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The changing hospital buying process [PODCAST]

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In this episode, Bruce Brandes, CEO of Lucro, discusses some of the new tools and strategies hospital leaders are using to accelerate the buying process.
Learn how to listen to The Hospital Finance Podcast on your mobile device.


Mike Passanante:  Hi, this is Mike Passanante. And welcome back to the Hospital Finance Podcast.

Today, I’m joined by Bruce Brandes, CEO and founder of Lucro, a new service designed to help hospitals quickly and efficiently sort and assess potential vendor partners.

Bruce is an expert in the hospital buying cycle. And he’s joined us to discuss some of the new tools and strategies hospital leaders are using to accelerate decision-making.

Bruce, welcome to the Hospital Finance Podcast.

Bruce Brandes:  Thank you very much for having me, Mike. I appreciate this opportunity.

Mike: We’re happy to have you, Bruce. First, just to give us some context, could you explain a bit about Lucro?

Bruce:   Sure! So, we started about two years ago on a journey in partnership with health systems that collectively operate about 20% of all the hospitals in the United States to figure out how can we help them to accelerate their decision-making process as well as to align and become more efficient in leveraging their scale as they make decisions around potential vendor partners.

So, in partnership with those organizations, we’ve actually spent the last couple years building, and now subsequently delivering, a platform to help healthcare organizations to make better decisions faster regarding vendor partners and accelerating their evaluation and buying cycle.

Mike: Thank you for that. And I think that will help provide some context as we go through some of these subsequent questions because I think we both come from the vendor side and we talk and deal with providers all the time. And certainly, as we chatted before the podcast, the hospital buying process, it’s complicated, and in some cases, it’s broken.

Bruce:  Yeah. And one observation that I’ve made is it used to not matter that much if healthcare organizations took years from the time they identified a need until the time they actually started acting on it and making decisions.

But the reality is, now with competitive pressures in the industry being what they are, many times you don’t have years, you have months (and in some cases, even less) to be able to make strategic decisions.

And sometimes those decisions are not necessarily about buying something new. Sometimes, the right decision is to leverage more effectively what we already have or an internal workflow or best practice.

So regardless, how do you help go from concept, “Hey! We identified this need or this opportunity” to turning that around and focusing on taking actions on how to solve it.

The other thing, by the way, that we’ve heard very consistently was one of the things that slows down the process is too often people across healthcare are in the habit of falling in love with a product and then trying to justify why I need to buy this product. But one thing that we heard loud and clear from many of these healthcare organizations is we need to turn that around and start first by defining the problem that we’ve prioritized we need to solve or the market opportunity that we’ve prioritized we need to address. And then, with that lens, look and see what the right solutions are that may be available outside the market or within our own organization to be able to address those issues quickly.

Mike: Agreed! And with that, let’s dive into some of those issues because I think there are some pretty interesting things we’re looking to discuss here. And one of the first questions I had on my mind when you think about the buying process and how it may have changed and evolved over the past several years, you think about information.

Search engines and social media offer healthcare leaders access to more information about vendors and solutions than they’ve ever had before. Yet we still see issues with the hospital buying cycle.

So, given that proliferation of information, what do you think is still not working well with the hospital buying process?

Bruce:  Well, Mike, you make a really good point. Before we jump into healthcare, think about how search engines and social media have affected the way you buy a car or the way you plan a vacation or the way you hail a cab, the way you buy a book. You could kind of go through and see how it’s revolutionized and simplified every other area of our purchasing, except when we look at healthcare, really, those search engines and social media really haven’t helped the way they have in other areas as it relates to making healthcare leaders more productive in their decision-making.

And I think it really falls to a few things. One, healthcare is a little bit different. And we have to make sure that we understand that this is not really a consumer play the way it is in other purchasing decisions. And I think, to some extent, the biggest gaps that you have by relying on Google and LinkedIn as your resources for making decisions is, in some ways, a lot of the information is really not relevant. I don’t know that I can trust it. And it also very often is very fragmented. So I’m only getting pieces of the information I need to make a fully informed decision.

So, I think that that’s where taking some of the principles that we’ve learned from these other industries and figuring out how we can take those technologies and processes and apply them in healthcare in a way that recognizes what’s unique about healthcare is really a big focus for us as long-term healthcare folks to figure out how can we apply those concepts into healthcare.

And in fact, actually, when we launched the company, the design firm that we engaged was a digital design firm that knew nothing of healthcare, but they were the ones who designed and built Air B&B, eHarmony, Open Table, Nike Plus, and companies like that. We arranged for them to interview two dozen healthcare executives and listen with their ear to the healthcare executives’ issues on why does it take you so long to make decisions and why is it so hard to innovate and to see what we could borrow from those other applications and then apply it in a relevant way to healthcare.

Mike: Bruce, let’s pivot and talk about the RFP process because the hospital RFP process can be arduous both for the vendors and the hospitals. How do you see that changing? Or how has that changed over the past few years?

Bruce: Well, that’s a great question. I don’t know that it’s really changed much in the last few years aside from now you might receive the RFP via an e-mail with a Word document attached. When you FedEx your binders, that takes one step out of the process. But the process really has not changed in a meaningful way.

And if you think about it, if we’re trying to accelerate decision-making in healthcare and also improve the efficiency of how we do things, the traditional RFI and RFP process is a colossal waste of time and resources for both the health system and the vendor.

And so, we at Lucro have really focused on that as a particular area where we think we can be really impactful. And I mentioned to you earlier that we started as an organization, before we ever built a product, we partnered with health systems that had critical mass of 20% of the marketplace. And we thought that that was really important if we’re going to change behaviors, to have that that influence over the market and the ability to crowdsource knowledge.

And so, I think that the opportunity here is recognizing why someone needs to do an RFP. It’s because they want to de-risk a decision, and they want to be able to make sure that they’re getting the best deal. But sending out a Word document via email and flipping through a bunch of binders that come back a few months later is probably not the best way to do that.

And what we’re able to do within Lucro is actually have health systems do self-discovery of solutions that are relevant for the projects that they’ve prioritized and they create what we call “boards,” which is like an idea board or a project board on Pinterest.

And when they identify those boards, vendors then have the opportunity, rather than waiting until an RFP comes to them, they actually can see those boards de-identified in the Lucro marketplace. And vendors, regardless of how many salespeople you have or how big your marketing team is, have a level playing field to be able to see these projects or opportunities where people are seeking solutions, and I can submit what we call a “solution card” as a vendor which is kind of like a synthesized, concise view of what we do.

And that gets submitted into the board that then, privately, the individual or committee that are responsible on the buy side of that board have the opportunity to evaluate what these different solutions are.

And inevitably, they then have a list of additional questions that they might ask. And we have the ability for them to ask those questions of their short list of vendors digitally within Lucro so that the vendor then receives that and has the opportunity to look at these questions and say, “You know what? This is a question that everybody asks me. So rather than my answering it privately, as I’m answering it for the first time, I’m going to add that information. Do we interface with Epic? How many live customers do we have? Whatever the questions might be, I’m just going to add that to my solution card so no one ever have to ask me that question again.”

And so, in the future state, we see RFIs being nothing more than just a search and filter application that can be done instantly and RFPs with the benefit of crowdsourcing of knowledge across all these different healthcare organizations that are engaging the platform that are largely asking the same questions of the same vendors a more efficient way to crowdsource those answers and that knowledge.

So, the RFP process, you can satisfy the traditional need as to why you’re doing the RFP in the first place, but to be able to do that either instantly or in a matter of hours because of the information being more readily and efficiently available.

Mike: Bruce, before we started recording, we were chatting a little bit about how the buying process is unfolding within hospital systems now and the roll-up of hospitals and mergers and acquisitions and how that’s driving changes in the RFP process and in purchasing generally.

In many instances, hospitals are now directing their staff to approach a procurement department or some committee, if you will, before they engage with any vendor. And then, that group wants to be involved in managing the buying process.

So, how is this process unfolding? How does Lucro play into a process like that?

Bruce: Yeah, that’s a great question. And it’s a very astute observation. The reality is the way healthcare organizations make buying decisions has to change. Their processes are changing so that they can leverage their scale more effectively.

And so, we at Lucro are really focused on making sure that we understand whatever the process is that that organization is looking to implement, either a new governance process, whether it be top-down or whether it’s ideation bottom-up, we’ve provided a technology platform that’s designed to support whatever that workflow should be.

But regardless of what that workflow should be, the one thing that we consistently hear, particularly from the people in the purchasing department as well as in IT, is that historically we end up having to be the bad guys. More often than not, somebody goes and falls in love with a product or has this project going on that we have no idea about, and they don’t come to us until they’ve already made a decision. And then, whether it be because of the IT requirements and diligence that that are needed or the purchasing requirements and diligence, I have to be the bad guy because I’m now slowing down your process which I didn’t even know there was a process underway.

So, what we’re finding now through the collaboration capabilities within our platform, there’s now a more effective digital way to raise visibility and to get alignment across all those different stakeholders who might have a role in helping to support the decision whether you’re the business owner, the clinical owner, the IT diligence person, or the purchasing person responsible for executing on a contract.

Regardless, this gives us a platform to get visibility into projects earlier in the process as well as whoever is launching those projects, be able to get visibility into have we already made a decision organizationally or are you wasting your time because we’ve already crossed this bridge or we have others across our own organization who are already tackling that.

Why don’t you guys combine efforts and make a decision together, including engaging your purchasing or IT folks earlier in the process when they can add more value before it’s too late as well as giving you visibility into, as you’re looking to solve this problem, what products from current vendors might you be considering.

Frankly, what products to be already own that you may not realize we own that could potentially help you with this? And if it is something that’s new and different, how does that compare with the things we already own? And is it on our GPO contract for example?

So, all of these types of things that both IT and purchasing resources can do to help really improve a process and add value to a process, in the new world, there’s a great opportunity for them to be involved earlier so that they can add that kind of value so there’s not a duplication of effort or a waste of time at the back end of a process.

Mike: And Bruce, you mentioned stakeholders in your explanation there and certainly getting all of the right stakeholders at the table. Understanding and vetting their concerns is a challenge for hospitals. As you see health systems getting bigger, how are they tackling this challenge?

Bruce: It really does become more and more of a challenge. And what I’ve heard particularly, those that have grown by acquisition, oftentimes, the right hand just doesn’t know what the left hands doing even if it’s as simple as not knowing what products or what workflows or best practices we’re already using.

And so, I think the biggest challenge is—particularly as they grow—we have more and more stakeholders that might be involved in the decision.

And back to accelerating decision-making, the thought that we have to have meeting in person after meeting in person and demo after demo perhaps around a particular purchase decision, because there are so many stakeholders at the table, if one of my prerequisites is we have to find a time that we can all meet in person, I’ve just added six months probably to a decision process if it requires multiple meetings just because of how busy all these disparate stakeholders are.

So, we need to find an asynchronous digital platform—which is what we built at Lucro—to be able to allow for that collaboration and communication in between meetings (and maybe instead of meetings) and also provide a more efficient way to give voice to other stakeholders that may not really be responsible for making the decision, but may have a valid voice or input or experience that can help those people who are tasked with making the decision to get greater input in a more efficient way.

And so, I think the bigger that as health systems get bigger, the kneejerk reaction is, well, it’s going to be top-down command-and-control, which may or may not be the right thing. But I think, most importantly, what they don’t want to lose sight of is to be able to tap into the collective wisdom and knowledge and experience of the people who are closest to the patient or to a particular problem, and make sure that they have a voice.

So, what I find that to be is a challenge for many health systems to make sure that they strike that balance as well as, at the same time, being able to align and engage stakeholders and share standards so that they can leverage their scale.

That is really a challenge. And I’m seeing more meetings being too common of an answer in a longer decision process or kind of a dictatorial “this is how it’s going to be” without having people feel like they have a voice. I think that there’s a way to leverage technology to help to ease that.

Mike: Bruce, I want to talk to you about a disparity that I think comes up often because references and testimonials and evidence are so important to hospitals and their decision-makers when they’re evaluating vendors. But they’re hard for vendors to get. Hospitals don’t always want to go on record and attribute themselves or endorse a vendor, if you will.

So, what kinds of sources are hospital leaders using now to get that unbiased information about vendors from their peers?

Bruce: Yeah, that’s a good observation. I would say that there is not a lack of opinions about different products. In fact, I would say, in this industry, it’s just the opposite; there are actually probably too many, whether it be from a third party organization like Class or Gartner or from an industry association like HIMSS or the American Hospital Association or from my GPO that may have done diligence or from a consulting firm that I might know and trust.

The reality is there are already a lot of different disparate data points out there about different solutions. The biggest challenge—and this actually exacerbates decision-making—because the problem is there are almost too many opinions, everybody has a different group that they may know or trust and it may be a multiple of them.

And what I found that they’ve asked us for is we need a platform that can synthesize all the disparate data points that are out there that we might already trust and put them into context so that we can understand what all those different stakeholders think, but then also marry that with internal knowledge around what my colleague network within my own organization say, do we have experience in-house in successfully deploying this solution, does it integrate with our current IT environment.

Whatever those questions are that are unique to my environment, it’s great if this third party says “this is the best product in the market” and they have all these great references, but that may or may not really translate into what’s best for me.

So, it needs to be put into context where then I can tap into the people in my network who I know and trust (whether they’re within my own organization or my colleagues at other healthcare organizations that I’ve been in the industry with my whole career that I know and trust that may have a point of view on this) and let me do my own homework digitally by collaborating with those folks (whether it be historically a hallway conversation at a conference or sending them a text or an e-mail, “Hey, what do you know about this?”)

To be able to put all that into context I think is really important.

And so, what I’m what I’m finding is the best way to get unbiased information is to tap into their peer network, but also, to have it in context of all this other noise that’s out there in the industry.

And at the end of the day, one other thing to recognize is not every vendor is a good vendor (even if they have good references). It’s kind of like when you’re hiring someone, no one’s ever going to tell you all the people who are going to have bad things to say about them. They’re going to give you, “Here are the three references—my mom, my priest, and my daughter,” and then you wonder, “Well, they said all glowing things.” So, I don’t know that anybody really trusts the references that vendors give them.

Now I think they do trust outcome studies and real results that can be pointed to, but I think they want to do their own discovery and homework. And I think we need to give them a digital platform and access to people who they know and trust in a more efficient way.

Mike: Bruce, in some cases, hospitals aren’t even aware, as you mentioned, of innovative solutions that can help them or maybe even solutions that they have under their own roof that can solve a problem that they have. But we’re in an environment where hospital leaders are deluged by vendor approaches and sales and marketing initiatives. And in a lot of cases, they’ve kind of had to block out some of that noise to try to move forward with their jobs. But when they do, of course, they kind of insulate themselves occasionally from the information they need maybe to help evaluate some solutions.

Bruce:  So, in that environment and in that context, how can hospitals do a better job of sourcing and embracing innovative solutions and learning more about them?

That’s a good point. And that’s a big part of what our mission is about. What we’ve realized is, as you have more and more consolidation in healthcare on the buyer side and this incredibly growing proliferation of new entrepreneurs and new vendors that are trying to call on them, the math just doesn’t work. The rate of cold calls, spam e-mails, people trying to shove a chocolate down someone’s throat at a trade show, those are no ways to get someone’s to pay attention to you.

And frankly, most real buyers avoid those things and ignore them. And it actually becomes a hindrance.

What I found—and the way we designed our platform intentionally—was about defining the problem first. So I think that the way a hospital system can do a better job sourcing and embracing innovative solutions is to recognize that just because someone’s trying to sell me something, and it’s important to them, odds are, it’s probably not a priority to me. So I have to tune all of that out.

So, the first thing is I would say redirect all of that unsolicited outreach. Don’t let that be a distraction to, not only you, but to your organization because it can be. What ends up happening is that cold call that you don’t reply to or that email you don’t reply to, that person ends up going answer-shopping, and then wasting somebody else’s time in your organization.

So, the first is to put in a process to gain control over that and then turning it around and saying, “Let’s define our problems first.”

And that’s really what Lucro is about—define your problems, put those projects on a board in Lucro, de-identified as to who your healthcare organization is if you’d like, and let vendor see that and submit to that if they’re relevant.

And ultimately, it’s similar to think about in the dating world. It used to be that somebody would go to a bar and think that they’re going to randomly run into someone who will become their soul mate. Today, you have technologies like eHarmony and Match.com that rather understand what each party might be looking for and help to put them together.

And that’s a good bit of what we’re trying to do, let the organizations, the health systems, define what problems they’ve prioritized or opportunities they want to want to focus on, and then allow relevant vendors that might have a solution to be able to submit to that board where I privately as a buyer can evaluate that.

I think the last statistic I saw on a study was 60% of all of the decision-making process happens before a vendor is ever contacted. So people want to do more and more self-discovery. I know that’s true of when you buy a car. You don’t just go to the lot anymore and tell the salesman, “I’m looking to buy a car.” You’ve done all of your homework ahead of time. And when you go, you have a point of view with specific questions when you engage in purchase.

And so much in the same way, I think we can turn that around and provide a digital platform for relevant parties to connect. Back to the dating analogy, I’m not telling you that you should get married, but it’s probably worth you guys going to have a cup of coffee.

And that’s kind of where we think we can help to tune out the noise a little bit, so that hospitals can know about the innovative solutions that are relevant for them without being distracted by the things that are not.

Mike: If a hospital would like to learn more about Lucro or sign up to use this service, where can they go?

Bruce:  It’s as simple as going to Lucro.com, and in the upper right hand corner, clicking on Login or Join Now.

And the thing I did fail to share with you is the foundation of what we’ve built is all free. So, for what I described to you in terms of the use case for health systems, there is no cost for health system to start using Lucro. And there’s actually no cost, no implementation, no training required. You can just log in.

We’ve made the platform generally available February this year. And it will get better and better. But ultimately, we think it’s pretty simple and intuitive. It’s kind of like LinkedIn. You don’t have to be trained on how to use LinkedIn. So, we would invite you to start using it, reach out to us as you have questions.

And then, if you’re a vendor, much in the same way, it’s free for you to create your solution card that has your profile attached, your marketing collateral, all your social media accounts, videos and other supporting documentation in the context of our solution card. It’s free for you to see all the boards that have been created across the Lucro community. And as you see boards that are relevant for you, it’s free for you to submit to the first few boards so that you can understand how this works.

And then, ultimately, the model is a freemium model where there are premium services that we offer on both sides. But the fundamental functionality on health systems in terms of being able to be the system of record and align and collaborate around these boards for an unlimited number of users and be able to digitize the legacy RFI or RFP process, there’s no cost for any of that functionality. And we always maintain the privacy first of the healthcare organizations.

And on the vendor side, there are some really nice premium services that we can offer that help raise the visibility and deepen the understanding of your offerings at scale. What Lucro’s real business is, if you think about the metadata that we capture as a byproduct of all this activity, that’s really our long term business, capturing all of these insights as to what people think and what they’re looking for without ever compromising privacy to any one individual or organization. That metadata and the insights that come from it we believe can be transformational for this industry. And those are insights that just don’t exist in healthcare today.

So, we would invite anyone who is interested in what I just shared, they can either reach out to me directly. My contact information is bbrandes@Lucro.com or just go to Lucro.com and get started.

Mike: Bruce Brandes, thanks for joining us on the Hospital Finance Podcast.

Bruce:  My pleasure! Thank you, Mike.

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