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In January 2001, when Lowell Church was named corporate director of materiel management at Adventist Health, Roseville, Calif., he found a wealth of opportunities to improve the IDN’s supply chain. But he knew he couldn’t take advantage of them without patience, skill, teamwork and salesmanship.
Indeed, Church was no stranger to sales. In years past, he had acquired several rental properties; lived in Haiti, where he facilitated the export of Haitian products abroad and the import of products to the island nation; owned and operated a company that made workbenches and tools; and operated a moving business with his son. This was in addition to his experience in healthcare supply chain management, including 10 years as materials director at Kettering (Ohio) Medical Center.
Among the opportunities he chose to tackle early on at Adventist was the IDN’s affiliate program. For Adventist (a Premier shareholder), an affiliate is a hospital or other facility that gains access to the Premier contract portfolio through Adventist. The shareholder earns credit for the purchasing volume of the affiliate(s).
“When I arrived at Adventist Health, we had affiliates, but they were loosely tied to us,” he says. “In many cases, they didn’t even know they were affiliated with us.” Upon analysis, Church found that many were using somewhere between 5 and 15 percent of the portfolio. “I said, ‘We have potential we’re just not realizing.’”
He studied other affiliate programs and came to believe he could immediately build Adventist’s program by doing three things: eliminating membership fees, eliminating compliance requirements, and giving affiliates a 60-day out clause.
“Some programs were charging their affiliates $30,000, $40,000, $50,000 a year,” he explains. “I discovered quickly that by going to a hospital and trying to encourage them to spend that much money, they could only see the bill but not the savings. So I said, ‘Why in the world create an obstacle like that?’ I’ll make more [in dividends] for a million dollar spend than I would from the fee we would assess. So the first thing I did was, no fee.”
Church noticed another characteristic of many affiliate groups. “Many were saying, ‘If you affiliate with us, you are required to use our core contracts.” Church believed that many hospitals would refuse the offer because they would be unwilling or unable to give up their choices. Instead, he reasoned that the savings they could achieve using the contract portfolio – rather than the pressure to commit to contracts – would stimulate affiliates to use the program more.
He also believed that demanding that affiliates commit to the program for three, four or five years was a barrier to entry. “So our program has a 60-day out clause, which says that if we don’t deliver, [the affiliate] can leave.”
He sweetened the pot by offering the largest affiliates who reach certain sales thresholds a portion of the dividends Adventist receives from its participation in Premier contracts.
Adventist at times must go head-to-head with other GPOs and even other affiliate programs to get the business. That calls for detailed market basket analyses and, in a word, selling. “Selling isn’t foreign to me,” says Church. “From a personal perspective, I enjoy the sales side.” And he hires salespeople to present the opportunities to potential clients.
But for Church, high pressure tactics are not part of the equation. “One thing we do upfront is a thorough analysis of the opportunity,” he says. “How realistic is it that a hospital coming to us will benefit by coming to our program?” A big consideration is, what percentage of that hospital’s SKUs are on contract with Premier? “They may only have 15 to 20 percent correlation to our contracts, in which case I tell the CFO, ‘You can join with us, but realize you have to do a fair amount of product conversion, and that’s not easy.’”
“We don’t try to persuade people,” he says. Instead, the Adventist team brings data to the potential client and lets that data speak for itself. “We let the data decide whether it’s a good thing [for the affiliate] or not.”
But as every sales rep knows, simply closing the sale of a product or service doesn’t necessarily mean the customer will enjoy the maximum benefits from it. “Just giving [a hospital] a new portfolio doesn’t help them change their behavior,” says Church. Oftentimes a financially struggling facility may need help in taking full advantage of the contract opportunities that affiliate membership can offer them.
For that reason, the Adventist team conducts “top to bottom analytics” of the affiliate’s spending activities. “Then we go in and offer actionable opportunities,” he says. Those opportunities – contracts – are broken down by department, so the appropriate director can respond. In most cases, the affiliates’ CFOs are brought into these discussions as well. “This way, we bring their awareness up,” he says. “We let the CFO know what we’re doing for them, that is, helping drive savings opportunities.” That said, Adventist’s intent is not to blindside department heads. “If anything, we try to help them through the details, so when that request comes from the CFO, they know their position and can speak intelligently about it.
“One core feature of our affiliate program – and this is ingrained in my staff – is that the affiliates are not cows for us to milk. They are part of our own herd. We take care of them like our own. And we only present opportunities that are good for them.”
So far, the track record speaks for itself, he says. “We haven’t lost anyone except [in the case of] hospitals being bought. So they do tend to stay. It has to be a partnership that works – works for them and for us.”
From a $20 or $30 million program 10 years ago, Adventist’s affiliate program now generates sales of $500 million. “It’s been growing exponentially,” says Church. Some 45 acute-care hospitals – primarily in California and other Western states – are involved, as well as more than 800 nursing homes in 40 states. Adventist has a full-time employee working with a large nursing home chain in Fort Smith, Ark.
While much of the attention remains focused on small, often rural, facilities, the IDN has begun working with larger members as well. One example is the Western Healthcare Alliance. Based in Grand Junction, Colo., the Alliance offers a variety of shared services – including bad-debt collection, insurance products, employee benefits, laboratory services, laundry services, etc. – to approximately 25 hospitals in Colorado. Adventist has a full-time staffer in Grand Junction to work with members on group purchasing.
WHA, in turn, is part of a larger organization called Network-to-Network Strategies, or N2N, a regional network of more than 100 hospitals. N2N provides its members a diverse offering of services, such as employee background checks, coding services, property insurance and charge master and charge capture assessment. And now, it is offering the Adventist group purchasing program as well.
Suppliers are an important part of Adventist Health’s affiliate program. But here again, Church avoids the hard-sell approach. “When we sign contracts, I sit down with our manufacturers and vendors and say, ‘Here’s where our utilization is – our own and, as best as I can determine, that of our affiliates. Here’s the volume you can expect to get without a question. Here’s the opportunity that exists, and this is how I’m going to help tee up that opportunity for you.’” Manufacturers carry marketing sheets with them describing the Adventist/Premier contracts available to affiliates. “We help support their presentation of the opportunity and what it means for any given affiliate, in order to help drive compliance to the contract,” he says.