Be­hind As­cen­cion's new GPO

As­cen­sion backs plan as oth­ers study own strate­gies

Modern Healthcare - - FRONT PAGE - Jaimy Lee

Form­ing a group pur­chas­ing or­ga­ni­za­tion may re­duce sup­ply costs for As­cen­sion Health and the GPO’S mem­ber­ship, but the decision is not likely to lead to a new crop of hospi­tal-owned GPOS.

Ear­lier this month, As­cen­sion Health said it would form a GPO that will func­tion as a wholly owned sub­sidiary of the As­cen­sion Health Al­liance, the newly formed par­ent com­pany of the St. Louis-based health sys­tem. The GPO will be a ser­vice of­fered by the Re­source and Sup­ply Man­age­ment Group, the sup­ply-chain op­er­a­tion for the sys­tem.

As­cen­sion Health is the largest Catholic health­care sys­tem in the U.S., mean­ing that the $4.2 bil­lion in spend­ing that RSMG is man­ag­ing in fis­cal 2012 pro­vides a unique level of pur­chas­ing power with sup­pli­ers. In ad­di­tion, the fi­nan­cially healthy sys­tem has the re­sources to in­vest in data col­lec­tion tech­nol­ogy and staffing that are nec­es­sary to op­er­ate the GPO.

The re­cent ac­qui­si­tions of Alex­ian Broth­ers Health Sys­tem in Ar­ling­ton Heights, Ill., will put the sys­tem’s to­tal man­aged spend­ing, which in­cludes sup­plies, med­i­cal cap­i­tal and some pur­chased ser­vices, closer to $4.4 bil­lion.

The for­ma­tion of the GPO also pro­vides As­cen­sion Health with a num­ber of added ben­e­fits: It can re­tain ad­min­is­tra­tive fees that sup­pli­ers pre­vi­ously awarded to other GPOS, and it can be used as a bench­mark to seek out lower prices from sup­pli­ers that also con­tract with the sys­tem’s GPO, Al­pharetta, Ga.-based Medas­sets.

Of the $3.8 bil­lion in sup­ply spend­ing and cap­i­tal that RSMG is man­ag­ing this year, Medas­sets man­ages about $800 mil­lion and will con­tinue to do so, said Scott Cald­well, chief sup­ply chain of­fi­cer for As­cen­sion Health.

“I don’t ex­pect that to change,” Cald­well said. “They’ve been a good part­ner, and they’ve been hum­ble enough to know that they can’t de­liver to our to­tal needs, and we’re hum­ble enough to know that we can’t ei­ther. Part­ner­ing to­gether makes us very strong.”

How­ever, a decision to move to a cen­tral­ized con­tract­ing model in 2009 pro­duced sig­nif­i­cant sup­ply sav­ings for As­cen­sion Health. Ad­her­ing to a com­mit­ted model of pur­chas­ing that now hov­ers around 95% and is led by clin­i­cal decision teams, RSMG re­duced the to­tal per­cent­age of sup­ply spend­ing to net pa­tient ser­vice rev­enue from 18% in 2007 to 15.5% in Fe­bru­ary with a run rate of $380 mil­lion in an­nual sav­ings on sup­plies.

“We are sig­nif­i­cantly on our way to solv­ing our own is­sues, which is our cost,” Cald­well said. “It was time to bring in ad­di­tional spend and fur­ther ag­gre­gate.”

De­tails about the still un­named GPO, which re­ceived a fa­vor­able opin­ion from HHS’ in­spec­tor gen­eral’s of­fice to op­er­ate as a wholly owned sub­sidiary, are limited. When asked about whether the GPO would share ad­min­is­tra­tive fees with mem­bers out­side of the As­cen­sion net­work, Cald­well said the GPO’S busi­ness model had not been fully de­fined. He also said it was not likely that the GPO would limit mem­ber­ship to Catholic health sys­tems.

“Our feel­ing is that ev­ery care­giver (and) ev­ery pa­tient de­serves for the cost of health-

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