Sup­pli­ers More pres­sure on pric­ing

Modern Healthcare - - SPECIAL REPORT -

Pric­ing pres­sure on tech­nol­ogy and med­i­cal de­vices from hos­pi­tals will only in­crease this year, which will likely lead to more ac­qui­si­tions among de­vice man­u­fac­tur­ers and an over­all fo­cus on re­duc­ing non­la­bor costs within a hos­pi­tal.

De­vice com­pa­nies, which have long used in­no­va­tion as a sell­ing point to gen­er­ate higher prices for their prod­ucts, are now faced with hos­pi­tal clients that are in­creas­ingly cost­con­scious and physi­cians who are now em­ployed by those hos­pi­tals.

“Our ex­pec­ta­tion is that de­vice­mak­ers will con­tinue to turn to share­holder-friendly ini­tia­tives and ac­qui­si­tions,” says Diana Lee, a se­nior credit of­fi­cer with rat­ings agency Moody’s In­vestors Ser­vice.

In a Dec. 9 re­port, Moody’s pre­dicted that or­ganic growth rates for med­i­cal prod­ucts and de­vice com­pa­nies will re­main soft through 2012, at­trib­uted in part to the weak global econ­omy, pric­ing pres­sure from hos­pi­tals, the reg­u­la­tory environment and de­clin­ing med­i­cal cov­er­age un­der health-ben­e­fit plans. Along with ac­qui­si­tions, de­vice man­u­fac­tur­ers will likely en­gage in buy­backs and div­i­dends.

In Washington, the de­vice in­dus­try will con­tinue to fight the med­i­cal de­vice ex­cise tax of 2.3% on man­u­fac­tur­ers’ sales, which is set to go into ef­fect Jan. 1, 2013, while the Food and Drug Ad­min­is­tra­tion will grap­ple with the In­sti­tute of Medicine’s rec­om­men­da­tion that the agency scrap the 510(k) clear­ance process.

For group pur­chas­ing or­ga­ni­za­tions, the at­ten­tion on cut­ting sup­ply costs keeps the out­look for GPOS pos­i­tive, says Amer­inet Pres­i­dent and CEO Todd Ebert. Sup­ply chain con­sult­ing, bench­mark­ing and rev­enue-cy­cle man­age­ment, as well as tra­di­tional sup­ply chain ser­vices such as ad­dress­ing prod­uct prices, re­duc­ing du­pli­cates and en­hanc­ing prod­uct us­age sup­port hos­pi­tals’ ef­forts to cut costs.

“Or­ga­ni­za­tions will con­tinue to look in­ter­nally to their ex­ist­ing busi­ness part­ners to help them with ef­fec­tive­ness and ef­fi­ciency,” Ebert says.

The twin pres­sures of health­care re­form and the econ­omy, as well as health sys­tems and hos­pi­tals that are grow­ing by con­sol­i­da­tion, means that man­ag­ing the sup­ply chain strate­gi­cally is cru­cial, adds Brent John­son, chief pur­chas­ing of­fi­cer at In­ter­moun­tain Health­care, a 21-hos­pi­tal sys­tem based in Salt Lake City.

—Jaimy Lee

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