Vendor Compliance

There are a few folks that I need to recognize for helping us get this blog up and running.  The topic, Vendor Compliance, is growing in importance and relevance to all industries.  Not only do we see an increase in readership of this blog every day, but the web searches for the keywords, vendor compliance, which were virtually non-existent 9 months ago is growing rapidly as well.  Of course these acknowledgements are months overdue and unlike the Oscars, this will be brief.

First….. I want to thank Kristine Hayes and Bart Mitchell.  They came up with the idea of the blog as a way to bring information and topics around vendor compliance that are in the news every day into a consolidated forum for discussion and thought.  I just write the blog.

Second…. I want to thank Lance Weatherby of the ATDC, and the author of the blog Force for Good.  His knowledge of blogging and advice has been “right on the money” and very helpful.  Great folks like Lance and Tony Antoniades make the ATDC a great place to be!

Lastly…. I want to thank Scott Burkett  from Peachpod Productions and  Startuplounge.com. He has great vision and a lot of insight into blogging and entreprenuership.  If you haven’t listened to one his podcasts, go check it out!

Thats it!

-Andy Monin

I remember a story of a large auto manufacturer who hired a well known consulting firm to rationalize their vendor base.  After exhaustive scrubbing, decisions were made to cut suppliers and vendors of all types and sizes to aggregate spend for better prices.  The decision to cut one company in particular, a small seemingly irrelevant sole proprietorship, eventually shut the entire plant down for a full day.  That small vendor was the guy responsible for plowing snow from the plant entrances.  Without him, a full day’s production was lost and any savings attributed to this ”cost cutting” project were lost immediately.

A vendor’s legal/tax status may on the surface appear to be irrelevant to you.  However, if you are a business of any material size you will have all types of vendors which carry inherent risks. I imagine that the high priced consultants dismissed the importance of this vendor based on spend and type of business.  Huge blunder.

A vendor’s type of business is an important indicator of it’s ability to deliver and support the products and services you purchase. While negotiating favorable vendor contracts can protect you from types of risks and liabilities there are inevitable pitfalls looming within your vendor base based on the types of businesses and the products and services offered. 

Issue / Problem Resolution

It is always painful and disruptive to business when problems arise with vendors.  Quality, responsiveness, on time delivery, cost to value, etc…. are great scorecarding measures.  However there is a big difference in the attitudes, incentives, and capabilities to perform and resolve issues between large, public, multi-national company’s versus a 2 employee sole proprietorship.  Bankruptcies, Liens, and Judgements have different impacts to different types of businesses.  A bankruptcy to a sole proprietorship means something completely different to you than a Worldcom or Delta Airlines. Those large companies continue operations with little visible impact to quality.  I would contend that quality indicators would have been visible long before the bankruptcy filing.  The sole proprietor could not escape so easily. 

Nature of Relationship

Are they a contracted vendor? 

Are the Principals of these vendors also your employees, board members or physicians of your organization? 

What is your spend dependency? Is this a minority owned business? 

Do they have access to employee/patient information? 

How dependent is a particular vendor on you? 

How dependent are you on the vendor to provide mission critical products and services?

Business Type  Definitions

• Corporations – a group of people granted a charter legally recognizing them as a separate entity having its own rights, powers, privileges and liabilities distinct and separate from those of its members.
• LLC’s – A distinct type of business that offers an alternative to partnerships and corporations, by combining the corporate advantages of limited liability with the partnership advantage of pass-through taxation (earnings are taxed only once).
• Sole Proprietorships - A sole proprietor is someone who owns an unincorporated business by himself or herself.
• Joint Ventures – An enterprise in which two or more investors share ownership and control over property rights and operations
• Public – a company which is permitted to offer its securities (i.e., stock, options, bonds, etc.) for sale to the general public, typically through a stock exchange
• Private – ownership of a business company in two different ways—first, referring to ownership by non-governmental organizations; and second, referring to ownership of the company’s stock by a relatively small number of holders who do not trade the stock publicly
• Non-Profit – an organization whose primary objective is to support an issue or matter of private interest or public concern for non-commercial purposes
• For Profit – an organization whose primary objective is for commercial purposes
• Multi-National – One that has a worldwide marketplace from which it buys raw materials, borrows money, and manufactures its products and to which it subsequently sells its products

People profile risk in their lives everyday.  From personal health and finance to public safety, risk profiling is everywhere.  Have you ever assessed whether or not you are at a healthy weight or cholesterol level?  Some people even go as far as gene profiling to determine their chances for hereditary diseases such as cancer and/or heart disease.  Businesses and government alike are spending billions of dollars to profile risks facing the American public.  Have you ever made an investment without first considering the risk?  

Each of these are inter-related and any of these elements have a higher level of importance based on the type of company.  As a practice these should not be viewed or measured independently.  I will spend the next several posts digging into each.

A recent article in the Charlotte Observer reported that an unidentified man walked into the Carolinas Medical Center’s maternity ward in Charlotte, NC and inappropriately touched two female patients. 

A CMC spokesman stated that providing loved ones with access to patients is a balancing act when you are an open public facility.  

At what cost?  According to the surveillance cameras, this individual was roaming the halls for 30 minutes prior to assaulting these patients.  Thank goodness he was only interested in assaulting patients with back rubs.   

I hope the healthcare industry doesn’t have to learn the same lessons the airline industry learned on 911.   Prior to 911, I recall seeing investigative TV journalists demonstrating the relative ease of getting access to planes.

This incident reveals a gapping security hole and huge liability that persists at virtually every hospital across the country.  Without an effective access control and badging solution, ”wierdos” and criminals with malicious intent, put everyone on the hospital premise at risk. 

I don’t know what CMC’s current badging requirements are, but this demonstrates a need for identifying everybody in the halls of a hospital.  Employees, visitors, patients, contractors, vendors, consultants….everyone!    An effective badging solution more than likely could have prevented this individual from having free access to the facilities, hospital assets/staff, and more importantly…. these 2 female patients.  It is time to act!

 - Andy Monin

My apologies for the gap in posts…. It was the end of the month and the Vendormate sales team is keeping our calendars booked.

Here are 2 examples of institutions who are devising policies to limit the challenges and problems associated with conflicts of interest.  From gifts to free product samples, these seemingly inocuous vendor incentives can be abused and influence sourcing decisioning.

Henry Ford Health System: New And Strict Vendor Policies Begin Jan. 1

The Henry Ford Health System in Detroit, will no longer accept free gifts, lunches, and other perks from medical sales representatives as part of its initiative to eliminate conflict of interest in relationships between vendors and employees. It’s all part of a trend that may soon be knocking at your door. Henry Ford follows the lead of several other large health systems, such as the University of Pennsylvania, Stanford University, and the University of Michigan, which have all instituted similar regulations. “The implementation of strict vendor policies should be applauded by the hospital industry,” says Norm Werner, FACHE, director of compliance with Continuum Health Partners in New York City.

University mulls banning gifts, changing free sample system

Published October 2006

The University of California at Davis Medical Center may become the next major academic medical center to adopt strict rules against conflicts of interest with drug and device manufacturers.

According to the Sacramento Bee, the medical center’s Pharmacy and Therapeutics (P&T) Committee sent the following recommendations to the center’s executive committee:

·  Forbid the center’s physicians from accepting gifts, free meals and payments for travel time or participation in online medical education programs from drug and device-makers.

·  Stop the distribution of free drug samples, but create a voucher system so qualified low-income patients may receive free medications from the manufacturer.

·  Exclude any medical professionals with ties to drug and device manufacturers from committees with purchasing power.

If it enacts the rules, UC Davis will join the medical centers at Stanford, Yale, and Penn in restricting industry’s promotional activities in its hospitals.

According to the Bee, UC Davis P&T committee chair Tim Albertson acknowledges the line between marketing and legitimate physician education can be thin. “What we are trying to do is bring light to the subject. We are not going to be police. But if we, as an institution, make a statement, that has power,” Albertson said in the report.