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June 2007 (Volume 85)
Quarterly Article
Kathleen Montgomery
Eugene S. Schneller
Oct 14, 2026
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This article analyzes hospitals’ strategies to shape physicians’ behavior and counter suppliers’ power in purchasing physician preference items. Two models of standardization are limitations on the range of manufacturers or products (the “formulary” model) and price ceilings for particular item categories (the “payment-cap” model), both requiring processes to define product equivalencies often with inadequate product comparison data. The formulary model is more difficult to implement because of physicians’ resistance to top-down dictates. The payment-cap model is more feasible because it preserves physicians’ choice while also restraining manufacturers’ power. Hospitals may influence physicians’ involvement through a process of orchestration that includes committing to improve clinical facilities, scheduling, and training and fostering a culture of mutual trust and respect.
Author(s): Kathleen Montgomery; Eugene S. Schneller
Keywords: physician preference items; standardization; supply chain; resource dependency
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Volume 85, Issue 2 (pages 307–335) DOI: 10.1111/j.1468-0009.2007.00489.x Published in 2007