. Another aspect is acknowledging each other’s objectives. If actors show interests in each other’s objective they will be more aligned due to the mutual interests and understanding. This alignment will improve the performance. Furthermore, according to the findings some aspects affect the alignment but do not directly influence the performance of the purchasing process. The objectives and financial incentives of the hospital will lead to more alignment of the purchaser and physician. On the other hand, the supplier-physician relationships affects the alignment in a negative way by influencing the physician in an opposing direction of the purchaser.
29 communication. In addition it expands our understanding of how an educational or cultural background influences the communication between physicians and purchasers. Both actors should take this in consideration when they communicate with each other and therefore seek to break down this barrier. Besides the communication part of this research also the part about the effect of alignment on performance have several implications. For one it expands our understanding what alignment aspects have impact on the performance of the purchasing process. Physicians and purchasers could develop a better understanding of each other when they acknowledge these aspects. Furthermore, some of our findings about alignment aspects were confirmed in literature.
30
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