And The Big Guys Win Again…

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Created on Sunday, 02 June 2002 12:58

Written by Ron Weinstein

As President of Laundry Today I hope you enjoy reading the publication. I particularly enjoy interactions with our readers from letters they send expressing their opinions on industry happenings or issues which concern them. I rarely take the opportunity to express my opinion, however today I find myself in a position of wanting to speak out regarding hospital consolidation and purchasing groups.

I have watched the business of independent sellers of institutional textiles evaporate as hospitals consolidated and purchasing groups were awarded the shrinking number of linen contracts. I reasoned that this change was yet another business reality where the big guys get bigger and the small independents disappear since large companies can afford to sell products at a lower price.

However, I am far from convinced that hospitals actually save money by purchasing everything from one general purchasing group. If fact, there are “small guys” who can compete with prices that large purchasing groups offer.

So why are hospitals going the route of purchasing groups when in most instances hospitals are committed to purchasing 80 - 90 percent of their needs from one group - effectively eliminating any competition?

I believe the large “rebate” checks that hospitals receive are an added attraction to a general purchasing contract. But the truth is-the rebate checks are not gifts. These hospitals are only receiving their own money back from overpayment on supplies that they were contracted to purchase at a higher price from large purchasing groups which they could have purchased elsewhere for a lower price.

And here’s another fact to consider, hospitals who think that buying groups are the answer to their prayers have reduced their purchasing staffs leaving themselves with little expertise to oversee their buying groups or to make sure they can’t get better deals on their own. So how can any of these hospitals know if they are really saving money?

After reading the expose pieces published in The New York Times I think the time has come for congress to investigate the financial links between hospital buying groups and suppliers. There is room for more than four textile firms serving the health care industry. But more importantly, the ability to compete fairly for business and a business’ ability to chose a supplier with the “best price” are quickly becoming traditions of the past. Is that something we as a society can afford to lose?

Ron Weinstein,
President, Laundry Today