Healthcare systems around the world vary in terms of the mix of public sector and commercial operators and the way in which medical care is structured. This structure and mix will continue to evolve as service providers rethink their systems to achieve cost improvements, implement leaner operational processes and use quality of medical care and patient experience as their point of differentiation. The expectation is that resource-intensive, high-capital facilities such as large hospitals will function as centres of excellence concentrated in geographic locations, supported by a network of smaller hospital and clinic facilities operating a mixture of specialist, primary care and ancillary services (KPMG, 2013). Speciality care offers advanced treatment of conditions such as cancer or heart disease; primary care is more general (covering a broad range of physical, psychological and social conditions); while ancillary treatment includes services such as outpatient surgery, diagnostic imaging and physiotherapy.

Whatever the scale and nature of medical provision within a healthcare system, organizations whose central purpose is to provide medical treatment direct their attention at exactly that, i.e. their core expertise, and (as with other sectors) outsource those activities to which they are unable to add value. In the healthcare sector, outsourced activities can be split into clinical and non-clinical services and may include the following:

1. Clinical services: radiology, pathology, dialysis, dentistry, physiotherapy and rehabilitation, pharmacy;
2. Non-clinical services: cleaning, laundry, catering, patient transport, car-parking, on-site retailing, facilities management, information and communications systems, purchasing. (Guimarães and de Carvalho, 2010)
The scope and value of contracts that a medical facility awards to a specific supplier and the breadth of services that providers might seek to supply to the healthcare sector can be quite varied. So, for example, in the UK, healthcare trusts that are part of the NHS might use Medirest (www.medirest.co.uk), a subsidiary of the Compass Group, for onsite retail and catering as well as support services such as logistics, security and cleaning. In providing cleaning services, Medirest needs to comply with NHS contract and performance requirements. This is vital given that patient experience is strongly influenced by the general aspect of a medical facility, and that cleanliness is a critical element of that experience and most importantly patient wellbeing. For cleaning purposes, areas within medical facilities are typically grouped according to risk to healthcare users:
• very high: operating theatres, critical care areas, accident and emergency departments;
• high: general wards, sterile supplies, public thoroughfares and toilets;
• significant: pathology, outpatient departments, laboratories, mortuaries;
• low: administrative areas, non-sterile supply areas.
Cleaning contracts specify the levels of cleanliness for these areas, frequency of cleaning and auditing of this, as well as the time frame within which non-compliance is expected to be rectified. Online systems enable Medirest’s performance to be monitored by area in a specific facility, within an entire site, and it could also be assimilated centrally to review Medirest service provision across multiple sites.
Meanwhile, companies such as Johnson Controls (www.johnsoncontrols.com) use their expertise in the management of physical buildings and related technologies to target the healthcare sector in North America. The company is present in over 3,500 healthcare facilities and manages more than 12,000 beds – this last figure is important given that building occupancy costs make up more than 6 per cent of annual operating expenses for the average large hospital. Johnson Controls combines facilities management, real estate services, project management and energy-efficiency solutions to help hospitals reduce costs by up to 25 per cent. Recent contracts secured by the company include a technology investment project worth $12.9 million signed with Methodist Healthcare Group in 2016 to upgrade this client’s flagship hospital facility in Memphis.
While the Compass Group and Johnson Controls focus on specific non-clinical services, companies such as Serco (www.serco.com) supply a wider range of integrated solutions to medical centres. For example, in 2011 the Department of Health in Western Australia awarded the contract for non-clinical facilities management and support services at the, then newly commissioned, Fiona Stanley Hospital to Serco.
The contract consists of 28 different services, including engineering and building maintenance, security, ground maintenance, linen, cleaning, catering, waste services, managed equipment services, transport, procurement, sterilization, reception and clerical services. The Department of Health followed an extensive specification development and procurement process before awarding the contract to Serco, including key performance indicators for each of the services to be supplied. The contract, worth up to $4.3 billion (over 20 years), was initially for ten years with the option of it being extended for two further five-year periods if the Department of Health in Western Australia decides that Serco is doing a good job. The range of services that Serco is contracted to deliver means that it has to rely quite considerably on subcontractors, of which critical supply partners are:

QUESTIONS

1. Choose one of the service examples featured in this case study and:

a. describe what you think should be the decision-making process;

b. outline what evaluation criteria you think might be used for initial selection and ongoing supplier performance;

c. explain how you would classify the buying situation;

d. specify what functional areas and levels of seniority are likely to contribute to the decision-making process.
2. For your chosen service, assume that you are part of a buying team trying to identify a new supplier:

a. visit the website of one of the featured companies who supply the service that your team wants to procure;

b. evaluate the usefulness of the company website in providing you with information as part of your initial exploratory search.