Hospital Buying Patterns For Small Businesses

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Another area of preparation before a small business begins selling to hospitals, is the understanding of the buying patterns of hospitals. There are two major budgets that a health care facility purchases products and services from.

The first is the hospital’s capital budget. Usually this is for large purchases with a formal sequence of budget creation, submittals, approvals and ultimately allocation of funds. The money is allocated around the facilities fiscal year which needs to be determined during a small businesses investigation. The fiscal year often does not mirror the calendar year. For example, it could be September to October or July to June.

This knowledge of the hospital’s fiscal year is critical is timing the marketing messages to insure that the small business is a vendor contacted during the budget creation time frame prior to their submittals to executive management approval. A downside to this is that there are usually a minimum of three vendors required by the by laws of the hospital to submit bids, which is by definition a competitive environment.

Next is the facilities operating budget. Hospitals use these fund for expenses occurred to keep operating and in compliance throughout the year. A small business who has creatively developed a low front end product to penetrate an account will be successful in getting in the door as a new vendor through the operating budget. This avoids the long sales cycle of capital approval and more formal sales process which small companies tend to be less likely to win.

There are other factors that come into play when ascertaining a hospitals buying pattern, such as purchasing group contracts or current agreements with present vendors. Some facilities that are under contract with a Group Purchasing Organization (GPO) are required to purchase a certain percentage of their products and services with vendors that are under contract with the GPO as well. A quick inquiry to the purchasing department of the facility should suffice in finding this out so the correct approach to acquiring the account can be implemented.

Small businesses will have to participate in the capital budget process, but if it can be avoided by securing jobs through less competitive operating budgets then do so.