Con­sid­er­ing a new GPO? Read our shop­per

Fac­ing in­creas­ing cost pres­sure, providers press pur­chas­ing groups for an­swers

Modern Healthcare - - Front Page - Jaimy Lee

After Robert Wood John­son Univer­sity Hos­pi­tal con­verted to a new group pur­chas­ing or­ga­ni­za­tion in 2008, the aca­demic med­i­cal cen­ter re­ported firstyear sav­ings of $6.5 mil­lion. The goal of switch­ing GPOS was to cut costs, says Wil­liam Stitt, vice pres­i­dent of ma­te­ri­als man­age­ment at the not-for-profit hos­pi­tal.

Fac­tors rang­ing from the hos­pi­tal’s use of physi­cian pref­er­ence items to the com­plex­ity of the pa­tients it treats as well as its sta­tus as a Level 1 trauma cen­ter led to in­creased eco­nomic pres­sures for the or­ga­ni­za­tion in re­cent years, ac­cord­ing to Stitt.

Previously a mem­ber of GNYHA Ven­tures, a for-profit sub­sidiary of the Greater New York Hos­pi­tal As­so­ci­a­tion, Robert Wood John­son Univer­sity Hos­pi­tal be­gan an eval­u­a­tion of its pur­chas­ing or­ga­ni­za­tions in 2009. It later se­lected Health trust Pur­chas­ing Group, a Brentwood, Tenn.-based GPO. “One of the pri­mary ob­jec­tives was: How do we re­duce our spend?” Stitt says.

By choos­ing Health trust, the New Brunswick, N.j.-based hos­pi­tal opted into the GPO’S com­mit­ted pur­chas­ing model, which re­quires stricter com­pli­ance with ven­dors but can de­liver bet­ter pric­ing.

The hos­pi­tal saved $2.2 mil­lion in 2010 and is ex­pected to save about $4.5 mil­lion this year, in­clud­ing a tar­geted op­er­at­ing room ini­tia­tive that aims to cut $2.5 mil­lion in costs. Most of the first-year sav­ings were “di­rectly rel­a­tive to the con­ver­sion to con­tracts” with Health trust,” Stitt says.

Robert Wood John­son Univer­sity Hos­pi­tal re­ported a $2.9 mil­lion gain in op­er­at­ing in­come for fis­cal 2009, com­pared with the $3.4 mil­lion op­er­at­ing loss it re­ported in fis­cal 2008, ac­cord­ing to a Moody’s In­vestors Ser­vice re­port from Au­gust 2010. Moody’s cited three fac­tors that led to the hos­pi­tal’s re­turn to prof­itabil­ity: a 3.5% in­crease in ad­mis­sions, rev­enue cy­cle im­prove­ments and ex­pense con­trols that in­cluded the switch to a new GPO.

Hos­pi­tals and health sys­tems are scram­bling for ways to re­duce their op­er­at­ing costs to pre­serve their mar­gins, and that scram­ble in­cludes com­par­i­son shop­ping for GPOs or putting pres­sure on their GPO to do more for them.

“The hos­pi­tals in this coun­try have placed an ad­di­tional set of pres­sures on the GPOs they work with in terms of how they per­form,” says Jody Hatcher, pres­i­dent and CEO of No­va­tion. “In­creas­ingly, what’s hap­pen­ing is that hos­pi­tals are look­ing to­ward their GPOs to pro­vide ser­vices and re­sults that have a dra­matic im­pact on the costs of sup­plies.”

No­va­tion is a sup­ply con­tract­ing com­pany owned by VHA and the Univer­sity HealthSys­tem Con­sor­tium, two na­tional health­care pur­chas­ing net­works.

While hos­pi­tals and health sys­tems dif­fer in the rea­sons why they change GPOs, the bulk of the de­ci­sion to con­tract with a new pur­chas­ing or­ga­ni­za­tion re­mains rooted in the abil­ity to cut costs. “Price is the pri­mary driver,” Stitt says. “Rarely do you see some­one switch a GPO if they don’t save money.”

In­ter­views with sev­eral health­care or­ga­ni­za­tions in the U.S. showed a marked dif­fer­ence in what fac­tors played the de­cid­ing role in choos­ing a new GPO.

Some providers cited so­phis­ti­cated data an­a­lyt­ics tools as key to their de­ci­sion. Oth­ers say their hos­pi­tals sought out flex­i­ble pur­chas­ing mod­els that would be of the most ben­e­fit to physi­cians and nurses. Other providers sim­ply ex­plained the im­por­tance of a cul­tural fit.

“Price still counts, but there are many other things,” says Todd Ebert, pres­i­dent and CEO of Amer­inet, a St. Louis-based GPO. “Data and an­a­lyt­ics are ex­tremely important to iden­tify op­por­tu­ni­ties not only to make sure that the cus­tomer is re­ceiv­ing the cor­rect price, but to iden­tify po­ten­tial du­pli­ca­tions and to iden­tify ther­a­peu­tic al­ter­na­tives all the way to uti­liza­tion and con­sump­tion.”

Tom Mar­chozzi, ex­ec­u­tive vice pres­i­dent and chief fi­nan­cial of­fi­cer at Hartford (Conn.) Health­care, says the four-hos­pi­tal sys­tem be­gan to look at im­ple­ment­ing qual­ity and safety pro­grams that would sup­port its co­or­di­na­tion of care ini­tia­tives in 2009.

Hartford Health­care, previously a mem­ber of VHA, awarded a seven-year con­tract to GNYHA Ser­vices, the Premier health­care al­liance, and Nex­era, a con­sult­ing firm owned by the GNYHA, in De­cem­ber. GNYHA Ser­vices, the GPO arm of GNYHA Ven­tures, func­tions as a re­gional GPO for Premier.

“It’s not like we were look­ing for a new GPO ini­tially,” Mar­chozzi says. “We were look­ing for

the tools nec­es­sary to be suc­cess­ful in health­care re­form in the fu­ture and pro­vide our pa­tients with the best qual­ity care.”

Be­cause of GNYHA Ven­tures’ long­time part­ner­ship with Premier, the sys­tem also has ac­cess to Premier’s pro­grams and has elected to par­tic­i­pate in Premier’s readi­ness col­lab­o­ra­tive for ac­count­able care or­ga­ni­za­tions and the Quest pro­gram, a col­lab­o­ra­tive for 200 high­per­form­ing hos­pi­tals in 35 states.

“As a non­profit, we’re go­ing to choose who­ever is of­fer­ing op­por­tu­ni­ties to re­duce costs,” Mar­chozzi says. “The rea­son we de­cided on Premier and the Greater New York Hos­pi­tal As­so­ci­a­tion was that it fits into our vi­sion of pro­vid­ing high-qual­ity co­or­di­nated care and keep­ing our costs low.”

Mar­chozzi also noted that the sys­tem re­lies on Premier’s bricks-and-mor­tar pres­ence in Wash­ing­ton—the com­pany opened a Belt­way of­fice more than 25 years ago. The qual­i­ty­im­prove­ment and group pur­chas­ing or­ga­ni­za­tion is based in Char­lotte, N.C.

Mar­quette (Mich.) Gen­eral Health Sys­tem be­gan to work with Premier for sim­i­lar rea­sons. CEO Gary Muller says Premier’s ad­vo­cacy ef­forts keep the hos­pi­tal linked in to Wash­ing­ton. Mar­quette is also par­tic­i­pat­ing in Premier’s ACO readi­ness ini­tia­tive.

The hos­pi­tal started the eval­u­a­tion process of its GPO four years ago, around the time Muller joined the 275-bed hos­pi­tal as chief ex­ec­u­tive. The fa­cil­ity previously worked with Medas­sets in ad­di­tion to HPS, a re­gional GPO in South­ern Michi­gan that is af­fil­i­ated with Medas­sets, he says.

“We meant to see how they com­pared to oth­ers,” says Muller, later adding: “They didn’t have the breadth of value-added pro­grams that Premier does.”

Muller, who had worked with Premier prior to join­ing Mar­quette in 2007, says the hos­pi­tal re­viewed six GPOS and chose Premier in March. He cited the facts that the or­ga­ni­za­tion is provider-owned; its clin­i­cal, fi­nan­cial and op­er­a­tional data­bases; and its com­pet­i­tive pur­chas­ing pro­posal, as well as the ad­di­tional sav­ings promised by Premier’s re­gional pur­chas­ing groups, as fac­tors in the de­ci­sion.

Sav­ings through com­mit­ment

Hack­en­sack (N.J.) Univer­sity Med­i­cal Cen­ter es­ti­mated the com­mit­ted pur­chas­ing model will save more than $20 mil­lion—about 8% or 9% of the 703-bed hos­pi­tal’s an­nual sup­ply spend­ing—in the first year of its con­tract with HealthTrust Pur­chas­ing Group, ac­cord­ing to Karl Blom­back, the hos­pi­tal’s vice pres­i­dent of fi­nance.

“The com­mit­ted model is the big dif­fer­ence,” he says. “They can re­ally drive some tremen­dous sav­ings.”

When Blom­back was eval­u­at­ing GPOs, he saw that the HCA hos­pi­tals work with HealthTrust. He de­clined to say what GPO the hos­pi­tal previously worked with.

“Know­ing that those are for-profit hos­pi­tals, that also made me very sure that the pric­ing had to be the best be­cause when you’re a for-profit hos­pi­tal, you know they’re not go­ing to ac­cept any­thing with a higher price,” he says.

Hack­en­sack im­me­di­ately saved $9 mil­lion by switch­ing to HealthTrust’s pric­ing in 2011, ac­cord­ing to Blom­back. He says that there had been no push­back from physi­cians and nurses about the tran­si­tion from a flex­i­ble pur­chas­ing model to a com­mit­ted pur­chas­ing model.

Jim Fitzger­ald, pres­i­dent and CEO of HealthTrust, says the GPO has ex­pe­ri­enced an “un­prece­dented level of in­ter­est in our model over the last year.” The GPO’s com­mit­ted pur­chas­ing model re­quires ap­prox­i­mately 80% com­pli­ance of a hos­pi­tal’s to­tal an­nual sup­ply­chain spend, he says. While the GPOs vary in terms of the com­pli­ance they re­quire, HealthTrust’s model is con­sid­ered to re­quire the strictest com­pli­ance.

“When health sys­tems be­come chal­lenged op­er­a­tionally, that opens up the eval­u­a­tion of lots of ser­vices and things that they do, which can of­ten in­clude the GPO,” says Sean Angert, a man­ag­ing di­rec­tor at Huron Con­sult­ing. “As some health sys­tems have grown in size and vol­ume and spend, many of them are look­ing for ad­di­tional flex­i­bil­ity.”

Yet most providers agree that the dif­fer­ences in pric­ing are lim­ited. GPOs that of­fer com­mit­ted pur­chas­ing mod­els may be able to ne­go­ti­ate slightly lower prices, but both providers and GPO ex­ec­u­tives say that the dis­tinc­tions in most of the pur­chas­ing or­ga­ni­za­tions are more likely tied to their in­vest­ments in data and tech­nol­ogy of­fer­ings, as well as pro­grams aimed at qual­ity im­prove­ment or rev­enue-cy­cle man­age­ment.

“We’re all within a very close ball­park when it comes to price,” Amer­inet’s Ebert says. “It’s what else you can do—how can you help them with an over­all so­lu­tion to save money?”

The big play­ers

Six GPOs ac­counted for nearly 90% of to­tal GPO pur­chas­ing vol­ume in 2007, ac­cord­ing to a Gov­ern­ment Ac­count­abil­ity Of­fice re­port from Au­gust 2010. The Health In­dus­try Group Pur­chas­ing As­so­ci­a­tion has re­ported that about 96% to 98% of hos­pi­tals in the U.S. use GPOs, as cited on the trade group’s web­site.

There are six GPOs that each man­aged at least $7 bil­lion in an­nual pur­chas­ing vol­ume for fis­cal 2010, in­clud­ing Premier ($43 bil­lion), No­va­tion ($40.1 bil­lion), HealthTrust Pur­chas­ing Group ($18.1 bil­lion), GNYHA Ser­vices ($9 bil­lion) and Amer­inet ($7.2 bil­lion).

MedAs­sets, which does not re­port an­nual pur­chas­ing vol­ume, re­ported $45 bil­lion in to­tal man­age­ment spend for fis­cal 2010. The Alpharetta, Ga.-based GPO ac­quired the Broad­lane Group, a ri­val GPO, in an $850 mil­lion deal an­nounced last Septem­ber.

Com­pe­ti­tion in the GPO mar­ket is based on a num­ber of fac­tors, ac­cord­ing to MedAs­sets’ an­nual 10-K se­cu­ri­ties fil­ing. Some of the fac­tors in­clude the abil­ity to de­liver fi­nan­cial im­prove­ment and re­turn on in­vest­ment through the use of prod­ucts and ser­vices; breadth, depth and qual­ity of prod­ucts and ser­vices; qual­ity and re­li­a­bil­ity of ser­vices, in­clud­ing cus­tomer sup­port; and price.

In the same fil­ing, MedAs­sets re­ported that it “pri­mar­ily com­pete(s) with Amer­inet, HealthTrust, No­va­tion and Premier, Inc.”

“We’re see­ing a huge, huge ap­petite and de­sire to un­der­stand how best to man­age spend, with the GPO be­ing a com­po­nent of that, and what are the other op­por­tu­ni­ties to not only rec­og­nize the im­me­di­ate ben­e­fit but to use a plat­form—a de­liv­ery model—that al­lows them to sus­tain those gains longer term,” says Joe Greskoviak, pres­i­dent of spend and clin­i­cal resource man­age­ment for MedAs­sets. “This is about sustainability.”

Cut­ting sup­ply-chain costs, es­pe­cially for physi­cian pref­er­ence items such as or­tho­pe­dic im­plants, re­mains a key driver when shop­ping for a GPO.

—Tom Mar­chozzi

“It’s not like we were look­ing for a new GPO ini­tially. We were look­ing for the tools nec­es­sary to be suc­cess­ful in health­care re­form in the fu­ture and pro­vide our pa­tients with the best qual­ity care.”

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.