"We're at the breaking point in terms of the survivability of the nonprofit segment of health care delivery."

That dire warning was delivered this spring at a roundtable of health care executives in Las Vegas. The roundtable, convened by Health Forum and sponsored by VHA, revolved around the urgent need for hospitals to rein in expenses as reimbursements tighten and competition for profitable service lines heats up.

Panelists specifically focused on the supply chain, the second largest expense in any health care organization. How, they were asked, are you "optimizing" purchasing to reduce costs and enhance value?

"We have pretty much beaten the commodity products to death," said Tom Beall, director of supply chain management at Halifax Health in Daytona Beach, Fla. "The real opportunity for savings lies in the physician preference arena. But it's also one of the most challenging areas to address."

Hospital leaders are meeting that challenge. They're appointing physicians to committees that approve products used in their organizations, and they're relying on clinical leaders to persuade medical staff to embrace the idea. Moreover, the growth of physician employment and comanagement arrangements gives docs more skin in the game.

One thing is critical to gaining physician support: solid data that compare products on cost and effectiveness.

"If we were to walk into a meeting these days without good data, we'd be dead in the water," Beall said.

Jennifer Sydnor, R.N., clinical value analyst and category manager at Mary Washington Healthcare in Fredericksburg, Va., noted that "when we go to various division meetings and present data on product standardization, our clinicians are often confused because they hear different figures from sales reps." However, over time, "they've come to trust our data."

At Lakeland HealthCare in St. Joseph, Mich., the goal is to be as transparent with physicians as possible, said Jim Wasserman, director of materials management. That isn't easy given the fact that vendors are often less than transparent about what they charge different clients for the same products and how effective those products are.

Nevertheless, by getting physicians involved early in the vetting process, Lakeland has been able to work out better deals with suppliers. For example, it has saved 25 percent on drug-eluting stents and more than $1 million in cardiovascular purchases.

Physician leadership is key, Wasserman said. "Our chief medical officer just helped us get over the hump by saying, 'We've got to do it. I'll deal with the docs. We've got to do it.'"

"All physicians want to do the right thing," VHA's David Markowski said. "If you show them there isn't a direct correlation between high costs and outcomes, they're willing to take a look at doing something different."

To learn more about how hospitals are optimizing their supply chains, read the full conversation here.